BRIDGING THE GAP BETWEEN AIRLINE

Transcription

1 BRIDGING THE GAP BETWEEN AIRLINE O P E R AT I O N S A N D T H E PA S S E N G E R : operations to improve customer IN ASSOCIATION WITH:

2 INTRODUCTION Ask any airline leader why operational excellence remains elusive, and the usual suspects appear quickly: antiquated air traffic control, airport ramp congestion and just bad luck with weather, all conspiring to throw the most careful flight plans into chaos. Airline complexity has long served as the enemy of on-time percentages and disrupted schedules for carriers large and small, regional and global. But what if effective answers to airline operational problems lie hidden within departmental silos, waiting to be discovered and harnessed to create a real-time situational awareness for operations leaders? What if those answers helped smooth operations and enhanced the bottom line? Airlines can control their destinies operationally, but they don t realize it, says Michael Baiada, a consultant for ATH Group in Evergreen, Colorado, who has studied airline efficiency for decades as an airline pilot. Each silo in an airline approaches operations with their own interests above others, and it turns into this Whack-a-Mole where leaders just hit the next problem that pops up on their radars. While improving the customer are clear motivators, new regulations penalizing delays in the United States and European airspaces incentivize airlines to take a fresh look at optimizing how an airline runs day to day and deals with unplanned disruptions. Airlines have a tremendous opportunity to improve performance if they use the best available, real-time data to treat their thousands of daily flights like the best manufacturing companies treat their factories, Baiada continues. Using tactical data in real time to track their aircraft (something airlines don t do today), so as to make a series of decisions on aircraft speeds and arrival times can make all the difference on the ground in three to five hours. To learn more about the relationship among data, technology and airline operations, and the ways these affect customer service and profitability, Forbes Insights and Sabre surveyed 100 operations, marketing, information technology and finance executives from the world s largest airlines. This brief, the first in a series of three, highlights a few of the key findings and explores the challenges operations executives face today in getting the data they need to deliver on their airline s brand promise. 1

3 THE IMPORTANCE OF ACTIONABLE AND QUALITY DATA Airline leaders cite technology and limited access to actionable data as the largest obstacles to improving their airlines customer experience (Table 1). Yet access to data is essential, and transforming that data into actionable intelligence is a key differentiator for airlines. (Table 1) WHAT ARE THE LARGEST OBSTACLES TO IMPROVING YOUR AIRLINE S CUSTOMER EXPERIENCE? TECHNOLOGY LACK OF INFORMATION SHARING LIMITED ACCESS TO ACTIONABLE DATA HUMAN RESOURCE LIMITATIONS 5 52% BUDGET LIMITATIONS 23% 6 28% ORGANIZATIONAL STRUCTURE 12% 25% INABILITY TO ACHIEVE CONSENSUS 7 11% ON COSTS & BENEFITS 8 25% LACK OF VISION 6% 2

4 Consider the following scenario: A hurricane changes course suddenly, forcing a ceasing of operations in six hours and evacuation of the airport. Inside the operations center, tough decisions need to be made in real time: which flights to divert, which flights to cancel both today and in the next two days, and what to do with scattered crews and stranded customers. Inside the strategic nerve center of any carrier in this position, it is not the time for guesswork. Leaders require quality information from all areas of the airline and need it presented in a way that gives them the true costs in order to make operational decisions. Data quality is absolutely the greatest challenge for the overall IT strategy, says Wan Qingchao, DGM of SOC for Air China. With incomplete or inaccurate data, it is impossible to deliver high-quality products, no matter how excellent the algorithm is and how intelligent the system is. Our company has realized this during the process of working on the decision support system of flight operations. As Mr. Wan goes on to detail, Air China faced a similar weather-related challenge with a recent typhoon that affected operations. Its systems projected a demand spike the day after the storm, causing the carrier s capacity allocation network to plan for far more seats. But in fact, the data significantly over-represented the true demand after the storm, so flights flew only 10 percent full in some cases. The outcome reflected the challenges of finding new ways to link data streams together to understand the right flights to cancel and the right ones to prioritize. 3

5 This kind of situation is a consequence of inaccurate data acquisition, where the data statistics of the system don t match with the actual operations, Mr. Wan says. Addressing the problem requires focusing on making data accurate as well as turning it into something that is actionable for leaders, or a single version of the truth to guide modern airline operators. The need for cost-effective technology that mines quality data from all reaches of an airline s operations from crew scheduling to revenue management to technical operations and flight planning was reflected in the survey results (Table 2) through the desire by leaders to adopt the latest technologies in order to improve the three interrelated areas of operational performance, customer service and profitability. Few leaders, though, ranked access to actionable data as highly as other choices in terms of driving improvement, potentially because they lack familiarity with solutions that can affect operational performance. Real-world performance of IT solutions that produce actionable data lead to outcomes that do not force airline management to choose between cost control and improved performance. Better operating metrics often drive profitability as well as enhance a carrier s brand promise. (Table 2) WHAT DO YOU BELIEVE WOULD IMPROVE YOUR AIRLINE S PERFORMANCE? OPERATIONAL PERFORMANCE Adopting advanced technologies 46% CUSTOMER EXPERIENCE 53% PROFITABILITY 41% Information sharing 27% 27% 12% Strong leadership 26% 16% 50% Increased budgets 19% 20% 13% More skilled employees 16% 33% 21% Improved access to actionable data 16% 23% 10% 4

6 AN EQUAL STAKE ACROSS THE AIRLINE IN CREATING A SINGLE VERSION OF THE TRUTH The journey toward creating actionable data for airline operations includes several challenges: extracting usable real-time data from all areas of airline operations, finding the right tools to analyze the relationships between those data subsets, and finally, determining the best way to present that analysis to leaders in a way that is truly actionable to drive improvement in operations. The right tools also have to be in place to present operational leaders with the best possible version of operational impact, or a single version of the truth, to guide real-time decision making. At Saudi Arabian Airlines, a holistic approach to information technology helps link different areas of the enterprise while generating the kind of data needed to help explain how to optimize operations. We have managed to create the underlying foundation by integrating all our operational, commercial and back-office platforms in a real-time approach, thereby giving us the opportunity to capture real-time data for further analysis, says Muhammad Ali Albakri, former executive vice president of strategic projects & airlines transformation at Saudi Arabian Airlines. Without having such cross-referenced analysis, capturing data alone may be limited in its value. When picking between two flights to cancel because of operational constraints, load factor (a measure of how full with paying passengers planes are) may seem like the easiest metric. But a half-full plane may hold a very high percentage of high-value customers and present a much more significant revenue impact than the fuller flight; the duty day limits of flight crews could make one 5

7 flight much more obvious, and the maintenance needs of the aircraft over another may yet be the most pressing driver of how to choose which flight to cancel. Those factors could even shift and evolve in real time; finding a way to balance the real-time data inputs into a decision matrix at the carrier s strategic operations center is where new technologies present the most value (Table 3). (Table 3) WHAT WOULD BE AN IDEAL WAY TO DISPLAY REAL-TIME, ACTIONABLE DATA? DEPARTMENT-RELATED DATA ON A DEPARTMENTAL LEVEL DATA FROM SEVERAL DEPARTMENTS ON A DEPARTMENTAL LEVEL SOME DATA ON AN ENTERPRISE LEVEL ALL RELEVANT DATA ON AN ENTERPRISE LEVEL Least Preferable Most Preferable 2% 14% 11% 2% 6% 20% 31% 9% 17% 28% 35% 9% 43% 34% 17% 34% 32% 5% 6% 46% 6

8 Finding tools that present operational decision makers with the single version of the truth drives improvement in metrics that go far beyond the simple on-time and completion factor: revenue, customer experience scores and more benefit when data powers the right decisions every day. What the survey results reflect is more confirmation that leaders believe technology can solve these issues and improve customer service: Technology and the ability to collaborate among different departments rank highly as both obstacles and enablers to aligning customer experience and operational performance (Table 4). This is one area that requires not only advanced technologies but certainly deep expertise in the various aspects of the business itself in order to build the necessary intelligence to produce actionable, reliable and timely data, Albakri says. (Table 4) WHICH OF THE FOLLOWING REPRESENT THE TOP OBSTACLES AND ENABLERS OF ALIGNING CUSTOMER EXPERIENCE AND OPERATIONAL PERFORMANCE? Ability to Collaborate Technology Adoption (Legacy vs. Advanced Technologies) Resources (Budget, Skills, Backlogs, Priorities) Ability to Achieve Consensus on Service Quality Improvement Costs and Benefits Organizational Structure (vertical vs. horizontal) OBSTACLES 45% 45% 54% 40% 17% ENABLERS 53% 49% 54% 32% 22% 7

9 If the utilization of operational resources can be increased by even a very small percentage with advanced technologies, the absolute value can be considerably large, not to mention the inestimable social value from the improved safety management level and service quality, says Air China s Mr. Wan. More than half surveyed (51%) believe improving operations is a top priority, ranking it higher than other factors such as aligning operations, marketing and IT (39%), and building customer loyalty (35%). The biggest obstacle to improving airline performance, according to the survey? Finding the right combination of technologies that yield the data required to build actionable intelligence for operational leaders, and creating those solutions in a cost-effective way. Gulf Air s operational strategy depends on actionable data in order to ensure optimum operations with reduction in operating costs, says Dr. Jassim Haji, director of information technology for Gulf Air, which recently changed its approach to IT infrastructure. What led to the change in approach is the realization that acting fast and quick on data helps to avoid potential disruptions, turns negative passenger experiences into positive ones, and keeps us ahead of the competition. Many different IT systems can mine raw data from different parts of an airline s operations, but how that data is analyzed and presented in real time (elevating simple technology into a solution that illuminates the true costs of delays, cancellations and resource constraints) can translate into perceived customer experience. The survey data reflects the importance of strong operations on brand perception and how those pieces flow through profitability (Table 5). (Table 5) HOW CAN A HORIZONTAL ORGANIZATION AND ADVANCED TECHNOLOGY SYSTEMS HELP AIRLINES OVERACHIEVE ON OPERATIONAL GOALS? Improved business processes, reduced cycle time, faster speed to market Real-time, seamless view of operational performance data Enhanced disruption handling due to more efficient collaborative decision making Better collection and decision-making ability using customer data Accelerate the improvement of profitability No benefits to a flat connected organization 74% 72% 71% 69% 60% 60% 8

10 BETTER ENTERPRISE SYSTEMS DRIVE ROI THROUGHOUT THE COMPANY All operational management now aims to defuse operational situations to prevent high-profile meltdowns that generate negative media coverage, hurt brand perception and often create lasting damage. More so than before, carriers are de-risking operations to prevent weather-related problems, and they re doing it through better data management and forecasting through these tools. Airlines can plan for the worst, but being tested by unforeseen operational crises remains the ultimate stress test of a carrier s whole IT infrastructure. Results are measured by the event s impact on revenue and the speed at which an operation returns to normal, an effort that typically requires all parts of an airline to move toward common goals in a coordinated manner. Two aspects generally take precedence when we recover irregular operations: namely crew schedules and legality and aircraft serviceability, Saudi Arabian Airlines Albakri says. Passengers conveniences and connecting passengers are also taken into consideration, depending on the situation. However, conducting cohesive assessment under the pressure of recovering irregularities remains a real challenge without the advanced intelligent tools. 9

11 Optimizing the day-to-day flight schedule provides obvious benefits that can push through the enterprise, but truly pay off during irregular operations where even the most careful plans are disrupted. With U.S. regulators fining airlines for aircraft that sit on the tarmac for more than four hours and European regulators forcing carriers to pay passengers back for delays, carriers are more motivated than before to be ready for (and minimize) schedule disruptions. One of the critical pieces is having a system that performs what-if scenario analysis to find the optimum way to handle a particular disruption event, says Dr. Haji of Gulf Air. This analysis should take into consideration the available aircrafts and crew, and compare this to accommodating passengers on other airlines, delaying a connecting flight to avoid missed connections or finding other alternatives. Often the decisions are revenue-driven above all, which impacts profitability at the same time as protecting the highest-value customers. What we see in leading airline performers is a dedication to operational excellence as the foundation of the brand promise to customers: we ll get you there more often than others, and meeting that promise creates a virtuous cycle of satisfaction and improvement in loyalty. Those are factors that frequently improve profitability. 10

12 BRAND PROMISE DELIVERY AND OPERATIONAL EXCELLENCE NEED TO BE DATA-DRIVEN The survey notes that 65% of airline leaders say their organizations are transforming across multiple platforms and functions; change and new technology are joining hand in hand. This allows airlines to harness data for operations leaders, with the enterprise enjoying the follow-on effects. To that point, the most frequent response to which initiative can improve overall operations: building unified technological systems in the enterprise (77%). Proper change management is another essential element that is required to ensure clear two-way communication, staffs knowledge transfer, staffs buy-in and create the necessary economic environment where the technology implementation brings true business values, Saudi Arabian Airlines Albakri says. Finding the right data tools leads airlines to see the virtuous relationship between improved operations, better brand perception and the bottom line. 11

13 I firmly believe that operation improvements will help airlines make good on their brand promises to customers and raise profitability, Air China s Mr. Wan says. The future aviation market will evolve towards personalized service and market segmentation. Building operational capacity is the fundamental guarantee for improving the strength of the company and enhancing the brand value and image. 12

14 METHODOLOGY Based on a survey of 100 executives from the world s largest airlines conducted by Forbes Insights and Sabre in the first quarter of All executives came from airlines that carried more than 500,000 passengers over the last 12 months. Out of that, 51% of airlines surveyed carried between 1 million and 25 million passengers, 15% carried between 25 million and 50 million passengers, and 21% more than 50 million. 33% of executives represented operations; 32% sales, marketing and customer service; 16% IT; and the rest came from other functions. 46% of survey respondents were from the Americas, 37% from EMEA, and 17% from Asia Pacific. ACKNOWLEDGMENTS Forbes Insights and Sabre would like to thank the following individuals for their time and expertise: Muhammad Ali Albakri, former Executive Vice President of Strategic Projects & Airlines Transformation, Saudi Arabian Airlines Michael Baiada, Consultant, ATH Group Dr. Jassim Haji, Director of Information Technology, Gulf Air Wan Qingchao, DGM of SOC, Air China Visit our website Worldwide Headquarters Sabre Airline Solutions 3150 Sabre Drive Southlake, Texas USA Please contact our nearest regional office for more information: Asia/Pacific Tel: contact.apac@sabre.com Europe, Middle East, Africa Tel: emea.contact@sabre.com The Americas Tel: contact.americas@sabre.com 4 Sabre, Sabre Airline Solutions and the Sabre logo are trademarks and/or service marks of an affiliate of Sabre Sabre Inc. All rights reserved.