Thursday, 17 April 2014

Connecting dots (or collecting dots)

Without a doubt, the ability to connect the dots is rare, prized and valuable. Connecting dots, solving the problem that hasn't been solved before, seeing the pattern before it is made obvious, is more essential than ever before.
Why then, do we spend so much time collecting dots instead? More facts, more tests, more need for data, even when we have no clue (and no practice) in doing anything with it.
Their big bag of dots isn't worth nearly as much as your handful of insight, is it?
Seth Godin

Wednesday, 9 April 2014

What stops airlines from recovering uninsured disruption losses caused by third parties

An increasingly busy operational environment and a growing number of outsourced services make airlines more susceptible to operational disruptions caused by third parties. This can incur substantial losses to airlines unable to credibly document indirect damages - the ripple effects following the initial disruptions.  

Ground handling incidents resulting in aircraft damage, for example, could put a plane out of service for days or even months and cost an airline hundreds of thousands and in some cases over a million dollars. Apart from the direct cost of aircraft damage associated with aircraft repair, it often incurs several times higher indirect costs caused by unserviceable aircraft. While losses above the deductible insurance values can be recovered for direct damages, as well as a part of ‘straight’ indirect cost, like hired replacement aircraft, those below highly set deductibles (over $1 million for wide body aircraft) must be borne solely by the airline, unless protective contractual clauses are agreed with the third parties. The situation is not much better in case of disruptions caused by ground handling, aircraft maintenance or technology companies, ATC, airports, or aircraft manufacturers.
At the core of the problem lies a deeply rooted industrial approach to cost management and inherited organisational departmentalisation - both contributing to the distortion of communication channels and consequently the objectivity of information. This is manifested through traditional, linear, top-down distribution of costs which are multidimensional by nature, and their dissociation from operational events like flight delays, cancellations, diversions, additional flights, and aircraft replacements. The same applies to passenger related costs including additional handling, loss of revenue and passenger compensation which remain disconnected from the events that have created them, making their recovery impossible.

Another obstacle to identifying the full impact of damages caused by third parties is related to the responsibility for collecting this information. It is dependent on people based in parts of an organisation who neither have much to do with tracking of actual costs and their origins, nor are they equipped with a cross-system tool necessary to successfully complete this complex task (job usually delegated to Engineering, Insurance, Ground Operations, Flight Safety or other operational departments).

However, improvement in this area is possible even for the most complex organisations. To identify the true value of disruption costs they need to be observed as close to real time as possible. All it takes then is to create a system that provides links between real time costs, initial and reactionary schedule changes (operational events) and their root causes. In addition to numbers, it needs to be accompanied with stories of those directly and indirectly involved in the event captured as close to real time as possible. It is amazing to see how this process opens the way to true cost tracking crossing the departmental boundaries in all directions; it sets a healthy ground for creation of the reliable information system that, apart from many other internal purposes can well serve legislative requirements for disruption loss recovery.

Designing and implementing this relatively simple and inexpensive method for loss recovery requires a good system knowledge, support at highest organisational level, and cross-system cooperation. The results spread much wider than for the purpose of loss recovery, with efforts and investments being minuscule compared to the benefits.

Those willing to share their personal experience, or have questions related to this subject including design of tools for disruption loss control can contact me at

Wednesday, 19 February 2014

CEO with deep industry knowledge vs financier

Shell, one of the biggest world companies has recently named an engineer rather than a financier as new CEO – the news has hit the headlines. Does this move, praised by analysts, signal the need for business leaders with deeper knowledge of the industry and direct executive experience across the range of a company’s activities?

Looking back historically, isn't it that the most successful (and least disruptive) airlines were born and thrived under the leadership of people with these dominant qualities? 

Thursday, 24 October 2013

Airport that loves disruptions

‘Airports love disruptions’ said an ex-Heathrow executive in an informal chat. They surely do, judging by recently announced 22% increase in nine months profit of the world’s most constrained airport. Heathrow success increasingly depends on retail revenue stimulated by the increase in length of dwell time that disrupted passengers spend at the airport. But how much they could possibly earn from increased disruptions? The following chart published by Airport Watch UK (with added comment) could provide some answers.  

Heathrow has enjoyed the freedom of disrespecting its runway limitations for years, letting in more flights than it could decently handle. This freedom has stretched to reporting which doesn’t agree much with common sense and passenger experience – its public reports on delays (published by CAA) indicate that airport punctuality gets better with the increase in airport (over)congestion:

This year Heathrow won the title of ‘Best Airport over 25 million passengers’ awarded by Airport Council International (ACI) Europe – not for the quality of service but for retail as the most valued criteria. So, more disruptions are on the way. Undercover or not, they will make air travel through Heathrow less convenient and more costly and will last as long as airlines and passengers continue to stretch their threshold of tolerance.

Tuesday, 1 October 2013

The planning crises

The infamous failure of IATA member airlines to predict financial losses in 2009 revealed the dark side of planning practices spread widely across the aviation industry. The figures were adjusted three times within the period of nine months, starting with US$ 2.5 billion in December 2008 and ending with US$ 11billion in September 2009 - the gap too wide to account for any excuses including increased uncertainty caused by the ongoing financial crises.
While failures of near-term predictions illustrate the magnitude of the gap between plans and reality, fallacies in strategic planning fetch more deeply, right to the core of the business. The damages they cause are long term, costly, and often impossible to mend. Like in the case of airport capacity crises in Europe, where high concentration of traffic at a number of major hubs has already reached or exceeded infrastructural limitations (with Heathrow in the lead). According to EU and Eurocontrol, despite slower air traffic growth in the next 20 years Europe still faces a major airport capacity crunch due to infrastructural limitations that can have damaging effects on the continent’s aviation system and connectivity. Similar warnings have been around for almost a decade, but ignored by major airlines. Growth in quantity ahead of quality and obsession with short-term gains has pushed operational disruptiveness and associated costs up, over the digestible level for many airlines.

What is the reason for such obvious and highly damaging oversights in planning? It seems that our human tendencies play a great part, as Rolf Dobelli explained in his book ‘The art of thinking clearly’.

‘So why are we not natural-born planners? The first reason: wishful thinking. We want to be successful and achieve everything we take on. Second, we focus too much on the project and overlook outside influences. Unexpected events too often scupper our plans.’ ‘Step-by-step preparation amplifies the planning fallacy. It narrows your focus even more and thus distracts you even more from anticipating the unexpected.’ ‘The problem is that experts enjoy free rein with few negative consequences. If they strike it lucky, they enjoy publicity. If they are completely off the mark, they face no penalties – either in terms of financial compensation or in loss of reputation. This win-win scenario virtually incentivises them to churn out as many prophecies as they can muster.’

Tuesday, 13 August 2013

Disruptions are less painful for airlines and passengers when there is a mutual feeling of understanding, care, and compassion

We are getting used to more disruptive flying and are learning to patiently accept official explanations for reasons behind long delays, even if caused by faulty planes. But what cannot be accepted is the lack of care for people experiencing disruptions, like on the recent British Airways flight to Riyadh (follow the link below) were those responsible for handling this situation were not capable of responding to frightened and confused passengers - some officials even ‘hid in a back office’. This kind of practices cost airlines much more than compensation offered to passengers ‘as a gesture of good will’. Wouldn't more care and compassion from airline side help minimise loss of passenger goodwill or more precisely, loss of revenue in years to come. 

Link to article BA Compensation After Saudi Flight 'Horror'

See also The Airport Lesson

Wednesday, 31 July 2013

The most comprehensive impromptu ‘course’ in aviation strategy, flavoured with business and politics mix

If you would like to understand what it takes to create a sustainable aviation strategy at government level, who the participants are in this process, their views and power interplay, this is a great place to go. Click here to read/watch UK Transport Select Committee sessions on aviation strategy. 

Tuesday, 30 July 2013

Heathrow Crises: One decade passed - two more to go?

When strategic plans go wrong there is always a high price to pay and lots to learn from, like in the case of Heathrow.

While heated debates and parliamentary hearings about the future of overused Heathrow runways continue, one thing is clear – whatever the solution, it will take about two decades to resolve the build-up of problems created by years’ long traffic overload at UK main hub airport. The runway usage is well above the official cap on the number of flights set to keep disruptions at an acceptable level - the limit that has been ignored for about a decade. The absence of space for recovery from even the smallest schedule change creates long cascading effects at Heathrow spreading disruptions throughout its worldwide network. 

The magnitude of runway overuse becomes more clear when compared with other similar airports - LHR does as many departures and arrivals as New York JFK with 4 runways or Dallas Forth Worth with 7. In terms of connectivity which appeared to be the major concern of politicians and businesses, London airports currently have 50% more seat capacity than Paris, the next biggest airport in Europe, and more connectivity to the top business destination than Frankfurt with 4 runways and Paris CDG with 4 runways combined.

All suggested solutions - from building new runways, spreading traffic to other nearby airports (assumes better ground connectivity) to closing Heathrow and building new airport at environmentally friendlier location have their pros and cons. Even though the equally important issue on how to avoid major traffic spills from overpacked and highly disrupted Heathrow during the interim period didn’t get much of attention, the unpopular question about capping the aircraft movements to 75% of current traffic in order to improve resilience was raised during the Select Committee Hearing and passed over to Airport Commission.

What will this interim period bring to the members of Heathrow ‘community’ if airport resilience doesn’t improve?

  • From airline perspective - more unstable schedules, more idle resources, more fuel, higher costs, loss of market competitiveness and reputation
  • From passenger perspective - longer, more inconvenient journeys and more costly travel
  • From ATC perspective - more challenges in controlling the air traffic
  • From the perspective of big influential businesses – impression that they will not be able to satisfy their expansion appetites
  • From the perspective of politicians - more skilful shaping of public opinion
  • From economics perspective – more inefficiencies and more losses in money and time
  • From the perspective of environmentalists - more air and noise pollution in populated areas around the airport zone
  • From the perspective of industry consultants - increased demand for their services and higher earnings
  • From the perspective of BAA, the Heathrow owner - lower business risk backed up with disruptions that generate more retail revenue, and other ways of raising revenue caused by the potential drop in demand
Balancing these diverse interests already is and will always be a challenging task, but chances for doing it right this time including the interim period should not be missed. If no improvement is made in the foreseeable future, Heathrow reputation as one of the world's most disrupted airports may ruin the efforts for regaining its strong market position at later stage.

Related links:

Saturday, 25 May 2013

Managing disruptions – software hurdles and how to get over them

The fact that airline decision makers are not aware about the full impact of disruptions on airline costs and overall business performance is mainly associated with dynamic nature of airline business and fragmentation of the existing information systems. Current applications like scheduling and network planning, operations control, aircraft maintenance, departure control, crew planning and various optimisation solutions are designed to satisfy individual planning and operational functions. Consequently, improvement decisions are made to predominantly serve departmental interests where even the best solutions do not guarantee the best system results. Integration and optimisation appear to be the biggest hurdles.

Integration of basic operational software applications has always been on vendors’ agenda despite airlines’ scepticism. A senior operations executive at a Big Three US carrier said that the ‘dream of completely integrated system that provides intelligent real time decision-making in Station Operations Centre, maintenance and airport operations is just that – a dream. There is a notion that at some point in the future this has to converge in an integrated system but it’s just not out there. The decisions we make today are far more complex than the systems are integrated to handle’.

Airlines and vendors have put in lots of effort to optimise the process of schedule recovery, but not many of their solutions have proved to be reliable and used in practice to their true potential. Some of the most costly airline disruptions have been caused by implementation of optimisation tools, causing long cascading effects including months of reduced operations. Airlines can make improvements in operational efficiency as long as they invest in workable solutions, rather than wasting their time and money developing the impossible. Sabre’s Chief Scientist said: The issue in operations is that you have a pretty complicated set of flows for aircrew, passengers and aircraft. There are an awful lot of possible solutions or recovery strategies for each component. If you are looking for a typical US domestic hub with complexes of 40 flights out, you’re talking literally billions of possible solutions out there. Not surprisingly, identifying the best solution, whether in terms of recovery costs or passenger service impact, is just impossible. Even airlines with the best data processing systems tend to look at some relatively simple localised solutions that may work for a particular hub at a particular point in time but that may have some downline impacts either for that particular hub later in the day or tomorrow or at other stations around the systems.

It is obvious that major improvements in the development of fully integrated information systems are still not in sight. The situation is pretty much the same at the other end: strategic and corporate managers are not fully aware about the effects their decisions have on operational performance. Their efforts to establish these links are sporadic, mainly subjective and usually related to loss recovery from third parties.

From these points of view, the situation may seem incurable. But, what if we start seeing the disruptions from a different perspective? What if instead of just being immersed in a myriad of daily problems we step above operational to a strategic plane where operational plans are conceived? With the support of the right tool, we would be able to see a bigger picture about disruptions, how they come into existence, and identify those with biggest impact on airline cost and quality of service. We will surely be much more selective about where our attention goes, which can give us more time to focus on problems that really matter. We will also be able to better understand internal relationship, recognise airline, airport and ATC limitations from a higher perspective, recover losses caused by third parties and much more. This new approach to still unexplored area of airline management (described in ‘Beyond Airline Disruptions’) opens up new opportunities for airline executives to act selectively and efficiently, continuously improving  operational performance and quality of services. 

Monday, 13 May 2013

Processing Heathrow future - Open letter to 'influential MPs'

Recent announcement (Financial Times, 10/5/13)  that an 'influential committee' of MPs backed the case for a third runway at Heathrow demonstrated how strongly the airport’s past glory dominates the reality of decision makers gathered to decide its destiny. They are still talking about preserving the UK’s status as a ‘leading international hub’ (a title lost years ago), about Heathrow being the ‘jewel in the crown of international aviation’ (while it has long lost its shine).

Dear influential MPs,
Wake up, you are dreaming. Heathrow is not what it used to be a decade ago. Stop trusting distorted statistics. Hidden from your eyes are growing inefficiencies and unknown increase in operating costs related to disruptions - included are things like long schedule buffers, additional aircraft, crew and maintenance costs, unreported tarmac delays, and loss of revenue. You may be wondering how many Heathrow passengers experience unpleasant disruptions every year, but you wouldn't know it, as this has never been reported. Their numbers are counted in millions. If you want to learn what Heathrow is and what needs to be improved just look at what happened in December 2010 when the airport was paralysed for almost a week caught up unprepared for snow. About 800,000 passengers were affected, thousands of them in an unprecedented way. You won’t find this number in statistical reports, but can work it out logically. If you do, you will start to feel what the politics of ‘growing quantity ahead of quality’ really means. This is more real than any speech or statistical report about Heathrow performance you have ever come across. And this is more real than what you were able to see during the London Olympics in summer 2012. Don’t feel ashamed for not knowing – the shame is not-wanting to know. So, go and see it, experience it. Get closer to real life because, even if your plans to build the third runway go ahead, it won’t be ready before the turn of the next decade. How many passengers will suffer from previous neglects in the meantime? How many people living around Heathrow will be exposed to even more environmental and noise pollution during that time? Before embarking on a final decision, try to work out how big their threshold of tolerance is. It is your chance to make things right this time. And never forget that airports cannot exist without passengers.  

Related articles:

Beyond Heathrow Disruptions
Politics and media mix on Heathrow future
The airport lesson
Future of London airports in fantasies

NOTE: In reply to my open letter, a representative of the Transport Committee pointed out that Committee’s inquiry looked at most of the issues I raised and published them in their Aviation Strategy Report, Chapter 3 in particular.The link to this document is published in my blog "The most comprehensive impromptu ‘course’ in aviation strategy, flavored with business and politics mix"

Sunday, 12 May 2013

Politics and media mix on Heathrow future

This is the report from the Transport Committee meeting on 10 May 2013

...and this is how the media shape public opinion on the same subject

Links to the articles:

Transport Committee

Financial Times
Evening Standard
The Guardian
The Telegraph
Public Finance
British Airways News

Friday, 19 April 2013

The role of feelings in shaping business success

In business, when we talk about change we associate it with change in form, in things we can measure, and ultimately with monetary value. But change is much more than that. It is also a result of our thinking and emotions – put them together and they turn into a change in feelings and consequently our behaviour. This unnoticeable and unreported ‘stuff’ makes a shift in the way we perceive and do things – ultimately creating the culture of either fear or love that leads to business success or failure.

When fear prevails, things we are asked to do are passively accepted, we are not inclined to make improvements and we do the job just to secure the flow of income. There are people who perform better when driven by fear, but there is always a question whether their efforts are oriented more towards their personal or company’s interests. We often refuse to see that by working for organisations which nourish the culture of fear, we may lose that job anyway because the chances are that this company cannot last long, at least not in its current shape. 

When love prevails, we enjoy what we do, we freely exchange ideas, communicate more, better understand and appreciate work of others, bring new value into the business, and feel as an appreciated contributor. Creation of ‘good vibrations’ proved to be among factors that bring longer lasting business prosperity in good and bad times.

Although this change in feelings cannot be measured by conventional means, change in disruptiveness can signal the transformation, and indicate its direction.