IATA Airline Operational Cost Task Force (AOCTF) Klemen Ferjan, MBA Consultant, IATA Operations Maintenance Cost Task Force (MCTF) 1 Airline Cost Conference Montreal - March 6, 2013 Geneva August 30, 2013
Facts & Figures to make us proud Air Transport is one of those industries that has transformed the world 19 a major contributor to global economic prosperity th in the World a major global employer provides significant social benefits 57 million 3.5x From 130 weeks to 1.7 weeks And will continue to provide jobs remain a vital component of modern life, a force for good 82 million 6 billion 6.9 trillion Source: Air Transport Action Group 2
And yet The worldwide airline industry has generated an average annual post-tax profit of just 0.1% of revenues between 1970 and 2010! (source ICAO, IATA) Although post-tax profit is slowly improving it still doesn t cover cost of capital Airline Cost Task Force (AOCTF) 3 AOCTF strives to improve the bottom line through effective cost management
AOCTF Mission & Objectives Mission: To share operational cost management best practices while providing an industry platform for effective cost benchmarking. Objectives: Support the industry efforts to better understand cost drivers & trends, manage operational costs Refine and standardize definitions and methods from a management accounting perspective Provide AOCTF members with an annual report, analyzing major cost drivers, identifying industry trends Increase the number of participating airlines, ensure greater data diversity Airline Operational Cost Task Force (AOCTF) 4
AOCTF Team IATA Operations, Montreal Chris Markou, Assistant Director Geraldine Cros, Operational Cost Manager Klemen Ferjan, Consultant Paris Dastjerdi, Intern Airline Operational Cost Task Force (AOCTF) 5
Steering Committee Formed in 2013, consists of 6 airline members: Chairman, Richard W. Creagh, UIA Vice-Chairman, Josua du Plessis, SAA Valdimar Bjornsson, Primera Air Hassan Ali, Egyptair Carlos Ramirez, Air Canada Nihat Cevik, Turkish Airlines Airline Operational Cost Task Force (AOCTF) 6
AOCTF FY2012 Process Data Collection Data Validation & Consolidation Analysis Report Airline Operational Cost Task Force (AOCTF) 7
Data Collection Various channels Current AOCTF members Personal contacts Steering Committee s network Promoting at Conferences, Symposiums, Seminars, etc. Back and forth communication Resulted in submissions from 30 Airlines Airline Operational Cost Task Force (AOCTF) 8
Data Validation & Consolidation The fun part! Data Check within the Excel file Back and forth communication Consolidation in one large Excel file More data checking with Qlikview More back and forth communication Airline Operational Cost Task Force (AOCTF) 9
Analysis Identified Cost Drivers Grouped data into several metrics to measure the effect of cost drivers Provided benchmarking on KPIs with disclaimer: Study is to inspire discussions around the cost drivers and cost elements NOT meant to derive direct comparisons as every airline operates in unique environment Airline Operational Cost Task Force (AOCTF) 10
Report Introduction Airline Industry Landscape 2012 Overview of the AOCTF Airlines Yearly Trends Analysis Operational Cost Analysis Focus on Fuel Cost Aircraft Type Analysis Detailed Analysis of B737NG and A320 family Airline Operational Cost Task Force (AOCTF) 11
Key highlights from the Report Airline Operational Cost Task Force (AOCTF) 12
Productivity Airline Operational Cost Task Force (AOCTF) 13
Revenue size indicated against RASK and CASK AOCTF 14
Yearly Trends Analysis 2009 2010 Change (%) 2011 Change (%) 2012 Change (%) Revenue Tonne Km (RTK) 39.6 Bil 42.7 Bil 7.6% 45.3 Bil 6.1% 49.6 Bil 9.5% Available Tonne Km (ATK) 61.4 Bil 63.9 Bil 4.1% 69.7 Bil 9.0% 75.3 Bil 8.1% Weight Load Factor (WLF) 64.6% 66.8% +2.2 pt 65.0% -1.8 pt 65.9% +0.9 pts Revenue Passenger Km (RPK) 312.4 Bil 327.1 Bil 4.7% 349.7 Bil 6.9% 380.6 Bil 8.8% Available Seat Km (ASK) 428.6 Bil 434.2 Bil 1.3% 471.7 Bil 8.6% 500.4 Bil 6.1% Passenger Load Factor (PLF) 72.9% 75.3% +2.4 pts 74.1% -0.8 pts 76.1% +2.0 pts Average Fleet Age (Years) 9.08 8.88-2.2% 8.85-0.4% 8.31-6.1% Total Flight Hour 2.449 Mil 2.554 Mil 4.3% 2.757 Mil 8.0% 3.0 Mil 7.8% Total Flight Cycle 914.082 K 945.648 K 3.5% 1.007 Mil 6.5% 1.1 Mil 9.9% Total Operating Expenses (USD) $29.6 Bil $32.2 Bil 8.6% $38.7 Bil 20.4% 40.9 Bil 5.7% Total Operating Expenses/FH (USD) $12.1 K $12.6 K 4.1% $14.1 K 11.5% 13.8 K -2.0% Total Operating Expenses/ASK (US Cents) 6.91 7.41 7.2% 8.21 10.9% 8.18-0.4% Total Operating Expenses/ATK (US Cents) 48.28 50.35 4.3% 55.61 10.5% 54.39-2.2% Fuel Share of Total Ops. Expenses 32.7% 32.4% -0.3 pts 36.9% +4.5 pts 39.0% +2.1 pts Total Ops Expenses without Fuel/ASK (US Cents) 4.65 5.00 7.7% 5.19 3.6% 4.99-3.8% *Based on 15 recurrent airlines CASK 8.21 8.18 cents CATK 55.61 54.39 cents Airline Operational Cost Task Force (AOCTF) 15
2012 Operational Cost Structure Airline Operational Cost Task Force (AOCTF) 16
Comparison with 6 Major US Airlines (DOT Form 41) 6 US Airlines (DOT Form 41) 2012 US Cents/ATK Comparison with AOCTF US Cents/ASK Comparison with AOCTF Fuel and Oil $35.6 Bil 22.79 7.74% 3.37 11.18% Maintenance and Overhaul $9.5 Bil 6.09 6.05% 0.90 9.56% General and Administrative $7.6 Bil 4.88 0.89% 0.72 4.58% Flight Deck Crew $5.4 Bil 3.44-12.17% 0.51-7.99% Reservation, Ticketing, Sales and Promotion $8.0 Bil 5.13 26.81% 0.76 29.54% Station and Ground $9.7 Bil 6.24 45.81% 0.92 47.83% Flight Equipment Depreciation $5.0 Bil 3.22 0.68% 0.48 4.38% Aircraft Rentals $5.5 Bil 3.50 16.58% 0.52 19.69% Airport Charges + Air Navigation Charges $8.8 Bil 5.64 16.85% 0.83 19.95% Passenger Service* + Cabin Attendants $8.4 Bil 5.35 3.50% 0.79 7.10% Other $2.0 Bil 1.27 35.39% 0.19 37.80% Total $105.5 Bil 67.55 12.11% 9.99 15.38% Airline Operational Cost Task Force (AOCTF) 17
Cost Grouping Airline Operational Cost Task Force (AOCTF) 18
Focus on Fuel Cost Airline Operational Cost Task Force (AOCTF) 19
Aircraft Type Analysis Fleet Type # Active Aircraft # of Airlines reporting B737 NG 695 10 A320 Family 277 11 B737 Classic 208 7 B777 184 10 A330 137 10 B747 55 7 A340 45 6 B767 38 < 5 A380 23 < 5 Regional Jet* 90 5 * Combined fleet of EMB-170, EMB-190, and CRJ Flight Operations Flight Ops. $/AC Flight Ops. $/FH Flight Ops. $/FC Flight Ops. $/ASK (US Cents) Flight Ops. $/ATK (US Cents) B737 NG $13.3 Mil $4,152 $7,428 4.18 34.16 A320 Family $14.5 Mil $4,633 $9,722 4.56 36.80 B737 Classic $13.3 Mil $4,624 $6,315 5.36 46.21 B777 $48.6 Mil $11,220 $64,616 4.59 27.33 A330 $33.8 Mil $8,800 $38,455 4.24 26.93 B747 $43.1 Mil $13,975 $86,616 4.33 30.93 A340 $48.5 Mil $11,824 $88,705 5.73 32.46 B767 $33.8 Mil $8,002 $51,887 4.78 25.68 A380 $61.7 Mil $18,837 $181,920 5.02 40.03 Regional Jet* $8.8 Mil $3,437 $5,462 6.05 46.90 * Combined fleet of EMB-170, EMB-190, and CRJ Airline Operational Cost Task Force (AOCTF) 20
Detailed Analysis of A320 Family Airline Operational Cost Task Force (AOCTF) 21
Way Forward Does AOCTF provide a real value to YOU? Input: We need your comments and suggestions to improve Participation: AOCTF evolution indicates between 35 and 40 airlines will provide data FY2013, will you be among them? Involvement: AOCTF Steering Committee will increase after the Airline Cost Conference, will YOU be our new SC member? Airline Operational Cost Task Force (AOCTF) 22
More info on www.iata.org/aoctf, AOCTF@iata.org Thank you! Q/A Klemen FERJAN, MBA Consultant, IATA Operations FerjanK@iata.org