Enabling Strong Operational Performance
“A System View: The Strategic Value Of Operations,” which appeared in the most recent issue of Ascend, explains how airlines can add value through operations. The topic can be further addressed by delineating the capability of an airline to encourage growth in operational value through collaboration among multi-faceted departments within its business structure.
L ike any well-run business, an airline must always strive to better its financial margin. One way to improve that margin is through operational efficiency. “A System View: The Strategic Value Of Operations” discussed ways in which operational factors can contribute substantially to the budget-savvy carrier’s bottom line.
At first glance, adding strategic value through operations may not seem like an easy task, but it can be encouraged through collaboration among an airline’s various departments.
Operations research shows that most airlines are established on a multi-commodity network structure. In other words, an airline is basically a set of different and somewhat diverse networks, including passengers, aircraft, crews, cargo and baggage, working to achieve a common objective: to transport passengers from one geographic point to another in the most efficient manner.
And all of these different networks are firmly rooted in a single input: the airline’s schedule.
Because airlines are such complex entities to manage, many different departments have been created to deal with each facet. For example, inventory control handles schedule changes on the airline’s reservations systems. Crew management plans the most optimal schedules for pilots and flight attendants that comply with negotiated labor and mandated aeronautical regulations.
These examples represent just a couple of the functions performed by multiple teams throughout an airline’s organization to keep each department synchronized with the published airline schedule.
In addition to these defined departments, airlines also apply various technologies to achieve their strategies and manage their day-to-day business procedures.
The bottom line is airlines encompass numerous extremely complex systems that require highly structured organizations and depend heavily on technology to support their operations.
In this intense business environment, enhancing opportunities for and strongly encouraging collaboration enables airlines to become more effective and competitive.
The Value Of Collaboration
Identifying the big blocks of business processes associated with making a schedule work is the first step in understanding the value of collaboration. The scheduling team drives the activities of many departments within an airline. Therefore, listening and collaborating with its stakeholders enables the scheduling team to achieve a robust and effective schedule.
Organizational Specialization: The First Constraint
A solid organizational structure is absolutely necessary to successfully guide the organization and execute an airline’s strategy.
Specialization is also necessary, since each airline department handles specific business issues, including such highly diverse functions as revenue management, maintenance, scheduling and ancillaries.
Each airline department must be aligned with the strategy, and key performance indicators (KPIs) should be applied to track the carrier’s performance.
Rules and responsibilities are clearly defined. Organizational charts are carefully and logically drawn. Communication must follow strict lines of command.
In fact, good communication is a given when there is sound and competent leadership, which is a necessity because the higher communication and other relevant issues are pushed within the organization, the more diluted any given business problem becomes. This leads to greater oversight and regulation, as well as burgeoning processes, roles and KPIs, effectively bogging down the airline’s entire operation.
Business processes and operations continue and must be effectively handled regardless of the complex business issues facing upper managers and executives. Therefore, competent leadership and clear communication are critical at all levels of the organization.
To further complicate matters, the interdependencies between and among many departments are intense, though necessary, since different departments require inputs and outputs from one another to function effectively.
While specialization is necessary, it can also be a source of day-to-day difficulties, including ineffective collaboration, if it is not managed correctly.
In the aforementioned article, one of the topics was suboptimal solutions, which encompass a range of less-than-satisfactory approaches. These, in turn, can reduce performance and/or increase costs. In fact, organizational specialization can be one of the main drivers of local optimal solutions (in other words, focusing only on a small and relatively familiar portion of the problem), instead of global optimal solutions.
Examples of local optimal solutions are easy to find and identify: scheduling attempts to maximize revenue without understanding the impact on the operation; maintenance unilaterally decides to open a base in a given city, because the move is cost-effective from the department’s standpoint; or an airport authority offers incentives but, in turn, requires a carrier to fly aircraft with different capacities that might not make economic sense in order to take advantage of them.
These types of suboptimal decisions drive costs upward.
So how can departments that are specialized by necessity make decisions that are globally optimal rather than beneficial for just one group and thereby reduce overall costs?
Basically, members of a particular department need to understand the functions and responsibilities of other departments, as well as the impact each has on every other one and the organization as a whole.
Well-known business analyst Yves Morieux recently addressed this topic. His example focused on an automobile designer who placed a cable where it was extremely difficult to reach. Morieux pointed out that if and when the cable needed to be repaired, an auto-shop mechanic would have to remove the engine to access the cable. This, in turn, would adversely affect the productivity of repair shops, thereby increasing the cost because it took longer to fix.
Clearly, the designer did not think through the entire process. Instead, he focused simply on finding a solution to fit his own needs, not about how the solution would inevitably affect down-line processes. Most likely, placing the cable in this location was the most cost-effective solution from a design standpoint, which fulfilled his objective.
Similarly, an airline’s scheduling department decided to fly a new fleet type to a new destination without understanding the process necessary to prepare the destination airport to service that particular aircraft model. The airport division struggled to acquire tow bars and the correct ground-support equipment. In addition, all relevant personnel had to be trained to handle this new airplane type.
If some measure of collaboration among the airline’s departments had been in place — and the person driving the changes had understood the impact on all departments involved — the true cost of flying this particular fleet type to this specific destination could have been calculated and evaluated in advance. The result would be a smoother, easier implementation.
The question then becomes: How can members of one department learn what the other departments do? And how can that understanding be more fully and practically put to use?
Morieux has proposed a simple answer: Integrators are needed to connect different departments. In the airline environment, the process of integration is referred to as “integrated planning.”
Collaboration also has to happen at the individual business-process level. For example, regarding the crew-management process, effective collaboration between the training and pilot/cabin bases is necessary to make pairings and create a roster. If pre-assigments are incorrect or not provided, the airline will have an infective crew plan.
Integrated Planning: Understanding The Impact Of Collaboration
Airlines follow a very predictably linear and sequential planning process.
The first step is the network planning process, in which the airline decides the markets to serve during different specific timeframes, say five years, 10 years and so on.
Once the network planning phase has been completed, the scheduling planning phase begins. This phase extends from the current year to approximately three months prior to the date the flight is scheduled to begin service. During this phase, the network plan is converted to an executable schedule.
The short-term scheduling group then takes ownership of the schedule and begins to manage any changes that occur close to the day of departure. These changes might include a decrease in demand in a given market due to a pandemic disease a month prior to schedule operation.
Finally, the schedule is given to the operations group for execution.
Airlines that approach these processes in a collaborative fashion tend to be more effective and productive, thereby lowering costs through not only greater productivity but also through greater efficiency.
Collaboration is necessary to communicate the proposed schedule to different stakeholders to review and assess its impact on their department.
Although the scheduling group technically “owns” the schedule, other stakeholders contribute valuable input, as they are responsible for executing the schedule. Therefore, a compromise between scheduling and other stakeholders must be achieved.
The advantages of this approach include:
- Detection of otherwise-unforeseen issues during each planning phase (network, scheduling, short-term scheduling, operations and other phases).
- Quantifiable financial impact of the proposed schedule, resulting from stakeholder contributions that facilitate schedule completion.
- Early resolution of stakeholder issues in the process, thereby providing stability to the schedule.
Realistically, there are also potentially negative issues with the integrated planning processes. These may include:
- A cumbersome planning process due to a lack or unavailability of optimal processes or IT tools during each phase.
- The inability of the airline to respond quickly to market conditions, especially if schedule changes are made close to the day of departure.
- The unwillingness of the scheduling department to share the proposed schedule with other departments in an attempt to guard its commercial and competitive value. Such risk can be effectively mitigated by granting schedule access only to designated employees in each department.
Effective integrated planning requires several complex business processes supported by numerous IT applications.
The pertinent stakeholders and realistic timelines are critical. Going deeper into management for leadership and execution is a positive factor for individual departments, but not for the creation of a map for integration and dependencies, which must fulfill organizational goals.
The mapping and distribution of processes among stakeholders can be of great value. Based upon behavioral observation, it’s fairly typical for airlines to understand their business as it plays out through all of these dynamics. But the processes are often not fully established and documented.
Leadership, therefore, must work to create a culture in which each department understands what the others do, and how they interact to further the overall collaborative process.
Integrated planning is not a one-time exercise. It is effectively a “rolling” planning process that can be achieved at both the strategic and tactical levels.
If the airline succeeds in furthering its planning agenda, all the departments will eventually begin to exhibit a new level of situational awareness as they understand how the process works and how they impact the system.
To achieve truly effective operations planning, airlines must have strong processes, highly appropriate and effective IT, and perhaps most importantly, the integrators.
How To Integrate The Integrators
Ideally, the role of integrating processes and properly analyzing schedule changes is the responsibility of the planners for each stakeholder group (maintenance, airport, crew, system operations control, etc.). The planners should be in constant communication with the scheduling department and be able to convey to the senior leadership of their respective departments the impact of these schedule changes, potential alternatives and ways to mitigate the impact of the changes.
It is a good practice to involve the finance experts supporting the department during the planning or analysis of schedule proposals. The finance team can provide advice, quantify the expected financial impact and subsequently, adjust the financial forecast fairly quickly once a scheduling decision has been made.
When the financial impact of the proposed schedule changes has been thoroughly analyzed, objective and data-driven communication with other stakeholders is essential.
Airlines structure their operational planning groups in a variety of ways. For example, some carriers’ planning groups report directly to each department. Other airlines have a centralized operations planning group and utilize a matrix approach to attach planning resources to each of the divisions.
This approach is actually similar to that of any other department, such as finance or human resources.
When properly executed, integrated planning may appear to be a rather large endeavor, and sometimes it is. However, the alternative — that is, operating without an intentional effort at integrated planning and internal collaboration — is also costly in terms of productivity, employee morale and, ultimately, financial performance.
“The true battle is not with your competitors,” Morieux said. “The real fight is against ourselves.”
Give collaboration a chance to improve airline performance, and analyze the positive results. Those results may well be evident in significantly better financial numbers.