110830 lufthansa consulting delay cost en
TRANSCRIPT
Direct and indirect costs of flight delays:Punctuality as a cost factor
Moscow, August 6th, 2011
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 2 -
Content
1. Dream or Reality: Delay Cost Management
2. Delay Cost Modeling – Delay Costing Practices
3. The Future: Delay Opportunity Cost Performance Management
4. Discussion
- 2 -
42%
3%6%11%
33%
5%Airline
Security
Misc.
Other Weather
ATFCM
Other Airport
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 3 -
The majority of delays are airline related while the second largestdelay driver is Ground Handling according to Eurocontrol data
74
IATA delaycodes
Source: Eurocontrol. CODA Digest. Delays to Air Transport inEurope. Annual Report 2010.
1. Technical Delays
2. Ground Handling
3. Flight Ops and Crewing
Primary delay causes 2010
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 4 -
Delays matter!Delay cost matter!
Individual Airline Delay Cost US Airline Industry Delay Cost
Source: National Center of Excellence for Aviation OperationsResearch: Total Delay Impact Study. A ComprehensiveAssessment of the Costs and Impacts of Flight Delay in the UnitedStates. Final Report — October, 2010.
Cost to USAirlines
8.3 BillionUS$
Cost to USPassengers
16.7 BillionUS$
Cost to US fromLost Demand
3.9 Bill. US$
Impact on GDP 4.0 Billion US$
TOTAL COST 32.9 Billion US$
Source: Lufthansa Consulting Research.
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 5 -
On timePerformance
Productivity CustomerSatisfaction
The theory is straight forward: There is a correlation betweencustomer satisfaction – performance and productivity
- 5 -
Teaming up for Excellence
$$$$
Performance
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 6 -
50
55
60
65
70
75
80
85
90
95
100
0 50000 100000 150000 200000 250000 300000
According to customer satisfaction delays made it to the internet:more and more internet service providers track & benchmark OTP
72.8%
Source: FLIGHTONTIME.info. Airline punctuality at uk airports
BritishAirways
Easyjet
Ryanair
Flybe
OTP
Number of departures
Scheduled Airline Departure On Time Performance 2010 within 15 min (UK)
68.6%
71.2%
80%
2010
2009
2008
2007
BMI
Lufthansa
Monarch
BMI Regional
Eastern Airways
Virgin Atlantic
Emirates
Iberia
BA CityflyerSwiss
Bmi baby
SAS
American Airlines
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Today the lawn is cut: handling fees shrink. Airlines have introducedtight service level agreements …… So what’s next ?
Too high
costs
1996
…... . .
.
… ….
25%
20%10 %
Cost Cutting
Ressourceallocation
Handling fees
Airline & Ground Handling /Airport System Partnership
Purchasing today
?
?
?OCC
HCC
SLA End of history ?
Delay Cost Matter – Ground Handling Conference Moscow, 2011
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 8 -
Customer Satisfaction
IATA delay codes are the element for performance managementBut delay costing and delay cost management is still in its infancy
Performance / OTP
ProfitablityTeaming up for Excellence
MIS
Dash Boards
Cockpits, etc.1
2
Airlines
82*
IATA delaycodes
478*
sub-delaycodes
Analytics,Forecasting
ABC ABM
BI
3
Tomorrow
BU
e.g. MIDT orCRM
COSTCost elements * Airline sample
DOCUnit Cost
Budget
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 9 -
Content
1. Dream or Reality: Delay Cost Management
2. Delay Cost Modeling – Delay Costing Practices
3. The Future: Delay Opportunity Cost Performance Management
4. Discussion
- 9 -
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 10 -
Westminster Report
2004
ATA USCarriers
2009
AirlineBusiness
Case
ITA Study
2000
Fuel X X X X
Maintenance X X X X
Crew X X X X
Airport Charges X X X
Aircraft Ownership X X X
Direct Operating Cost (DOC) 60,99 $ 40 – 66 €
Extra Gates and Ground Staff X X
Passenger Compensation X X X
Passenger Opportunity Cost X X
Total Unit Cost / delay minute 72 € 98,55 $ 66 € 87 – 126 €
Delay cost models target unit costs per delay minute or hourbased on annual / quarterly / monthly accounting figures
With delays airlines loose more than an image and customers - delays cost money
This is why stable operations pays off by all means
The leading cost models applied at airlines (e.g. EUROCONTROL -University of Westminster) get more and more sophisticated
- 11 -
Source: EUROCONTROL Cost Benefit Analyses. Edition Number: 4.0. October 2009
Extra Gate and Ground Staff
Delay Cost = f(……..)
Tactical & Strategic Delays Length and Situation of Delays
+
+
+
CXX Cost = f(……..)
+ATA US Carriers 2009
COST
DOC
Unit Cost
BudgetCost elementCost element
Delay Cost Matter – Ground Handling Conference Moscow, 2011
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 12 -
Source: EVALUATING THE TRUE COST TO AIRLINES OF ONE MINUTE OF
AIRBORNE OR GROUND DELAY. Report Commissioned by thePerformance Review Commission: Unicersity of Westminster. May 2004
In general the cost models apply delay cost as an additive functionof cost – the cost of each delay event are defined as a linear function
The cost of cancelation are defined as follows
CXX cost
in EUR
50 seat narrow body aircraft 3.400
120 seat narrow body aircraft 16.000
400 seat wide body aircraft 75.000
Per CXX 7.000
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 13 -
Source: EUROCONTROL Cost Benefit Analyses. Edition Number: 4.0. October 2009
Cancelation Cost
service recovery costs(passenger vouchers, drinks,telephone, hotel)
interline costs (rebookingrevenue)
loss of future value (individualpassenger delay expressed invalue)
operational savings (fuel, en-route charges, crew facilities,handling
outstations, lounges outstations,board supplies)
Costs not included are groundhandling costs, missed connectioncompensation, denied boardingcompensation and luggagedelivery costs.
COST
DOC
Unit Cost
BudgetCost element
CXX Cost = f(……..)
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The reality on delay costing …. we talk ‘Scheingenauigkeit’(apparent accuracy) … we talk legacy systems and methods
Delay Cost Matter – Ground Handling Conference Moscow, 2011
ERP Systems
Cost CenterAccounting
COST
DOC
Unit Cost
Budget
Delay Cost = f(……..)
Cost ElementAccounting
Cost ObjectAccounting
Route Profitability
Aircraft1328
Interviews
Personal cost
Maintenance: fixedmaintenance, direct var.maintenance, reserves, …
Personal: cockpit cost,cabin cost, station cost,handling cost, fuel, material
DOC (catering, landing,parking, etc.),
….
627 Department
Station
Projects
Tools or Ept.
Services
….
4
HOLDING & ApproachDeviations: Fuel Consumption
250
72 €
4
3 Technical cost
Miss Connex Cost(irregularities, loss of
revenue, drop in yields,dispo HCC, staff luggageservice, sations included
calc
Station handling overtime
Flight irreg. / luggage
Delivery delayed baggage
5Block time cost
….
+
+
+
765180
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 15 -
Content
1. Dream or Reality: Delay Cost Management
2. Delay Cost Modeling – Delay Costing Practices
3. The Future: Delay Opportunity Cost Performance Management
4. Discussion
- 15 -
Delay cost management is about managing complexity –airlines establish Hub Control Centers to reduce delay cost
On-Blocks Off-Blocks
Hub Airport
Off-Blocks
En-routeSpokeAirport
Take-Off Touchdown Take-Off Touchdown
SpokeAirport
On-Blocks
En-route
HubControlCenter
Ground Event
BaggageHandling
PassengerHandling
TurnaroundManagement
Airport
ATC
PunctualityCustomer Satisfaction ProfitabilityConnectivity
Outstation / Representation Outstation / Representation
Delay Cost Matter – Ground Handling Conference Moscow, 2011
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This was the starting point: Ground OPS was a black box
on blocks off blocks
Ground Handling Activities
Minimum Ground Times
?
Delay Cost Matter – Ground Handling Conference Moscow, 2011
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The objective was to manage and anticipate delay drivers toplan preventive actions and take recovery measures
on blocks off blocks
REFERENCE MODEL
Hub and ground handling activities
Recovery
Prediction of delayfollowed bypreventive action
Recovery
Prediction of delayfollowed bypreventive action
Delay Cost Matter – Ground Handling Conference Moscow, 2011
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A core activity of the HCC is to monitor and manage theturnarounds
On-Blocks Off-Blocks
Hub Airport
Off-BlocksSpoke Airport
En-routeSpokeAirport
Take-OffSpoke Airport
Touchdown Take-Off TouchdownSpoke Airport
SpokeAirport
On-BlocksSpoke Airport
En-route
Airplane CharacteristicsAirbus A320
Crew
Dock bridge / stairs
Catering
Disembarking
Refueling
Cargo unloading / loading
Gate, embarking
Remove bridge / stairs
40 min 35 30 25 20 15 10 5 0
On blocks Off blocksFirst passenger on board
max. 1 min.
max. 5 min.
25 20
max. 10 min.
max. 12 min.
max. 14 min.
Last bulk freight/mail at the A/C
max. 12 min.
max. 14 min.
Contact position: First passenger on board
Remote position: Arrival of the first bus at A/C Remote position: Last bus at A/C
5
doors inparkCleaning max. 8 min.
Last opportunity to report irregularities / last orders
Positioning / Removal
Activity
Turnaround Mgmt
Delay Cost Matter – Ground Handling Conference Moscow, 2011
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Source:
The building blocks of Hub Management at Lufthansa
Steering Passenger & BaggageConnection
Real-Time KPI ManagementTurnaround Management
Delay Cost Matter – Ground Handling Conference Moscow, 2011
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Based on real-time delay forecasting the ground events are managedby speeding up the processes where needed
Turnaround Manager
Quick Cleaning
Increase Cleaning Crew
Leave Bag Behind
Increase Loading Crew
High Speed Catering
Increase Catering Crew
…….
Steering Activities
Real-Time KPI Management
Production
Time Stamps
Steering Action
Turnaround Management
Real-time Analysis
Delay Cost Matter – Ground Handling Conference Moscow, 2011
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The Passenger and Baggage Connection Managementclassifies passengers based on rules and automatically calculatesand suggests steering actions
Steering Passenger & BaggageConnection
Real-Time KPI ManagementSteering Activities
Time Stamps
Steering Action
Real-time Analysis
Approach Priority
Gate Direct Service
Ramp Direct Service
Electrical Car Service
Connex Delay x> 10min
Connex Delay x>10 min
New Position
Roll Priority
…..
Delay Cost Matter – Ground Handling Conference Moscow, 2011
Delay management needs to do a profit and loss analysisbased on a delay opportunity cost analysis
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 23 -
Delay Cost
Steering Unit Cost
OCC
Aircraft Reserves
Block time buffers
Version Change
Aircraft Change
Equipment Change
Diversion
Re-Routing
Cancellation
…
Connex Steering UnitCost HCC
Approach priority
Ramp transfer
Gate direct
Cart connex
Delay aircraft
New position
Roll priority
…
Turnaround SteeringUnit Cost HCC
Quick cleaning
Increase cleaningCrew
Leave baggage behind
Increase loading crew
High speed catering
Increase catering crew
…
Classic DOC
Holding & aapproachdeviations
Flight irreg. /baggage
Deliverydelayed baggage
PAXcompensation
Transit
Missed Connex
…
Delay Opportunity Cost
Profit and Loss Analysis
Cost Benefit Analysis
PAX Revenue
SteeringCost+
SLA Malus
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 24 -
Delay management will need to forecast / simulate the effects of thesteering actions plus a deviation analysis plan vs. actual efficiency
Cost
Time2h1h 4h3h 6h5h 8h7h 9h
CXX
Aircraft Change Equipment Change Version ChangeOCC Delay Cost
Reduction Measures
HCC Delay CostReduction Measures
Approach Priority Ramp Transfer
Crew Change
Gate Direct New Position Roll Priority
Quick Cleaning Leave Bag behind Leave Bag behind
Opportunity Cost
Delay Cost Drivers
Increase Catering Crew
SteeringCost+
Delay Cost Matter – Ground Handling Conference Moscow, 2011 - 25 -
Content
1. Dream or Reality: Delay Cost Management at Airlines
2. Delay Cost Modeling – Delay Costing Practices
3. The Future: Delay Opportunity Cost Performance Management
4. Discussion
- 25 -
Thank you very much for your attention!
Any questions ?
- 27 -
Contact
Lufthansa Consulting GmbHVon-Gablenz-Str. 2 – 650679 CologneGermany
Tel.: +49 (0)221 826 8107Fax: +49 (0)221 826 8260Mobile: +49 (0)151 58940507
e-mail: [email protected]
www.lhconsulting.com
Gesine VarfisManaging Consultant
Lufthansa Consulting GmbHTsvetnoy Blvd. 25, bld. 3, 6th floorMoscow 127051Russia
Tel.: +7 495 7987729Fax: +7 495 680 6304Mobile: +7 903 798 7729
e-mail: [email protected]
www.lhconsulting.ru
Askhat TorshinPermanent RepresentativeRussia, CIS and Baltic States