operational risk management in aviation the implementation of a new baggage logistics technology at...

MBA Dissertation

Sunderland University Cavendish College

MBA Dissertation

Operational Risk Management in Aviation: The implementation of a new baggage logistics technology at Heathrow Airport Terminal 5

Danilo Gomes de Matos

Sunderland ID: 089068287Date: 15/05/2009STATEMENT OF AUTHENTICITY/DECLARATION

This research has been finished with the help of others who contributed with their opinions, views, corrections and criticisms. The work is original and I am responsible to the full extent.

Signed:

_________________________________ May 2009

Danilo Gomes de Matos

Sunderland University - Cavendish CollegeDanilo Gomes de Matos

The Dissertation Committee for the above candidate for the MBA Degree, recommend acceptance of this dissertation.Supervisor______________________________________________

This dissertation is accepted by Cavendish CollegeDEDICATION

To my Parents: Jose Alberto de Matos and Tania Regina Gomes de Matos for all the support and care throughout my life.

To my girlfriend Elisa Brioschi for the love, understanding and encouragement she gave me to get this academic achievement.

To my sisters: Vanessa Matos Loge and Aline Gomes de Matos for always being on my side.

To my supervisor John Jones and my professors Bruce Sheppy and Pavlos Stavrakakis.Table of Contents

10Executive Summary

11Chapter 1 - Introduction

111.1 - Introduction

121.2 - Background Problem

131.3 - Objectives

131.4 - Chapter Summary

14Chapter 2 - Literature Review


142.2 - Risk Management

162.3 - Different Types of Risk

172.4 - The common risks faced by companies

172.5 - Operational Risk

182.5.1 - Controlling the risks

192.5.2 - Strategies for managing the risks

202.5.3 - Actions required

202.5.4 The Decision Process in Operations

212.6 Baggage Handling

212.7 - Operations Management

222.7.1 - The Activities of operations Management

222.7.2 - The direct responsibilities of operations management

232.7.3 - The indirect responsibilities of operations management

232.7.4 - The broad responsibilities of operations management

242.8 - The scope of project risk management

242.9 - The project life cycle


27Chapter 3 - Research Methodology


273.2 - Research Questions

273.3 - Research Design

283.4 - Type of Research

283.5 - Research Instruments

283.6 - Data Collection

293.7 - Target Population

293.8 - Sampling

303.9 - Administration of Questionnaires and Interviews

313.10 - Data Analysis

323.11 - Elimination of Bias

333.12 - Study Limitations


34Chapter 4 - Data Presentation


344.2 - Findings from the questionnaire

384.3 - Finding from the interviews

394.3.1 - Question 3






46Chapter 5 - Analyses of findings

465.1 - Questionnaire

485.2 Interview

55Chapter 6 - Conclusions and Recommendations

556.1 Conclusion

566.2 Recommendations

566.2.1 Heathrow Airport Terminal 5

576.2.2 Aviation sector

58Chapter 7 - Personal Development Plan (PDP)

587.1 - S.W.O.T. Analyses

597.2 - Action Plan

61Bibliography

65Appendices

65Appendix 1 - Risk factors identified: premises, product, purchasing

66Appendix 2 - Risk factor identified: people, procedures, protection

67Appendix 3 - Risk factors identified: processes/performance

68Appendix 4 - Risk factors identified on planning and policy

69Appendix 5 - Questionnaire

71Appendix 6 - Questions interview

72Appendix 7 - Letter of recommendation

List of tables

Table 1 Eight stages in the project life cycle...........................................................25Table 2 - Interview Schedule......................................................................................31Table 3 Differences noticed by passengers.............................................................37Table 4 Activities most and least important (handling baggage)............................37Table 5 Improvements at Terminal 5.......................................................................38Table 6 - Future investments in terminal 1, 3 and 4 at Heathrow ..............................41Table 7 - Observations during interview.....................................................................45Table 8 - Action plan...................................................................................................60List of FiguresFigure 1 Gender.........................................................................................................34Figure 2 - Group of age................................................................................................35Figure 3 - Problems with baggage................................................................................35Figure 4 - Common problems with baggage................................................................36Figure 5 - Customer perception....................................................................................36Figure 6 - Customer perception - security....................................................................38Executive SummaryThe executive summary for the research done can be seen as follow.

The chapter one had showed the introduction of the study with the background problems that was happening. The aims of the research were indicated as well.

Chapter two showed the literature review that the study had researched. It included theories about risk management, operational management, and different types of risk, how to control those risks through strategies and actions required, and the new baggage system that is being used at Heathrow Airport Terminal 5.

Chapter three showed the research methodology. The research question and design were described in this chapter. The type of research, the data collection, the target population, the sampling, the data analysis and the elimination of bias were written in detail in this chapter.

Chapter four showed the data presentation from the questionnaire that was done with passengers at the arrival and departure point at Heathrow Airport Terminal 5 and also the data presentation from the interviews that were done with people who worked for the airport and the company (BA British Airways and BAA British Airports Authority). Chapter five had analysed the findings from the questionnaires and the interviews. It was linked to the theory about the topic and changes that they had introduced.Chapter six gave a conclusion about the research that had been undertaken and also recommendations for both, BA and BAA.

A personal development plan was conducted on chapter seven. It included an S.W.O.T analysis and also an action plan for the author of this study.

Chapter 1 - Introduction

1.1 - Introduction

The study investigated the activities that were initiated when Heathrow Airport Terminal 5 introduced a new baggage system, specifically the operation management which deal with both, human and system failures. The study was based on the background of the sector that showed different problems with the operations of dealing with baggage.

The study compared all the processes given about the theory of risk management with what is being done at operational level in the baggage system at Heathrow Airport Terminal 5.

Loader (2007) defines operational risk as the risk associated with human error, systems failures and inadequate procedures and controls during the processing of business related transactions and the loss of reputation by a failure to implement the processing correctly. He also suggests that operational risk can be broken down into further sub-sections like operations risk, technology risk, reporting risk, malicious risk, legal risk, regulatory risk and so on.

According to Fischer (2003), the principles of risk management are needed even more today than ever before. In the past, many organizations either ignored the risks altogether or simply lived through the unfortunate consequences caused by them.

According to IATA (2008), the number of passengers is increasing worldwide at an annual rate +5%. It means the quantity of baggage have also increased a lot. It results in new challenges the companies are facing: Traffic rising and baggage volumes higher than never before, stricter security regulations, cost pressures increasing year-by-year, etc. Because of these factors, baggage becomes a critical point before, during and after the flights. For this reason the baggage identification must be accurate, reliable and economical. The companies have introduced new solutions and innovations such as the use of RFID (Radio Frequency Identification) in the UHF range for contact less reading and writing of bag tags.

British Airports Authority (BAA) introduced a new high-tech baggage system at Heathrow Airport Terminal 5, to be more effective and also to be more dynamic to deal with baggage.

Heathrow Terminal 5 is using a system developed by Vanderlande Industries, an expert international company in material handling systems based in the Netherlands, and the worlds second provider of baggage handling systems. The system can be resumed to transport bags from a baggage entry point (e.g. a check-in desk) to a pre-determined output point in a timely manner (e.g. loading into a container ready to get onboard the aircraft).

1.2 - Background Problem

According to the Journal of Theoretical and Applied Electronic Commerce Research (2008) the airplanes ship nearly two billion bags per year and the cost that mishandled bags that aviation industry has to pay is about U$3.7 billion per year, which does not include delayed flight costs due to baggage problems, refund to the passenger gate parking costs due to baggage delayed flights, etc. Krzymuski (2007) adds that it could increase costs in more U$4 billion per year.

The baggage problems (long baggage claim time, delayed, damage, lost baggage, etc) are ranked as the second more important on the customer complaints list (U.S. Department of Transportation, 2006). It has a high impact in customer satisfaction and loyalty level. Many customers decide to change the company after an incident with his/her baggage.

The 2005 SITA statistics show that 30 million bags were mishandled. For every 1000 passengers, 17 were delayed, 2.7 were damaged or pilfered, and 0.75 were lost or stolen. European hubs mishandled 15 to 20 bags per 1000 passengers compared with 6 in the USA. The contributory factors worldwide were 61% transfer bag mishandled, 15% failed to load, 8% ticketing error/security, 5% weather/space/weight restriction, 4% loading error, 3% tagging error and 3% mishandled on arrival.

According to BBC News (2008), almost 300 flights in and out of Heathrow Airport were cancelled during the first five days after open Terminal 5, which caused a chaos. The problems seem to be due a combination of factors, which include the operational management and the new high-tech system.

According to Boynton (2008), one of the problems in Terminal 5 was that the boarding gates were not connected directly to aircrafts. The operations were not satisfactory due that Terminal 5 which has 20 security lanes (Terminal 4 has just 8 security lanes) was not using all the lanes that they could, which can be one of the facts to help the disaster of 27th of March.

1.3 - Objectives

The aims of the study can be seen as follows:

-Identify the main risks when a new baggage system is introduced;

-Identify the effective operational process of a new baggage system;

-Check if the customers experienced any benefits from improvements at Heathrow Airport Terminal 5.

-Analyse how the risk management theory can be applied in baggage handling automation process in airports.


This chapter has given the introduction to what the study is all about, definition of risk management, background to the problem and objectives. From the information in this chapter, we can see that risk management has a crucial role to play in operations. But unfortunately if the people are not trained properly for the functions given, several problems can occur. The result of this study is an action plan that may be used to identify areas and procedures that need to be changed and/or improved. The objectives of the study are therefore, to identify the processes which is considered the main operational risks and how to effectively deal with those keys factors. The next chapter seeks to review what previous authors and experts have said and noted.

Chapter 2 - Literature Review

2.1 - Introduction

This chapter aims to review what previous authors and experts have said and noted. One of the most important reasons for undertaking this particular study is the contribution to the specific area in aviation. As the study is based on recent facts, there are not many reports and publications published and for this reason the literature reviewed was sourced largely from secondary literature sources such as books, newspaper, articles and journals.

2.2 - Risk Management

Operational risk is defined as the risk associated with human error, systems failures and inadequate procedures and controls during the processing of business related transactions and the loss of reputation by a failure to implement the processing correctly (Loader, 2007). According to Kazda and Caves (2007), the baggage handling process still has a considerable human content, leading to many health and safety concerns. Operational risk can be broken down into further sub-sections like operations risk, technology risk, reporting risk, malicious risk, legal risk, regulatory risk and so on (Loader, 2007).

The reputation of an airport can be damaged because of the human error e.g. mishandling that can occur, leading to a certain number of lost or mislaid bags. In Heathrow Airport Terminal 5, a high tech baggage system is being used and according to BAA (2008), the new baggage system is extremely sophisticated and has been designed for performance and reliability.

According to Fischer (2003), principles of risk management are needed even more today than ever before. In the past, many organizations either ignored the risks altogether or simply lived through the consequences caused by them. In many cases, these organizations did not have anyone dedicated to look at or out for potential risks that could adversely impact the company. Companies without focus on risk management went bankrupt and some companies closed permanently their business doors. Therefore, a closer look at the topic of risk management is essential (Robertson, 2005).

Technology risk is both power and danger. It gives advantages that can be exploited and problems that can be devastating. It drives operations but can equally be a constraint and it can be costly if not managed correctly (Loader, 2007). Baggage handling is becoming a critical activity. The airlines are trying to shorten the turn round time between individual flights and at the same time, the average load factors are increasing (Kazda and Caves 2007). Of all the things that affect operations performance, technologies is the biggest friend and at the same time a potential nightmare. Only the managers who embrace technology and have the vision to develop it will be prepared for the changes and challenges that operations face in the coming years. Technology drives businesses, operations managers drive technology. Making it happen is the challenge for managers in both operations and technology. Technology is, not surprisingly, varied (Loader 2007). At Heathrow Airport Terminal 5, the baggage system consists of two complementary systems, a main baggage handling system overlaid with a fast track system. The fast-track system enables bags to bypass the main sorter to convey time-critical transfer or late bags to individual aircraft stands (Doherty, 2008)According to Doherty (2008), the technology can become a threat is the baggage system failure at Denver. Denver Airport in Colorado, USA, was originally scheduled to open in October 1993 with a single system for all three concourses. This became February 1995, opening with separate system for each concourse, with varying degrees of automation. According to Loader (2007) the management should have a focus on terms such as how many times is it actually a systems problem? instead of is it a system problem?. The baggage systems US$ 186 million original construction costs grew by US$ 1 million per day during months of modifications and repairs. In August 2005 it became public knowledge that United Airlines was going to abandon the system (Doherty, 2008).

System failures can range between problems with programs, for example system affected by viruses or bugs or incorrect codes to complete system failures when no trades can be input or processes can be run. IT problems are aggravated by either new systems that experience teething problems or old systems that have problems copying with the volumes and complexity of the business. IT problems are worsened if a financial institution has many different systems and applications bolting to one another (Loader 2007).

2.3 - Different Types of Risk

According to Robertson (2005), there are two types of risk, the potential risk and the realistic risk. The potential risk may or may not occur, but an emergence plan must be done to stop or reduce the impact, there are examples such as the stock market crisis recently, employees leaving the department, poor executive level decisions and so on. Those risks can come from internal or external forces as shown before on examples. The realistic risks are based on known threats. These threats are common for a specific industry or all industries, examples for realistic risks can be the loss of profits, legislative decisions, overseas regulations, computer virus and so on. Different from potential risk, most of the realistic risks come from external forces and it can be a challenge to manage.

There is another type of risk management which is the option based risk management that consists in a framework, and it is accompanying theoretical perspective and methodology, to real world sequential information technology (IT) investment problems. These problems involve alternative investment structures that bear different risk profiles for the firm, and also may improve the payoffs of the associated projects and the organizations performance (Benaroch, Jeffery, Kauffman and Shah 2007).

According to Benaroch et al (2007), the option based risk management combines traditional with implicit or embedded real options that are available with no specific investment required provided the decision maker recognizes them. This combination helps the decision maker to both explicitly surface all of the strategic choices and accurately value those choices, including ones that require prior enabling investments.

According to Gould (2008) there is another type of risk which is the enterprise risk management, which consists that any situation could bring some impact positive or some impact negative, but the positive ones can be seen as opportunities. Enterprise risk management addresses the risks and opportunities facing an organization by classifying objectives into four categories which are: strategic that focus on supporting an organizations mission, operations that use in an effective and efficient manner the organizations resources, reporting that focus on reliability of reporting and compliance which consists in laws and regulations.

2.4 - The common risks faced by companies

According to Triana (2006), some areas that a risk commonly appears can be weather, legislation, economic, company employees and technology.

These common risks that companies face, two areas can be applied for the purpose of the study. First area is the employee due that people are always unpredictable and that in itself is a huge risk for companies. A hiring, training and retaining quality employee is a challenge for companies and causes the biggest expense and a bad reputation for the company. For Heathrow Airport Terminal 5, it is a constantly risk to be managed. An employees lack of productivity or un-expectant departure can greatly impact project work and plans for implementing new products and services. The baggage system at Heathrow Airport Terminal 5 had been developed for 400.000 hours, in three different countries (Netherlands, Germany and United States) (Doherty, 2008). The second area is the technology. The use of new technology can be very expensive and if it does not work properly it can take an organization down on both sides, loss of profitability and consumer retention. If an organization does not keep up with new technology it could be left behind and become uncompetitive. (Triana, 2006)

2.5 - Operational Risk

According to Jeynes (2002), there are ten elements of operation that represent those main risk areas which are: Premises, product, purchasing, people, procedures, protection, processes, performance, planning and policy. In operational risk management in aviation, the following areas can be considered as a dangerous threat:

People the workers in the organisation, skills needed, training needed motivation and commitment, employment contracts. It affects directly the process of installing or constructing anything. A wrong person on the wrong function can cost money and time for the company.

Procedures production procedures, record keeping and reporting systems, monitoring and review, use of standards, emergency procedures. If the wrong procedure is taken, the entire project could fail. The wrong decision making can cause a failure in long or short term.

Performance targets set, monitoring, measurement tools, consistency, validity of data. The operational management level has to keep the performance at an acceptable standard level, once that the performance can delay the processes.

Planning management skills, external factors and level of control. Keep the schedule on time is a tough role, managers must have the right skills to manage the time scale (Jeynes, 2002) (see appendices 1, 2, 3 and 4 for detail of risk factors). Each element represents its own type of risk which can impact positively and negatively. No one can eliminate all the risks in all areas, but minimizing the risks is the key factor. It is a risky business setting up, operating and developing a successful operation and it becomes more difficult if the operation is huge, such as at Heathrow Airport Terminal 5 (Jeynes, 2002).

It is vital that all risks to the business should be considered strategically at the most senior level, not just financial risks, and an approach that can be used consistently throughout is a valuable tool for management (Chapman and Ward, 2002)

2.5.1 - Controlling the risks

According to Jeynes (2002), the process of controlling risks has some steps. All risks identified must be collated to reduce overlap and repetition and also a list of primary risk factors must be done. After the risk factors had been identified, they must be listed in order according to the threat, from the high level to low level of threat. A decision to consider urgency of action or not is required, considering the actions that can be taken quickly to alleviate the potential harmJeynes (2002) also adds that long-term action is needed with an acceptable time scale, considering the cost implications and the potential results of planned actions.

2.5.2 - Strategies for managing the risks

According to Benaroch et al (2007), a comprehensive analysis of risks to the business is a vital step in confirming assumptions and gaining a full picture of the potential extent of harm possible if actions are not taken. However, at Heathrow Airport Terminal 5 it does not demonstrate that risks are being managed effectively. The 10 Ps are intended to provide a range of prompts to ensure overall coverage of business activities without stressing the importance of one area over another. While some elements are considered to be operational rather than strategic, they are just as important in the context of managing risks to the business.

Every business realizes that any decision will need to take some level of risk. Therefore, any approach to risk management should include competitive advantages. When reviewing the competitive advantage, it may be best to create a grid in order to compare and contrast the different categories of risk (Kaufman, 2006)

The priority rating for risk factors needing attention has formed the basis of identifying future actions. It does not necessarily represent a set of targets or objectives for the business overall. Depending on the size and structure of the organisation, the range of activities required in order to reduce or eliminate the risks could well be substantial. Planning activities need to take into account other factors in order to be effective and reach the targets set. These include questions such as actions required, resources required, workforce, training, timescale and so on (Chapman and Ward, 2003).

2.5.3 - Actions required

According to Chapman and Ward (2003), the actions required could range from technical analysis of potential risks, replacing of existing equipment, training for specified group of workers, recruit internal staff or making contract with external sources in order to up-grade skills or knowledge base and expertise and establishing more effective, wide-spread information that include all relevant group of workers.

The business that does not take the right action required can be affected directly on the business activities, facilities, staffs, and so on. Everyone must be involved in discussions, informed about outcomes and decisions made and also give the relevant feedback (Gordon, Loeb and Sohail, 2003).

2.5.4 The Decision Process in OperationsAccording to Heizer and Render (2006), what makes the difference between a good and a bad decision is that the good decision uses analytic decision making which is based on logic and also considers all available data and possible alternatives which follows six steps: the first one is clearly define the problem and the factors that influence it. The second is to develop specific and measurable objectives. The third is to develop a model that is, a relationship between objectives and variables (which are measurable quantities). The fourth is to evaluate each alternative solution based on its merits and drawbacks. The fifth is to select alternative and the sixth is to implement the decision and set a timetable for completion.

Regardless of the complexity of a decision or the sophistication of the technique used to analyze it, all decision makers are faced with alternatives and states of natures. The alternative is a course of action or strategy that may be chosen by a decision maker. The state of nature is an occurrence or a situation over which the decision maker has little or no control. (Heizer and Render 2006).

2.6 Baggage Handling

The way of baggage handling can be described as follow. The passenger check-in and leave the baggage at this point. The bag is bar coded and laser read the code and store in a data base. The data are used for the baggage routing within the baggage sorting system. These data are also compared with the data from the database on passengers. This provides positive identification, called baggage reconciliation, to ensure that passengers have boarded the same aircraft into which their baggage has been loaded. If any passenger does not board the aircraft it is possible to determine exactly where the baggage is and unload it for security. On airport with a great number of transfer passengers it is moreover necessary to provide sorting and redistribution of baggage in a very short time in order to guarantee the minimum transfer times of the passengers (Kazda and Caves 2007).Arrival bags are taken from the aircraft and placed airside on a continuous belt which carries the bags to landside bag reclaim hall, either directly through the airside/landside screen or via a transfer belt which feeds a free-standing carousel with a sloping bed (Kazda and Caves 2007).The new baggage system that is being used at Heathrow Airport Terminal 5 can process up to 12.000 bags per hour through the tilt tray sorter. It has 18.000 meters of conveyors being used for bags entering the system, normally from check-in or transfer process. Passenger who are late have their bags moved around on the 8000-metre, high speed baggage rail link. Those who get early to Terminal 5, have the bags held in a 4.000-bag capacity store. Every bag has a unique bar code which allows the system knows what time and where the bag is going to (Doherty, 2008).

2.7 - Operations Management

Operations management is about the way that companies produce goods and services, everything in terms of production, is the operations managers who organize. The operations function is central to the organization. There are three core functions which are: the marketing function which is responsible for communicating the organizations products and services to its markets in order to generate customer requests for service, the product/service development function, which is responsible for creating new and modify products/services in order to generate future customer request for service and the operations function, which is responsible for fulfilling customer requests for service throughout the production and delivery of products and services. (Slack, Johnson and Chambers, 2001)

In large airports it is necessary to provide automated sorting of baggage. Automation can increase the capacity of a terminal building significantly and also improve the service standard. Automated sorting uses baggage tags with bar codes, magnetic cards or electronic chips for baggage and destination identification. Nowadays, bar coding is the most frequent used in terminals with high number of flights (Kazda and Caves, 2007). 2.7.1 - The Activities of operations Management

According to Slack et al (2001), operations managers have some responsibilities for all the activities in the organization which contribute to the effective production of goods and services. There is the direct responsibility for the activities which produce and deliver products and services, the indirect responsibility for the activities of other functions of the organization and the broad responsibility to respond to the emerging challenges for operations management in the future.

2.7.2 - The direct responsibilities of operations management

There are some general classes of activities which apply to all types of operation no matter how functional boundaries have been draw. The first responsibility of any operations management is to understand what it is trying to achieve, developing a clear vision of how the operation should help the organization achieve its long-term goals (Slack et al, 2001).

Another responsibility is to develop an operations strategy for the organization, because operations management involves many decisions making in a short period of time and it is vital the operations managers have a set of general principles towards the long-term goals. The next one is designing the operations service processes. This activity is to determine the physical form, shape and composition of products, services and processes. Planning and controlling the operation is the activity of deciding what the operations resources should be doing. And the last one, improving performance of the operation which is very important due that a failure to improve at least the rate of customers expectations condemn the operations function always to fall short of what the organization should expect from it (Slack et al, 2001).

2.7.3 - The indirect responsibilities of operations management

Many decisions taken outside the operations function still can have an effect on operations activities. It is working together with the other parts of the organization which forms the most important indirect responsibilities of operations management. Developing and improving the relationships between operations and other functions of the firm should be central to operations contribution to overall performance (Slack et al, 2001).

2.7.4 - The broad responsibilities of operations management

Both the direct and indirect responsibilities of operations management are largely focused on those concerns which are of clear and immediate benefit to the organization itself. But increasingly it is recognized that all businesses, including their operations managers, have a set of broader responsibilities. There are six relevant issues that are linked with operations management, which are: globalization, environmental protection, social responsibility, technology awareness and knowledge management. All of those broad responsibilities represent considerable challenges to modern (Brown, n.d.).

2.8 - The scope of project risk management

The efficient and effective project management requires appropriate management of all the sources of uncertainty. According to Green (2001), uncertainty in any project is considerable, and most project management activities are concerned with managing uncertainty from the earliest stages of the Project Life Cycle, clarifying what can be done. Risk management processes that adopt a simplistic focus on threats will not address many of these sources of uncertainty. It is useful to define risk as an uncertain effect on project performance rather than a cause of an uncertain effect on project performance. Risk management processes concerned with threats and opportunities but will still tend to be focused on uncertain events, conditions, or circumstances. This does not facilitate consideration of aspects of variability that are driven by underlying ambiguity. To address uncertainty in both variability and ambiguity terms it is needed to adopt a more explicit focus on uncertainty management (Turner, 1992).

According to Adams and Barndt, (1988), uncertainty is related to variability to performance measures like cost, duration, or quality. In a project context these aspects of uncertainty can be present throughout the project life cycle, but they are particularly evident in the pre-execution stages, when they contribute to uncertainty in five areas which are: variability associated with estimates, uncertainty about the basis of estimates, uncertainty about design and logistics, uncertainty about objectives and priorities and uncertainty about fundamental relationships between projects parties.

2.9 - The project life cycle

The project life cycle is a convenient way of conceptualizing the generic structure of projects over time. It is often described in terms of four phases, using terms like conceptualization, planning, execution, and termination (Adams and Barndt, 1988). Alternative phraseology may be used, such as formation, build-up, main programme, and phase-out (Thamhain and Wileman, 1975), but the underlying phases identified are essentially the same.

According to Thamhain and Wileman (1975), there are eight stages in the project life cycle that can be seen on the table below.

Table 1 Eight stages in the project life cycle

PhasesStagesSteps

Conceptualization1. Conceive

the productTrigger event

Concept capture

Clarification of purpose

Concept elaboration

Concept evaluation

Planning2. Design

The product

Strategically

3. Plan

The execution

Strategically

4. Allocate

Resources

TacticallyBasic design

Development of performance criteria

Design development

Design evaluation

Basic activity and resource-based plans

Development of targets and milestones

Plan development

Plan evaluation

Basic design and activity-based plan detail

Development of resource allocation criteria

Allocation development

Allocation evaluation

Execution5. Execute

ProductionCo-ordinate and control

Monitor progress

Modification of targets and milestones

Allocation modification

Control evaluation

Termination6. Deliver

The product

7. Review

The process

8. Support

The productBasic deliverable verification

Deliverable modification

Modification of performance criteria

Deliver evaluation

Basic review

Review development

Review evaluation

Basic maintenance and liability perception

Development of support criteria

Support perception development

Support evaluation

To be fully effective, risk management needs to address the whole project life cycle rather than selected stages, guiding and informing each and every stage of the project life cycle. The scope and depth of analysis should increase as the project progresses toward the execute stage. Prior to each stage a preliminary risk analysis should guide the first step, but as more details and options are considered in subsequent steps, further risk analysis should be performed with increasing detail and precision to continuously guide and inform the project management process. Risk management should be an integral part of project management at each stage of the project life cycle, designed to accommodate the focus of each stage in an integrated, holistic manner (Thamhain and Wileman, 1975).

2.10 - Chapter SummaryThis literature review gave enough insight in risk managements, different types of risk management, the common risks faced by companies, operational risk which included controlling the risks, strategies for managing risks, the action required and the decision process in operation. A chapter about baggage handling explained how it was done in general and how it was one at Heathrow Airport Terminal 5, the scope of project risk management, the project life cycle and also a chapter about operation management which included the activities of operations management, the direct responsibilities of operations management, the indirect responsibilities of risk management and the brad responsibilities of operations management. It also revealed the research that had been done in this specific research topic. It is clear from the literature above, that there are a number of factors that may contribute to become an action plan to solve the problem.

The next chapter presents the Research Methodology that was applied in this study. The chapter looks at the rationale for the study, the research design, the research process, limitations of the study and the elimination of bias during the study.

Chapter 3 - Research Methodology

3.1 - Introduction

This chapter explains in details how the research was conducted and also it gives justification for the methods used. Such information is important to provide validity and reliability to the findings and recommendations of the research. Specifically, it explains how the information was collected, where it was found; how it was accessed and processed to than arrive at the conclusions. Research is a process, a series of activities unfolding over time. It involves a number of things such as choice of the research design, the collection of data and evaluation of results and so on. One of the most important decisions to make is the general approach the research is going to take (White, 2002). In this chapter is a presentation of the rationale for the study, the research design namely types of research, the target population, the type of sampling done and reasons for choosing each sampling type. The chapter also explains the research instruments that were used, the research process, the administration of questionnaires, how data was analysed and what was done to ensure its validity and reliability. The chapter also presents the limitations of the study and how elimination of bias was done.

3.2 - Research Questions

There are two questions to be answered in this research which are if BAA used the most effective way when introducing a new baggage system and also if the risks about operational management were covered doing the right procedures according to the literature.

3.3 - Research Design

Research design is the plan and structure of investigation which explains where the study was intended to be carried out. The research design section gives an overall view of the method chosen and the reason for that choice (Saunders et al, 2007).

A single case study strategy was adopted for this research in order to identify specifics factors that contributed to the baggage problem at Heathrow Airport Terminal 5. The case study method involves an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence (Robson 2002). According to Morris and Wood (1991), the advantage of using the case study method is that it provides a rich understanding of the context of the research and the processes being enacted. It also has considerable ability to generate answers to the questions why? as well as the what? and how? question, although what? and how? questions tends to be more the concern of survey strategy. For this reason the case study strategy is most often used in explanatory and exploratory research.

3.4 - Type of Research

There are two types of research which are qualitative research and quantitative research. In this study both types of research have been used.

3.5 - Research Instruments

Research instruments associated with qualitative methods include interview and questionnaires. The questionnaires were also used as a method to collect quantitative data.

3.6 - Data Collection

In this study both, primary and secondary data was collected. Primary data was collected using one set of questionnaire (Appendix 5) to test the customer perception about the system used in Heathrow Airport Terminal 5. The questionnaires had both open and multiple choices questions.

They were designed to facilitate the collection of qualitative and quantitative data. From the open question it was possible to check the opinions from the respondents, which consequently enhanced the testing of hypotheses. The multiple choices questions were designed to obtain more quantitative data in order to define the customer perception with a statistical analysis.

Parameters such as security, fast decision, problems with baggage and customer service were used to determine what experience the customer had using Heathrow Airport Terminal 5. The questionnaires were applied on both, at the arrival and departure of the terminal. Interviews were also used to collect data. It was done with people that worked at operational level at Heathrow Airport Terminal 5. Interviews (Appendix 6) with people who developed the system were another option, but due the material that the company sent via e-mail was enough to obtain the information needed. To gain access to those people who work at Heathrow Terminal 5, a formal letter was written by Bruce Sheppy, the head of business department at Cavendish College (Appendix 7) which gave a professional impression from managers at Heathrow Airport Terminal 5 and facilitates the arrangements for interviews.

As secondary data were used specifics articles about everything related to the topic of baggage system, operational management, operations, and so on. Also for the secondary data, other relevant documents were used such as files sent by BAA, BA and Vanderlande Industries related to the research.

3.7 - Target Population

For the purpose of the study the target population, which is the total collection of elements that the study was intended to make some inferences were passengers who had previous experience using Heathrow Airport Terminal 5, people who worked at Heathrow Airport Terminal 5, specifically those who deal with the baggage system.

3.8 - Sampling

Sampling is the collection of information from a portion of the total population and on the basis of the information collected from the subset, to infer something about the whole target population (Ghosh, 2002). The sampling techniques available can be divided in two types: probability/representative sampling or non-probability/judgemental sampling. The probability samples is often associated with survey and experimental research strategies and non-probability samples is more frequently used when adopting a case study strategy (Saunders et al, 2007).

The approach used on the study was a phenomenological with a non-probability sample, using the judgement samples. There are some limitations using this type of sample, such as number of people interviewed, statistical analysis cannot be made, but in this case it was used to get specified answers to make my own conclusions based on knowledge of the people interviewed.

The sampling method used was appropriated considering the time and difficulties to get people interviewed. The passengers normally were most of the time busy and the people who worked in the Airport were very difficult to find because due all the technology used in Terminal 5, people who deal with baggage system, do not stay in the Terminal itself, they stay in restricted areas.

3.9 - Administration of Questionnaires and Interviews

The study had one set of questionnaire and one set of interviews. The questionnaires were for customers. A total of 60 questionnaires were administered in the sample. The questionnaires were distributed to the passengers by the researcher, who at the distribution stage read out the contents of the questionnaires in order to clearly explain the questions contained there and allow for questions and clarifications from respondents.

The respondents were then allowed to respond to the questionnaires at their own time. At the stage of collecting the questionnaires, the researcher again sat with the respondents to allow for further questions, clarifications and correct any mistakes that could have been made by the respondents when filling in the questionnaires. The interviews were done with people who worked at Heathrow Airport Terminal 5. A total of 6 interviews were administered.

A pilot interview was done to test the interview content, structure and to evaluate that the questions were phrased in a concise and understandable way. At the presentation stage, the researcher read the contents of the questions in order to clearly explain the questions. The interviews were audio-recorded had approximately 30-45 minutes and each question was read by the researcher and the person interviewed answered that question. At the end of the interview the researcher asked if there was any further points that the person interviewed wanted to add.

The interviews schedule can be seen on the table as follow.

Table 2 - Interview Schedule

APPOINTMENTSLOCATION RESPONDENTSJOB TITLES

22nd April 2009 (Wednesday)

1100 hrsHeathrow Airport Terminal 5Respondent 1Supervisor

22nd April 2009 (Wednesday)

1200 hrsHeathrow Airport Terminal 5Respondent 2 General Manager

23rd April 2009 (Thursday)

0930 hrsHeathrow Airport Terminal 5Respondent 3 Operational Manager

23rd April 2009 (Thursday)

1500 hrsHeathrow Airport Terminal 5Respondent 4 Operational Supervisor

24th April 2091 (Friday)

1500 hrsHeathrow Airport Terminal 5Respondent 5 Check-in Supervisor

27th April 2009 (Monday)

0930 hrsHeathrow Airport Terminal 5Respondent 6 General Manager

3.10 - Data Analysis

Ghosh (2002) argues that the purpose of data analysis is to build up a sort of intellectual model where the relationships involved are carefully brought out so that some meaningful inferences can be drawn. Analysis of data is to be made with reference to the purpose of the study and its possible bearing on the scientific discovery. Analysis is made with reference to the research problem at hand or the hypotheses. The first step in the analysis of data is a critical examination of the assembled data. A total of 60 questionnaires were collected and 6 interviews were done.The questionnaires were entered in the computer using Microsoft Excel to make graphs of the demographics and customer perception/acceptance of the new baggage system. Interviews were audio-recorded and transcribed (Microsoft Word) which reproduced as a written document.

3.11 - Elimination of Bias

Cooper and Schindler (2003) observe that the characteristic of sound measurement is that the tool used should be an accurate counter or indicator of what one is interested in measuring. In addition the tool should be easy and efficient to use. There are three major criteria for evaluating a measurement tool namely validity, reliability and practicality.

Validity refers to the extent to which a test measures what you actually wish to measure. For this study, different sources of evidence, structured interviews and questionnaires were researched.

Reliability has to do with the accuracy and precision of a measurement procedure while practicality is concerned with a wide range of factors of economy, convenience and interpretability. In an attempt to eliminate bias during the study, the following steps were taken: The questionnaires were subjected to a pilot study to measure their suitability, validity and reliability before being finally used in the field, the same action was used for interviews. Also for the interviews, the questions were semi-structured and the same approach was used for each individual person interviewed.

3.12 - Study Limitations

Though the study was successfully conducted, BAA and BA could not provide specific actions taken during the introduction of the new baggage system. They claimed that it was classified information that should not be given out. The other problem was the limitation in terms of information given by the passengers which most of the time did not want to answer the questionnaire, and for that reason, most of the people answered very fast which could compromise the findings. This was the major limitation to the study. The issue of inadequate resources was another limiting factor in the study due the topic be very specific and there is no general theory about operations risk management in aviation, but the general operational risk management theory was successful applied at the research proposed. The authors inexperience in research and interviewing skills might lead to ineffective facilitation of interviews. This can mean being unable to detect signs which could lead to a further understanding about more relevant information of the context. However, confidence and experience gained after the pilot and subsequent interviews conducted compensated for the initial amateurism.


This chapter highlighted the importance and rationale for the study, which was basically to provide a basis for the formulation of appropriate policies in the research. The research was designed in such a way that both quantitative and qualitative approaches were used and the target population was passengers who used Heathrow Airport Terminal 5 and people who worked dealing with baggage system. The target population was sampled basically, one set of questionnaire and one set of interview; questionnaires were used with passengers and interviews with people who worked at the Airport as a way of clarifying and getting additional information. The data collected was analysed using the Microsoft Excel and Microsoft Word. The next chapter presents the studys findings and analysis of data.

Chapter 4 - Data Presentation

4.1 - Introduction

This chapter presents the data of the results that the author researched. It begins with the questionnaires applied with passenger at Heathrow Terminal 5 and ends with the interview applied to people who work at Heathrow Terminal 5.

4.2 - Findings from the questionnaire

Question 1- Specify your gender.

MaleFemale

65%35%

Figure 1 Gender

Of all the respondents in the questionnaire, 65% were male and 35% were female.

Question 2 - Which group of age do you include yourself?

Group of Age

18-2825%

29-3920%

40-5040%

51-6015%

60 or more0%

Figure 2 - Group of age

People with age between 40 and 50 years old were the most interviewed with 40%, people from 18 to 28 years old had 25% of the questionnaire answered, 20% of the people between 29 and 39 years old, 15% of the people interviewed had between 51 and 60 years old and no one with more than 60 years old was interviewed.

Question 3 Have you ever had any problems with your baggage? (e.g. delays, lost baggage, etc.)? If yes, what was the problem?

YesNo

85%15%

Figure 3 - Problems with baggage

Most of people interviewed had previous problems with baggage.

The common problems that people interviewed related were delays and lost baggage in the follow proportion.

Lost baggageDelays

20%80%

Figure 4 - Common problems with baggage

Question 4 Have you noticed any difference about how your baggage is handled here in Terminal 5, compared with other terminals and airports?

YesNo

45%55%

Figure 5 - Customer perception

Passengers were divided in terms of the perception of dealing with baggage at Terminal 5, where 45% of the people interviewed noticed difference and 55% did not notice any difference.

Question 5 Which were the differences apparent in any of the following activities?

Table 3 Differences noticed by passengersActivityPassengers

Speed (time to collect the baggage or to check in)IIIII IIIII III

Less problems with baggage (e.g. lost baggage, delays, etc.)IIIII III

Others specifyIIII(very easy)

I (Overweight was more adequate)

Many people did notice differences, and most of them notice difference in terms of speed, less problems during the arrival and some people thought it was easy and fast.

Question 6 Which activities do you consider most and least important when somebody is dealing with your baggage (please, use the scale of 1 for the most important and 5 for the least important)?

Table 4 Activities most and least important (handling baggage)ScaleSecuritySpeedCustomer service (when something happens with your baggage and somebody needs to help you)To be sure my bags are being handled by a fully automatic system without manual contact after check in

1IIIII IIIII IIIIIIIIIIII III

2IIIII IIIIII IIIIIII IIIII

3IIIII IIIIIIII III

4IIIIIIIIII IIII

5I

*each group of five I represents 10 people.Most of the people interviewed thought that security, speed and customer service (when something happens with your baggage and somebody needs to help you) as the most important activities and to be sure that my bags are being handled by a fully automatic system without manual contact after check in was the least important for them.

Question 7 - Heathrow Airport Terminal 5 is using a high-tech automatic system to handle baggage. Do you yourself feel more secure with your bags than in other airports with more manual handling service?

Figure 6 - Customer perception - security

When people had the knowledge that their baggage were being deal by an automatic system, 65% of the passenger felt more secure than their baggage being deal by humans (staffs) and 35% did not feel more secure with all this technology.

Question 8 In your opinion, what improvement(s) in the baggage handling service should airports introduce?

Table 5 Improvements at Terminal 5Improvements Manual labour checks

Double up on man power

More staffs around passenger

Most of the people interviewed did not give any idea of improvement, but some of them gave, such as double up on man power, manual labour checks, more staffs around passenger. Some people interviewed said that with all the technology that is being using at Terminal 5 there is no need for improvements in terms of baggage handling.

4.3 - Finding from the interviews

Questions 1 and 2 were personnel and there was no valuable information related to the objective of the interview.

The findings from interviews are structured under the questions as headings:

3) How do you compare the operational baggage system which operates at Heathrow Airport Terminal 5 from the baggage system which operates in other airports?

4) Is it likely that this new baggage system will be implemented at other terminals?

5) What were the main risks that were faced before the new baggage system was introduced?

6) How would you explain the operational problems experienced on March 27th?

7) To what extent is the system solving the baggage problems encountered on March 27th?

8) In your opinion do you believe the customers have noticed any differences since this new high tech baggage system was introduced?

The questions were semi-structured and all the respondents had the same approach. The objective of the interview is to analyse and investigate the risks and process when the new baggage system was introduced and also if the passengers noticed any difference with the new system.

4.3.1 - Question 3

How do you compare the operational baggage system which operates at Heathrow Airport Terminal 5 from the baggage system which operates in other airports?

The purpose of finding the difference between the operational baggage system at Heathrow Airport Terminal 5 from the baggage system which operates in other airports is to check if this new system is more efficient in terms of operations than other baggage system.

The respondents had the same start saying that the baggage system used at Terminal 5 was unique and it was developed exclusively for Terminal 5. The respondent 1 added: The baggage system at Terminal 5 was designed by BAA, BA and Vanderland industries. They used more than 400,000 hours just in softwares developments and also they needed to get manufactures in 3 different countries, the Netherlands, Germany and the US to get the system ready.

The operational baggage system is basically operated by softwares and the manual contact happens in two stages, at the check-in point where the staff put the bar code on the baggage and at the gate point where the carriers get the baggage to put into the airplane.

All the processes that separate which baggage is going to which airplane, at what time and what is the final destination are all processed by the system and delivered in the most efficient manner in terms of time. The respondent 2 added: It is possible due that this system is unique and it can process up to 12,000 bags per hour through the tilt tray sorter and at any point in the time there will be 18,000 metres of conveyors being used for bags entering the system, normally from the check-in or transfer process. For the passenger who arrives late the system has an 8,000 metres high speed baggage rail link.

The system has another characteristic which is not usual in airports, the fast bag drop, which permits the passenger to check-in several hours before the flight. The system put the baggage in a 4,000 bag capacity until the time of the flight. The respondent 4 added: Every bag entering the system is individually bar coded before being screening and routed to its destination. It allows the system knows at what time each baggage has to be ready in the gate point to be collected by the carriers.

The main difference that was seen about Terminal 5 from other terminals is the number of bags that can be processed (up to 12,000 per hour), the number of bags that can be stored (4,000 bags) and the tilt tray sorter which can be up to 18,000 metres which can allow more flights in less time spent to deliver baggage on time and everything made and processed by software. The respondent 3 also added: The complexity at Terminal 5 is more depth where the system does everything from the check-in point to departure gate, from one gate to another during transfer and to passengers on arrival in the baggage reclaims area in the best time consuming manner.

4.3.2 - Question 4

Is it likely that this new baggage system will be implemented at other terminals?

This question has the aim to identify the future possibilities of using such technology in other terminals.

The respondents again answered that the system at Terminal 5 was developed exclusively for Terminal 5. But there are plans to future investments in the baggage system for the other terminals. The respondent 2 added: Well, BAA just redeveloped Terminal 3 of a new modern forecourt at the end of 2007, but there are plans for 1 billion upgrade for the next ten years which will construct a new automated baggage link to connect Terminal 1, Terminal 3 and Terminal 5.

Investments in Terminal 1, Terminal 3 and also Terminal 4 that will be using that 1 billion investment plan to improve the processes of baggage system as can be seen on the table as follow:

Table 6 - Future investments in terminal 1, 3 and 4 at Heathrow

TerminalsAction

Terminal 1The baggage link will be refurbished and also an upgrade in the existing baggage system with new check-in and upgraded x-ray screening capacity.

Terminal 3An integrated baggage system will be developed

Terminal 4The baggage link will be refurbished and a new and integrated baggage system including the replacement of existing sorters will be done.

Basically the baggage system used at Terminal 5 will not be implemented in other terminals, the respondent 5 added: About the chance to the same baggage system that operates at Terminal 5 can be used in others Terminals, the probability is very low or even 0% due that the baggage system was done specifically for Terminal 5 with its dimensions, building facilities, potential number of customers which leads to potential number of baggage to be processed at the same time, and other Terminals have its characteristics which would be not similar to Terminal 5.

4.3.3 - Question 5What were the main risks that were faced before the new baggage system was introduced?

The purpose of this question is to achieve the main objective of this research which is to identify the main risks that BAA and BA faced before they introduced the baggage system.

There were several risks faced by BA and BAA during the process until the system was introduced. The respondent 3 added: The baggage system vision was ambitious.

Before the system was introduced BAA and BA were committed to use tried-and-tested technology to mitigate risk. When the team first started the set of installation the system, the environment was not the perfect one which meant that time, cost, quality and safety risks all had to be managed. The respondent 2 added: The most significant risk in baggage handling is the system integration that involves data from BA and BAA starting to flow between both companies as the team tests the resilience of the system

The effective transmission of data over the Heathrow and Terminal 5 communications network was another risk. The respondent 1 added: ...and also its receipt and understanding by the baggage system, such as core to the testing and management of the overall baggage product.

The time that staffs had to interact, understood and manage the system was another risk due that the baggage system was released on 28th September 2007 to start the trial, less than 1 year of the date to open the Terminal. The respondent 4 also added: ...BAA and BA started the trainings in a weekly basis instead of daily basis.

4.3.4 - Question 6

How would you explain the operational problems experienced on March 27th?

This question has the objective to understand what factors contributed to the operational problems experienced on March 27th, the open day of Terminal 5.

Almost all the respondents agreed that the operational problems experienced on March 27th started months before that day. The respondent 5 added: BA and BAA changed the names and faces that represented both organizations. The respondent 1 also added: Some people have talked about the senior disagreements that did take place, and that their roles was to get together with their counterparts, understand the real issue and find a way through.

Also some rumours about BA might not be ready for opening because BA knew that once they were committed to the open date, the business and reputation damage would be devastating if dead lines were not delivered or an unknown risk materialized.

The system problem was the last problem on the opening day, the respondent 6 added: The problems started with the car parking provision, than with the delay in staff security screening and staff familiarization which resulted in a backlog of baggage. Also the respondent 1 added: There was a technical problem with airports three-stage luggage processes system. The first stage which was the fast bag drop was working as expected but the second stage which was the underground conveyor system became clogged. At that point, the staffs failed to remove the bags quickly. And the respondent 2 added: The computers also did not recognize staffs identities which made them not able to log on to the system.

There is no exactly explanation, but some facts that proportioned and helped to happen what happened.

4.3.5 - Question 7

To what extent is the system solving the baggage problems encountered on March 27th?

This question has the aim to verify the efficiency of the new baggage system.

For this question no statistics numbers were cited by the respondents, they answered based on what is happening. The problems that happened in the first few weeks were documented. The baggage system has not to do about the delay problem at Terminal 5, the respondent 4 said: ...is happening due other airlines are not getting the baggage on time, there are also different carriers using different process at Heathrow. The respondent 1 added: When the baggage is transferred from BA to BA, the statistics are fairly robust, but when they are coming from other carriers they are not so.

The figures compared with last year are getting better, but there are much more work to do due the respondent 3 said that the system can work near the perfection when the BA flights are all on the same Terminal, using one baggage system and one baggage team but it is impossible to happen due the capacity of the Terminal 5 cannot get all BA flights, it will be needed to wait until Terminal 5 A and B get ready to try this move.

4.3.6 - Question 8

In your opinion do you believe the customers have noticed any differences since this new high tech baggage system was introduced?

This question has the objective to check if the passengers noticed any difference, according to BAA and BA.

All the respondents believe that the customers noticed differences with the new high tech baggage system. Respondent 3 said: ...now they can check-in in five minutes, there is no more need to wait until the check-in is open. Respondent 1 added: ...if the passengers came early they can use the fast bag drop which will keep in safe their baggage in the store bag. Respondent 2 added: The technology used in Terminal 5 is not only to BAA and BA interests but much more for the passengers due that the objective of the system is to avoid long queue in the check-in, minimize the number of lost and delayed bags, minimize the time to collect the baggage when the passenger arrives, everything in the best time consumer manner.

The table below describes some observations during the interviews, the duration and where the interviews were conducted.

Table 7 - Observations during interviewRESPONDENTSPLACEDURATIONOBSERVATIONS

Respondent 1Office30 35 minsRelaxed and confident. The respondent gave a lot of informations.

Respondent 2Office20 25 minsInterrupted once by mobile phone

Respondent 3Meeting Room25 20 minsThe respondent does not seem very confident

Respondent 4Office30 35 minsVery reserved

Respondent 5Office25 30 minsConfident

Respondent 6Meeting Room35 40 minsRelaxed and confident

Chapter 5 - Analyses of findings

5.1 - Questionnaire

The first two questions there is no need of analyze due it was done to get demographic statistics.

Question 3 - Have you ever had any problems with your baggage? (e.g. delays, lost baggage, etc.)? If yes, what was the problem?

At this answer most of the people had previous experience with baggage problems. As the questionnaire was applied just with passenger that had previously used Heathrow Airport Terminal 5, most of the passenger which had problems with their baggage could have those problems during the initial period of activities at Heathrow Airport Terminal 5, which was very bad in terms of statistics in number of lost baggage and delayed baggage. According to BBC News (2008), almost 300 flights in and out of Heathrow Airport were cancelled during the first five days after open Terminal 5, which caused a chaos.

Question 4 - Have you noticed any difference about how your baggage is handled here in Terminal 5, compared with other terminals and airports?

There were more passengers which did not notice any difference about how the baggage was handled. It can be explained because most of people interviewed did not use the fast bag drop, which is a differential in Terminal 5. The passenger can have the basic process in the check-in point where there is a need of the manual contact, which is the same in all terminals. It can lead that most of the passengers did not experience what the Terminal offer in terms of differential in check-in. the reasons for that could be many, from cultural prospective to marketing perspective. If the airport does not show its differential and benefits to its customers, the customers cannot identify what is different from Terminals 5 to another terminals.

Question 5 - Which were the differences apparent in any of the following activities?

a) Speed (time spent on your baggage until you collect it)

b) Less problems with baggage (lost baggage, delays, etc.)

c) Others specify.

In this question, most of the people that noticed differences at Terminal 5 said that the speed in terms of the time spent until the passenger collect their baggage and less problems in terms of lost baggage and delays were the main differences that they noticed. Others passengers said that the using the fast bag drop was very easy and very fast.

Question 5 - Which activities do you consider most and least important when somebody is dealing with your baggage (please, use the scale of 1 for the most important and 5 for the least important)?

In this question the passengers interviewed said that speed, customer service and security were the most important. According to Department of Transportation (2006), the baggage problems (long baggage claim time, delayed, damage, lost baggage, etc) are ranked as the second more important on the customer complaints list. It has a high impact in customer satisfaction and loyalty level. And the least important activity was the threat of the technology used at Terminal 5 which does not need any manual contact with the baggage.

Question 7 - Heathrow Airport Terminal 5 is using a high-tech automatic system to handle baggage. Do you yourself feel more secure with your bags than in other airports with more manual handling service?

Most of the people interviewed said that they felt more secure that the bags are being handled with less manual contact. According to Daily Mail (2009), at Heathrow the numbers of lost bags in the first three months in 2008 were 270,106, which included the first five days after Terminal 5 opened. People link the term fail with human error and less people dealing with your baggage means less propability that any problem can occur.

Question 8 - In your opinion, what improvement(s) in the baggage handling service should the airports introduce?

In this question people who was interviewed and said that did not feel more secure with the baggage being handled by an automatic system said that improvements in double man power or manual labour checks could be done. But on the other hand people who answered either that felt more or less secure with the automatic system said that more staffs around could be one improvement. It can lead that at Terminal 5 there is a lack of staff s around the check-in to help even people who want to use the fast bag drop.

5.2 InterviewThe first two questions will not be analyzed because they are personnel answers and have not specific that could be used as part of the research. 3) How do you compare the operational baggage system which operates at Heathrow Airport Terminal 5 from the baggage system which operates in other airports?

In this question the operational baggage system at Heathrow Airport Terminal 5 can be seen as a unique and much more modern comparing to other terminals. Most of the terminals still have a considerable human content on baggage handling. At Heathrow Airport Terminal 5, the number of staffs dealing with the baggage is fewer than other terminals. It can be seen few people working at the check-in points, due the high number of check-in points automated. In Heathrow Airport Terminal 5, a high tech baggage system is being used and according to BAA (2008), the new baggage system is extremely sophisticated and has been designed for performance and reliability.

The baggage system at Terminal 5 was designed more than 400,000 hours of software development followed to get manufactures in the Netherlands, Germany and the US to get the system ready. This system is unique and it can process up to 12,000 bags per hour through the tilt tray sorter, at any point in the time there will be 18,000 metres of conveyors being used for bags entering the system, normally from the check-in or transfer process. Also there is an 8,000 metres high speed baggage rail link for passenger who arrives late. Another point is a 4,000 bag capacity store for those passengers who get to Terminal 5 early. Every bag entering the system is individually bar coded before being screening and routed to its destination. All those process is automatic, basically the only manual contact that the bag has is during the check-in point that the bag is bar coded by BA staff and when carriers pick up the bag from the point that the bag goes to the airplane. The main difference about Terminal 5 from others airports is the number of bags that can be processed (up to 12,000 per hour) and the number of bags that can be stored (4,000 bags) which can allow more flights in less time spent to deliver baggage on time. More than 360 airlines in the world use a lot of technology to track their baggage; the industry standard is the world-trace which is to find lost baggage. The complexity at Terminal 5 is more depth where the system does everything from the check-in point to departure gate, from one gate to another during transfer and to passengers on arrival in the baggage reclaims area in the best time consuming manner.

4) Is it likely that this new baggage system will be implemented at other terminals?

At this question was clear that the new baggage system developed to operate at Heathrow Airport Terminal 5 was only for that Terminal due the characteristics that the building had. BAA and BA have a 1 billion plan to spend in other terminals at Heathrow Airport which can be seen on table 6 pp.41. According to Loader (2007), operational risk is defined as the risk associated with human error, systems failures and inadequate procedures and controls during the processing of business related transactions and the loss of reputation by a failure to implement the processing correctly. According to Kazda and Caves (2007), the baggage handling process still has a considerable human content, leading to many health and safety concerns. It could be a factor the made BAA and BA to implement the 1 billion package to improve Terminal 1, 3 and 4 because the reputation of an airport can be damaged because of the human factor mishandling that can occur, leading to a certain number of lost or mislaid bags. Technology is seen as a solution to minimize those threats that aviation has. According to Doherty (2008), the new baggage system cost approximately 200 million. It is nothing compared with the costs that Aviation lost just with baggage problems, which according to the Journal of Theoretical and Applied Electronic Commerce Research (2008) the airplanes ship nearly two billion bags per year and the cost that mishandled bags that aviation industry has to pay is about U$3,7 billion per year, which does not include delayed flight costs due to baggage problems, refund to the passenger gate parking costs due to baggage delayed flights, etc. Krzymuski (2007) adds that it could increase costs in more U$4 billion per year.

5) What were the main risks that were faced before the new baggage system was introduced?

There were a lot of risks that were faced before the new baggage system was introduced. According to Triana (2006), these common risks that companies face, two areas can be applied for the purpose of the study. First area is the employee due that people are always unpredictable and that in itself is a huge risk for companies. A hiring, training and retaining quality employee is a challenge for companies and causes the biggest expense and a bad reputation for the company. For Heathrow Airport Terminal 5, it is a constantly risk to be managed. An employees lack of productivity or un-expectant departure can greatly impact project work and plans for implementing new products and services. The second area is the technology. The use of new technology can be very expensive and if it does not work properly it can take an organization down on both sides, loss of profitability and consumer retention. If an organization does not keep up with new technology it could be left behind and become uncompetitive.

The baggage system was very ambitious. BAA and BA had a significant risk when the system integration that involves data from BAA and BA started to flow between both companies. The effective transmission of data over Heathrow and Terminal 5 communications network was other risk. The main risk was the receipt and understanding by the new baggage system, such as core to the testing and management of the overall baggage product.

According to Jeynes (2002), there are ten elements of operation that represent those main risk areas which are: Premises, product, purchasing, people, procedures, protection, processes, performance, planning and policy. In operational risk management in aviation, the following areas can be considered as a dangerous threat:

People the workers in the organisation, skills needed, training needed motivation and commitment, employment contracts. It affects directly the process of installing or constructing anything. A wrong person on the wrong function can cost money and time for the company.

Procedures production procedures, record keeping and reporting systems, monitoring and review, use of standards, emergency procedures. If the wrong procedure is taken, the entire project could fail. The wrong decision making can cause a failure in long or short term.

Performance targets set, monitoring, measurement tools, consistency, validity of data. The operational management level has to keep the performance at an acceptable standard level, once that the performance can delay the processes.

Planning management skills, external factors and level of control. Keep the schedule on time is a tough role, managers must have the right skills to manage the time scale.Each element represents its own type of risk which can impact positively and negatively. No one can eliminate all the risks in all areas, but minimizing the risks is the key factor. It is a risky business setting up, operating and developing a successful operation and it becomes more difficult if the operation is huge, such as at Heathrow Airport Terminal 5.6) How would you explain the operational problems experienced on March 27th?

At this question there was no one right explanation, but some facts that proportioned what happened. The first fact was the BAA and BA changes the names that represented both companies, which could lead to different types of dealing with people. People can have different understanding from different approach. BAA and BA thought that it could not bring a different understanding. According to Jeynes (2002), all risks identified must be collated to reduce overlap and repetition and also a list of primary risk factors must be done and also a long-term action is needed with an acceptable time scale, considering the cost implications and the potential results of planned actions. BAA and BA did not plan properly due the changes that both companies had.

Another factor was the disagreement about the senior management which their roles was to get together with their counterparts, understand the real issue and find a way though. According to Chapman and Ward (2003), the action required to minimize the risks at the operational management level, could range from technical analysis of potential risks, replacing of existing equipment, training for specified group of workers, recruit internal staff or making contract with external sources in order to up-grade skills or knowledge base and expertise and establishing more effective, wide-spread information that include all relevant group of workers.

The changes made by BAA and BA did not up-graded skills or knowledge, it just consumed time.

The system problem was the last problem on the opening day which many problems came at the same day in a snowball effect. The problems started with the car parking provision, which was no clear signal and also was far away from the terminal, delay in staff security screening and staff familiarization which resulted in a backlog of baggage. There was a technical problem with airports three-stage luggage processes system. The first stage which was the fast bag drop was working as expected but the second stage which was the underground conveyor system became clogged. At that point, the staffs failed to remove the bags quickly. The computers also did not recognize staffs identities which made them not able to log on to the system.The operational problems caused on the 27th March, started with the planning on the early stage of construction, production and development of the Terminal itself. More tests could be done in order to avoid and understand all the risks that could happen. 7) To what extent is the system solving the baggage problems encountered on March 27th?

According to Kazda and Caves (2007), baggage handling is becoming a critical activity. The airlines are trying to shorten the turn round time between individual flights and at the same time, the average load factors are increasing.The problems that happened in the first few weeks were documented and in terms of statistics the number of errors is less than was before. Delays are still happening but this has nothing to deal with the baggage system, it is happening due other airlines are not getting the baggage on time, there are also different carriers using different process at Heathrow. When the baggage is transferred from BA to BA, the statistics are fairly robust, but when they are coming from another carriers they are not so. The figures compared with last year are getting better, but there are much more work to do. The system can work near the perfection when the BA flights are all on Terminal, using one baggage system and one baggage team.In Denver Airport, Colorado, USA, the baggage systems US$ 186 million original construction costs grew by US$ 1 million per day during months of modifications and repairs. In August 2005 it became public knowledge that United Airlines was going to abandon the system (Doherty, 2008). It does not look like the case at Heathrow Airport Terminal 5 because the system is working as expected when BA deal with BA, but all the potential that is expected can be seen just when flights from BA are all in the same Terminal using one baggage system and one baggage team.

8) In your opinion do you believe the customers have noticed any differences since this new high tech baggage system was introduced?

At this question, there is a contradiction. People who work at Heathrow Airport Terminal 5 believe that the customers have noticed differences with the new high tech baggage system. They appointed some points which could be the differential. The check-in could be done in 5 minutes, the passenger could came early and using the fast bag drop could do the check-in hours before the flight and the baggage would be kept in the 4,000 storage bag that the Terminal provides. BAA and BA said that all the technology used at Heathrow Airport Terminal 5 is not only to BA and BAA interests but much more for the passengers due that the objective of the system is to avoid long queue in the check-in, minimize the number of lost and delayed bags, reduce the time spent to collect the bag on the claim hall and so on.

The questionnaire done with passengers at Heathrow Airport Terminal 5 at the arrival and departure points gave the opinion that 55% of the people interviewed did not notice any difference about how the baggage is handled in Terminal 5, compared with other terminals and airports.Passengers cannot be familiarized with the new system, but more important is that the questionnaire with passengers showed that most of them feel more secure with an automatic system that need less manual contact with their baggage.

Chapter 6 - Conclusions and RecommendationsThis chapter will give a summary of findings, conclusions and recommendations of the research.

6.1 ConclusionThe study done had the aim to identify the main risks when a new baggage system is introduced, the effective process of a new baggage system and its benefits and also to analyse how the risk management theory can be applied in baggage handling automation process in airports.

The research had an extensive literature review in order to identify what previous authors have written about operational risk management, secondary research such as books, articles and data collection was used and also primary research such as interviews was used on this study. The findings were analysed both qualitative and quantitative methods where quantitative were used graphs and tables and qualitative were linked with what the theory said about the topic. The conclusions and recommendations for this study were based on the findings of this research.

The study results have clearly shown the main risks when a new baggage system is introduced which requires an effective and efficient process of operational management since it begins. Any small risk found must be minimized in order that it could cause bigger problems in the future. The study had shown many different types of risks that could be found and also how to deal with those risks.

An efficient baggage system can bring some benefits to customers and many benefits to companies as Terminal 5 is using a high tech baggage system which is operated by machines and softwares and the airport do not need to employee many staffs for this role. On the passenger side, benefits can be seen such as the use of the fast bag drop which allows the passenger make check-in hours before the flight, through a kiosk in Terminal 5 which minimize the time spent and queues comparing to normal procedures that normally is done in check-in. Unfortunately Heathrow Airport Terminal 5 is not exploring this new advantage that the customer can have because passengers are not well informed about the fast bag drop and because there is no staffs around to explain it.A case study of Heathrow Airport Terminal 5 was chosen due the high tech baggage system that the airport is using to analyse what the theory say about risk management and what people who work at the airport had done. A better understanding of risks must be known by management level due that their decisions point where the process goes and it is crucial that a wrong decision made about any kind of risk can be much bigger in the

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