Achieving Optimal Airline Results
Airline departments focus on optimizing their work within each of their areas, but achieving “optimal” across the entire airline must be done through a holistic approach rather than focusing on each of the individual parts.
Webster’s Dictionary defines the word “optimal” as “most desirable or satisfactory.” In the context of the business structures of airlines around the world, the word “optimal” is used frequently.
Airlines are complex enterprises, built to deal continuously with highly complex business problems. Over time, many airlines have either developed or purchased technology systems to solve their business problems. But because each area within an airline has its own set of business problems, the airline’s technology systems have generally been individually purpose-built for a specific department.
The network planning and scheduling department, for example, uses its automation to create an optimal network and schedule that produces the most profitability, and crew management systems create rosters that minimize unproductive hours among crews.
Blocking Additional Revenue
A North American airline wanted to improve its on-time performance without addressing its operations challenges. In this scenario, the scheduling department is forced to use high-scheduled block times, which preclude the ability to produce additional revenue. It also drives up crew costs.
When each of these departments works within its own individual silo, the departments are missing opportunities by not working together. Such potential synergy would be especially important between the scheduling and operations departments.
The Schedule’s Central Role
The schedule is the greatest revenue generator for an airline. It also has the biggest impact on costs.
Generally, the schedule is developed and optimized first, then passed down to the operating groups. This order of doing things puts a constraint on the operating groups. Therefore, the schedule inherently limits the ability of crew, group ops and other departments in attempting to optimize their performance.
In practice, over time, this style and tradition of one-way communication can adversely affect profitability.
Not many airlines have a good understanding of the marginal costs associated with changing a given schedule, especially if their individual departments are working in silos, independently of one another.
For example, an airline might add flights that cause a marginal cost increase of 9 percent, yet may still be profitable. However, somewhere along that work cycle, adding further flights will start reducing the profit-growth rate.
If airlines don’t have two-way communications between the scheduling and the operations teams, the airline’s options are limited. It can only plan to maximize revenue. In this case, the revenue maximum point is not the one at which profitability is optimal, but rather at some point before revenue maximization is achieved. This is a simple example; however, in reality, the decisions are not simple due to factors such as competition, regulation and labor-cost pressures.
Another example might show the opposite behavior. Say a North American airline wants to improve its on-time performance without addressing its operations challenges. For the sake of this scenario, the scheduling department is forced to use high-scheduled block times, which preclude the ability to produce additional revenue. Furthermore, this example entails high crew costs.
Instead of having a one-way process, an airline should look at an iterative process to make the entire flow of events (and the result) optimal.
The Problem Of Compartmentalized Optimization
Working and optimizing within a department, an airline can actually create down-line impacts that hurt the process. Compartmentalization also allows (and even invites) local optimization, which is always suboptimal when compared to global optimization.
Some examples of down-line adverse impacts include:
- The scheduling department chops five minutes off the block time to make a legal connection for a competitive origin and destination, but the flight will be arriving late more frequently.
- To theoretically minimize crew penalty, crew scheduling builds a line with a shorter crew connection, but it is dependent on the flight being on time every day.
- Scheduling puts a new aircraft type into a city, which necessitates new equipment and training of the local staff.
- An airline has different country registration numbers that minimize the cost of ownership, but this, in turn, adds complexity to the operation due to licensing requirements for any given new country, which also adds training costs.
- An airline does not include the operations teams on schedule planning. Then, when the schedule is shared with operations, the schedule is not feasible — such as proper time for maintenance transit checks or no available gates at an airport. This, in turn, translates into schedule cancellations, which adversely affects the annual plan and presents problems for passengers.
Considering these adverse results, how does an airline redefine optimal between the scheduling and operating departments? It should:
- Develop robust processes across the constituent areas,
- Increase communications among all relevant departments,
- Ensure all involved departments share data,
- Incorporate performance metrics.
Building robust processes is more than just a series of steps along a one-way path. It is a series of multiple functions to achieve a common goal. Each of the functions within the process have unique mechanisms (such as people involved and systems and technology used within the process), as well as controls and constraints (corporate policies, government regulations, information, etc.). For example, looking at the mechanisms and controls within a process function can identify gaps within a process, which, in turn, can improve the process.
In addition, a robust process involves loops and feedback mechanisms. This encourages the various departments to see the entire process, not just their individual process piece. It also helps to have all stakeholders understand the challenges outside of their own department.
Communication is the key to making processes work efficiently. Communication, therefore, is absolutely critical. Once all stakeholders in the process have the proposed schedule, they should look it over thoroughly to see if there are any compromises that can be made.
For example, if crew scheduling has a tight connection, it should contact scheduling to see if the flight can be adjusted by a few minutes to make a better crew connection with minimal schedule impact.
At all times, departments should communicate with one another to ensure a holistic focus. This must occur and be constant during the various planning phases (the long-term/strategic phase, midterm phase and tactical phase). In fact, communication should also be continuous during the operational control window because there are high probabilities that the operations disturb the schedule and its original optimal level.
As such, regular meetings should be conducted between the scheduling and operations teams in which information is shared. It’s always better to over-communicate than to under-communicate.
It is also good practice to assume that the other stakeholders might not be aware of the potential impacts to their own business or other areas. So communication and collaboration among scheduling and the operational groups will help raise awareness of potential issues.
The article “Fostering Collaboration,” published in Ascend, 2014, Issue No. 4 (www.ascendforairlines.com), discusses different ways to break the silos and make the communication between operations planning groups more effective.
Just as verbal communication supports a holistic focus, systems and data need to communicate between departments and technology as well.
For example, does an airline’s scheduling tool integrate with the crew scheduling system? That integration is absolutely essential. If there is integration between the two systems, data can be exchanged to increase the velocity of analysis and decision making.
The scheduling systems should have all information about airport constraints. The more data integrated into the stakeholder departments effectively enables all departments to see the bigger picture, not to simply have the view of one department.
For example, a U.S.-based airline shares the proposed schedule electronically with the airport team to validate the gating requirements and to get full buy-in from the airport team. If the schedule is not feasible, both groups look for solutions.
A Latin American carrier uses technology and strong business processes to validate the maintenance constraints that are built into the schedule and ensure that all aircraft receive the correct level of maintenance, which, in turn, helps increase aircraft availability while reducing maintenance delays, as well as cancellations. If changes are required, they can be sent back to the scheduling system.
In the end, results count. Each department has its own set of metrics used to measure performance. In addition, there needs to be a complete review of performance around the scheduling/operating groups.
At least once each month, the scheduling and operations teams should review performance for each individual team and for the overall scheduling and operations processes, thus allowing all departments to identify areas of improvement that can serve to more fully optimize the scheduling and operations processes.
Subpar turn performance, less-than-satisfactory on-time performance and poor block performance are strong indicators that the network is not robust. In a previous Ascend article (2013, Issue No. 2) entitled “Airline Doctor,” the author discussed how the health and robustness of a schedule can be determined through key performance indicators.
There is a North American carrier that spends an entire day reviewing its operational performance for the previous month and provides much-needed feedback to the scheduling department if the schedule is affecting the operation.
So when thinking about “optimal” for a department or an entire airline, it’s wise to think in much broader terms.
The chances are quite likely that if an airline is optimizing a single variable or business challenge, that action is affecting another group within the airline and following through with the original departmental optimization might not be a good decision.
Having a sound, valid understanding of the potential impacts will lead to better decisions. And those better decisions help lead to achievement of a true optimal level.