Thinking fuel? Nope!
The fastest and most steadily growing costs in the airline industry are those related to operational disruptions, resulting from the mismatch between companies' plans and actual results. These costs can reach up to 30 percent of operating expenses, especially for major hub carriers. This is partly due to investments in punctuality through built-in buffers designed to offset the negative effects of disruptions. These buffers include additional block times, more aircraft, more fuel, extra crew, more ground personnel, additional aircraft stands, spare parts, equipment, more airport space, and more human effort. Preplanned changes in planned operations start as soon as the budget plan becomes effective and continues throughout the season. On-the-day schedule changes that upset passengers most further add to the rise in costs and loss in revenue.
Almost every single cost item in financial reports contains a part of these disruption costs. Still, they are not officially recognized as a cost category - not because they don't exist, but because their multidimensional and dynamic nature doesn't fit into the linear frame of inherited cost structures. Lack of ability to understand the origins of disruption costs is the main obstacle to the effective control of losses in cost and revenue, and operational risk management.
Becoming friends with disruptions and understanding their messages is a rare, if not the only, opportunity for planners and decision-makers to tune into reality and understand their deeper origins. Only then can they take collective actions to improve the quality of operational performance, provide better service to passengers, and create economic value.
Considering the dynamics and complexity of the airline business, managing these costs effectively requires performing continuous systemic reality checks, as described in my book Beyond Airline Disruptions - Thinking And Managing Anew and numerous blog articles. Mastering these practical skills makes complexity manageable and ensures an inimitable competitive advantage. Don't let KPIs destroy the opportunities for progress.
Don't let generic, obsolete KPIs destroy the opportunities for progress.
The fastest and most steadily growing costs in the airline industry are those related to operational disruptions, resulting from the mismatch between companies' plans and actual results. These costs can reach up to 30 percent of operating expenses, especially for major hub carriers. This is partly due to investments in punctuality through built-in buffers designed to offset the negative effects of disruptions. These buffers include additional block times, more aircraft, more fuel, extra crew, more ground personnel, additional aircraft stands, spare parts, equipment, more airport space, and more human effort. Preplanned changes in planned operations start as soon as the budget plan becomes effective and continues throughout the season. On-the-day schedule changes that upset passengers most further add to the rise in costs and loss in revenue.
Almost every single cost item in financial reports contains a part of these disruption costs. Still, they are not officially recognized as a cost category - not because they don't exist, but because their multidimensional and dynamic nature doesn't fit into the linear frame of inherited cost structures. Lack of ability to understand the origins of disruption costs is the main obstacle to the effective control of losses in cost and revenue, and operational risk management.
Becoming friends with disruptions and understanding their messages is a rare, if not the only, opportunity for planners and decision-makers to tune into reality and understand their deeper origins. Only then can they take collective actions to improve the quality of operational performance, provide better service to passengers, and create economic value.
Considering the dynamics and complexity of the airline business, managing these costs effectively requires performing continuous systemic reality checks, as described in my book Beyond Airline Disruptions - Thinking And Managing Anew and numerous blog articles. Mastering these practical skills makes complexity manageable and ensures an inimitable competitive advantage. Don't let KPIs destroy the opportunities for progress.
Don't let generic, obsolete KPIs destroy the opportunities for progress.
