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1 MAXIMIZING CREW PRODUCTIVITY Combining analytical models with the reality of under-the-hood airline business practices Presented by: Martin Harrison Principal, ICF International 3rd Airline Cost Conference August 26-27,
2 INTRODUCTIONS Who Am I? Martin Harrison, Principal at ICF Former COO Ground, Tech & Flight Ops (including ex Head of Crew Planning) Served in network, LCC, and regional business models JAA Form 4 Approved Post Holder 1 1
3 INTRODUCTIONS Who is ICF? One of the world s largest, most experienced aviation consultancies 52 years in the air transportation industry 85 aviation staff located in 7 offices worldwide, including Hong Kong ICF Worldwide Airline Clients 2 2
4 AGENDA The Challenge The Theory The Practice 3
5 THE CHALLENGE The Crew Planning Manager is constantly walking the tightrope of too many crews or not enough crews 4
6 THE CHALLENGE Too many crews means you are costing too o much Too many Too few...but having too many crews will never get you fired 5
7 THE CHALLENGE LCCs seem to be more adept at the balancing act 900 Average flight hours per pilot Average easyjet Ryanair Thomson British Airways Monarch Virgin Atlantic Jet2 Thomas Cook flybe bmi Group Sources: 2012 UK CAA, Ryanair 20-F 6
8 THE CHALLENGE Note the industry is seeing an increasing share of airline employees being pilots and cabin crew 40% Share of pilots and cabin crew out of total employees 35% 30% 25% 20% 15% 10% 5% 0% Being proficient at managing your crew resource cost is growing ever more important Source: IATA WATS 7
9 AGENDA The Challenge The Theory The Practice 8
10 THE THEORY First of all, you have to think about crew related expenses and their different natures Crew benefits Fixed salary Variable salary Pension Insurances (loss of licence, health) Crew indirect costs Hotel Ground transport Flight positioning Training Flight & duty base allowances Temporary allowances 9
11 THE THEORY Cost structure depends on the nature of operations 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Crew cost structure 0% Flybe Virgin Pilot salaries Pilot training Cabin crew salaries + training Pilot allowances Pilot other costs Cabin crew allowances Source> UK CAA, ICF analysis 10
12 THE THEORY Crew productivity is driven by many factors, but internal Flight Operation s processes have an important impact Crews Per Aircraft Flight Crews per Aircraft vs. Average Daily Utilization Less Efficient More Efficient Sources: IATA World Air Transport Statistics (WATS); ACAS; Annual reports 11
13 THE THEORY Simpler work rules and leaner operations put the LCCs on the lower end of the spectrum in terms of how many crews they need Atlas Pilots per aircraft (heads) EL AL Icelandair MIAT Onur S7 Ukraine Int. Air Astana ANA Kuwait Tunisair Ryanair MEA China Southern Asiana Finnair Korean Air Turkish Swiss TAP Gulf Air Ethiopian Royal Jordanian Easyjet Average daily aircraft utilisation (hours) Their advantage is substantial compared to some legacies Even though LCCs tend to operate out of multiple bases Source: IATA WATS, Easyjet, Ryanair annual reports. 12
14 THE THEORY Rule of thumb: more aircraft hours means more crews, but how many more? Additional pilots per additional hour of utilisation (heads / hr)? In the industry downturns, airlines tend to be able fly more aircraft hours with less pilots As the good times are returning, are we losing that focus? Source: IATA WATS 13
15 THE THEORY Best Practice Operations Planning developed analytical systems and processes to optimize for efficiency and financial impact 1970s 80s 1990s 00s 2000s today Incident Focus System Focus Profit Focus FOCUS Manage incident recovery, fire-fighting Zero-sum decision making Plan for upcoming events Balance maintenance and operational needs Integrated planning to optimize resources Customer and financial impact at center RESULT Silo-based decisionmaking Blame culture, wasted effort Department metrics only results in mixed performance Coordinated business decisions Problem-solving culture Joint metrics improves focus on system performance Integrated planning and execution structure Innovative planning and control Feedback metrics for continuous improvement What happened What will happen 14
16 THE THEORY whereas in Crew Planning, the sophistication of systems has often outpaced the effectiveness of implementation Manual Schedules Automated Pairing & Rostering Preferential Bidding Focus Comprehensive crew coverage of flight schedule Complex algorithms geared toward finding efficiencies Maximizing crew efficiencies with schedule preferences Outcome Labor intensive Time consuming Unrecognized efficiencies Improved schedule efficiencies Integrated fleet and crew planning processes Optimized schedules based on commercial needs and crew preferences Risks Weak Optimization Weak Calibration Weak Strategy 15
17 AGENDA The Challenge The Theory The Practice 16
18 THE PRACTICE Three Organizational Considerations People Focus: Organization structure, business policies, responsibilities, incentives Strategies: Business model Growth Commercial flexibility HR marketplace Business Processes Focus: Procedures, logic, algorithms, data use, communication, decision making, schedule recovery, misconnects, feedback loops Tools Focus: Automation and optimization capabilities, integration, management information 17
19 THE PRACTICE Crew efficiencies typically slip at four points (in my experience) 1The classic ops vs. commercial tussle 2Something optimised vs. something resilient 3The tightrope bias as mentioned before 4These are real people (yes, they have feelings, they need rest and they are in demand) 18
20 THE PRACTICE An airline need routine, comprehensive assessment Strategy Planning Scheduling SOC The right KPIs Business Plan Fleet Plan Commercial Plan Aircraft Mx System Flight Schedule Planning Aircraft Mx Checks Crew Establishment Crew Leave Management Crew Training Crew Pairing Builds Crew Bid Process Roster Changes/Trades Flight Watch Crew Tracking Crew Comms Dispatch Disruption Management Pay to BH ratio Crew hotel & deadhead Staffing vs plan Roster BH distribution FRMS Roster stability Hotel/ Transport Management Tail Allocation You must understand upstream and downstream effects Key: Other functions Crew Planning 19
21 THE PRACTICE And finally, as one can learn from LCCs, often simple is best 20
22 Thank you! For questions regarding this presentation, please contact: Martin Harrison Principal, Aviation Markets 21
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