the cost of delays and cancellations

The Costs of Delays & Cancellations

- Analysis & Means for Cost Reductions -

AGIFORS Dubai 2006

m2p Consulting

www.m2p.net • Frankfurt (Germany) • New York (USA) • Dubai (United Arab Emirates) • www.m2p.net

- 2 -Dubai AGIFORS Operations Conference 2006 Mai 06

1

2 Causes & Cost Analysis

Introduction “Delays & Cancellations”

3 Opportunities to Decrease Costs


In 2004 more than 20% of all scheduled flights in the US and EU were either delayed or cancelled

According to most transportation reporting statistics (such as those of the US DOT) only flights that departs or arrives 15+ minutes behind schedule are rated as delayed

- Delays & Cancellations US / EU in 2004 -

Ontime76,6%

Delayed21,6%

Cancelled1,8%

Total Departures: 7,129,270

Delays & Cancellations US 2004 Delays & Cancellations EU 2004

Ontime79,5%

Delayed17,5%

Cancelled3,1%

Total Departures: 3,751,842

* Source: AEA Annual Report 2004* Source: DOT OTP Statistics 2004


A delay is an event that causes the change in schedule of a flight and/or aircraft’s planned departure or arrival

122

722

400

002A-PA

A-PY

B-TC

B-TD

123 238 239

Check

- Definition of a Delays -

401

723 1

3

0014

- Late Arrival / Finish: During an event the finished time will be delayed. In case of a flight event this is a delayed arrival.

- Late Departure / Start: The start of an event will be delayed. This is in case of a flight event a delayed departure.

- Schedule Change: The length and/or timing of an event will be changed before it has started. In respect to change publication constraints this is a schedule change.

- Early Arrival / Finish: A scheduled event will start earlier than scheduled. This happens in case a flight arrives before schedule.

2

1

2

3

4

now


According to the delay cause, many delays are outside the responsibility of the airline

- Delay Causes -

Ground Handling Delayed loading (Passenger, Baggage, Cargo, etc.), cleaning, fuelling etc,

Maintenance Aircraft maintenance issue (defects, late arrival from check etc.)

Weather Enroute weather, weather at departure / arrival station etc.

ATC Enroute traffic congestions, ATFM / ATC capacity restrictions etc.

Connection Departure delay because of late arrival passenger, baggage, cargo etc.

Airport Authorities Mandatory Security (Pax / Bag offload), immigration / customs issues etc.

Rotational Aircraft rotation, flight or cabin crew rotation etc.

Others Other exceptions (Industrial Action within / outside Airline)

DescriptionDelay Group Controllable

Limited

Yes

No

No

Limited

No

Yes

No


A cancellation describes a particular flight which is the airline deems or is physically not feasible to operate

- Definition of Cancellations -

A scheduled flight has to be cancelled because …

required resources (Aircraft, Crew etc.) were not available

environmental conditions are not in-line to operate the flight according to safety rules (Weather)

external capacity constraints regulated by ATC and / or Airport authorities

A scheduled flight will be cancelled because …

the ongoing delay of the previous event will cause a major delay of the scheduled event and could not be compensated (Lack of reserves)

economical reasons in case of low passenger bookings

Re-Active Cancellation (Stochastic) Pro-Active Cancellation (Strategic)

Because of rotational dependencies of flight events, a cancellation has an impact on its related return pair with respect to A/C and crew rotation


The handling of delays and cancellations are within the decision making governance of operations control

DecisionMaking

Governance

Business Objectives

Airport

Irregularity ReasonsC

onstraints

ATC Crew

Aircraft Weather …

RotationCrew

RotationAircraft

HubCapacity

Fleet

Slots

…

ProductProfitability

Regularity

Safety

Punctuality

Inte

rfac

es

Commercial

ATC

Engineering

…

Cargo


1





At least 1/3rd of all delays are within the responsibility of the airlines and / or its suppliers

- Delay Cause Analysis -

Delays Causes US 2004 Delays Causes EU 2004

* Source: FAA Statistics 2004

ATC37,1%

Airport Authorities0,2% Airline Control

30,7%Connection28,3%

Weather3,6%

Total No of delayed flights: 1,568,439 Total No of delayed flights: 676,211

* Source: AEA Statistics 2004

Approximately 10% of all Airline related delays are caused by maintenance problems. The majority is caused by rotational problems (Aircraft, Crew, etc.)

Weather2%

ATC25%

Connection4%

Airline Control58%

Airport Authorities11%


Maintenance delays are not only caused by a poor Aircraft / Component reliability

Aircraft Defects during transit or after positioning of aircraft (AOG)

Maintenance equipment, -facilities, -tools, lack of or breakdown

Non-scheduled maintenance, special checks and/or additional work

Lack of spares

Maintenance work execution issues (Shortages of staff etc).

…

Poor Aircraft & Component Reliability

Insufficient line maintenance process / quality (base station / outstation) according to operating requirements

Check cycles / visit plan & work scope with regards to utilization constraints

Visit plan quality (Level of detail, accuracy, etc.)

Lack of buffers / reserves (Tools, Spares, Staff etc.)

…

Maintenance Delay Reasons Causes Analysis

- Maintenance Delays -


LG AY

RO

SNSK

JUOKCYIG AZJKLO LHAFMA

JP IBOU

TKBD

OS KLBALX

FI OAKM

TP

65,0%

70,0%

75,0%

80,0%

85,0%

90,0%

95,0%

0 100 200 300 400 500 600 700

- European carriers On-Time Performance 2004 -

4 out of 5 Europe’s top carriers are above the calculated OTP average of 82%

Airline departure volume does not automatically indicate poor on-time performance

On-TimePerformance

No of Departures

Average OTP 82.0%

* Source: AEA Annual Consumer Report 2004


The analysis of regularity within Europe intends to show that big carriers cancel more flights than smaller ones

- European carriers Regularity 2004 -

AY

RO

SN

SK

JU

CY

IG

AZLO

LH

AF

MAJP

IB

OU

BD

OS

KL

BA

LX

FI

OA

KM

TPLG

OK

97,8%

98,3%

98,8%

99,3%

99,8%

100,3%

0 100 200 300 400 500 600 700

Regularity

* Source: AEA Annual Consumer Report 2004

Average Regularity 98.7%

No of Departures


A specific model is used to calculate the overall Profit / Loss for each single flight event

SalariesAdministrationInsurance...

Landing FeesCateringFuelTravel Costs Flight DeckATC charges...

Version ChangeAircraft ChangeEquipment ChangeDiversionRe-RoutingCancellation...

PassengersCargo...

Irregularity CostsVariable CostsFixed Costs Revenue

Cost

Profit / Loss

- Profit & Loss Calculation Model for a single flight event -


The duration of a delay has a major impact on the overall delay costs of a particular flight event

- Delay Costs according to Delay duration -

$

Jet Fuel

Passenger Re-Bookings

Crew Duty-Time Costs

Aerodrome Surcharges

Snacks / Meals

Crew Per Diem + Acc + Trans

Passenger Acc + Trans

Handling Surcharges

Cargo Rev / GHC / QRT

Airport Services

M&E Repair / Man Hours

NCC Support

M&E Spare Provisioning

t1h 2h 3h 4h 5h 6h 7h 8h

* Source: m2p Delay Cost Analysis


Maintenance & aircraft ownership costs represent 35% of the estimated operating delay costs

- Delay Cost Analysis US carriers 2004 -

Distribution of Operating Costs Delay Costs per Minute

* Source: ATA Statistics US Carriers 2004

Jet Fuel $17,05

Crew $16,77

Maintenance $10,16

Ownership $9,74

Other $3,36

Total $57,08

Fuel30%

Crew29%

Maintenance18%

Ownership17%

Other6%

In the US a total of 86.5 million ATC delay minutes were recorded in 2004 with an estimated $4.8 billion in direct operating costs


In addition to Operating Costs the total delay cost should also include Passenger’s Time

- A320 Delay Cost Example -

Passenger Cost

$57.08

Cost per Minute

Operating Cost

$66.00

Cost Item

Total per Minute $123.08

*1 Source: FAA Statistics

Cost per Passenger / Hour1

Cost per Passenger / Minute

Total Cost / Minute2

$33.25

$0.55

$66.00

2 Cost Calculation based on average A320 capacity of 150 passenger with load factor of 80%

Based on the minimum accountable length of a delay defined by US DOT (15 min) the minimum cost of a delay equals approximately $1,846

Taking passenger costs into account requires aircraft type specific values

A linear cost figure simplifies the overall cost calculation but does not provide exact costing at any point of time


1





In many cases a more accurate plan could help to avoid controllable delays and its related costs

Establish Problem / Impactvisibility

Improve organizationalReactiveness

1 32Increase Planning

Accuracy

Most of controllable delays are caused by an unstable plan which has not sufficient buffers to compensate minor problemsPlanning quality indicators have to be implemented and measured. Results have to be feedback into the planning process

At the point a delay occurs the impact of an uncontrollable delay is very often not clear which could cause additional cost because of suboptimal decisionClear visibility on delay impact will provide baseline for cost efficient counter-measures

Decrease of uncontrollable delays through pro-active cancellations

Decrease of controllable delays and re-active cancellations

Decrease of controllable and uncontrollable delays

In case of any delay the duration of the delayed event is a major cost driverProcesses, Organization and Staff Skills should be aligned to support pro-active decision making and flexible problem solving

- Opportunities to decrease costs -


Efficient and accurate planning requires aligned key processes and business objectives

Flight Scheduling & Operation

Business Objectives

Maintenance Planning & Execution

On-Time Provisioning

AircraftReliability

CostEfficiencySafety

Business Objectives Punctuality Regularity ProfitabilitySafety

Provides Aircraft

Aircraft

Demands Aircraft Demands Aircraft

Provides Aircraft

- Maintenance Planning & Execution -

M&EDepartment

Airline Flight

Operations

1


A consistent, integrated, and stable planning process aligns maintenance planning with flight scheduling

Maintenance Planning

Flight Scheduling Operations Control

Maintenance Control

Planning is done to ensure a stable production

Business Objectives Punctuality Regularity ProfitabilitySafety

Business Objectives

On-Time Provisioning

AircraftReliability

CostEfficiencySafety

Planning will be done across department borders

Planning in-line with agreed business objectives

Integrated

Consistent

Stable

- Recommended Planning Approach -

1


The planning quality across all planning stages could be measured with specific Performance Indicators

Flight Scheduling & Operation

Maintenance Planning & Execution

- Establish Measurement Points (KPI’s) -

KPIKPI

KPI

KPI

KPI

KPI

MeasureProductivity

&Quality of Service

Maintenance&

Engineering

Airline /Flight

Operations

The KPI concept should reflect the relationship between the two core processes Flight Scheduling & Operation as well as Maintenance Planning & Execution

KPI’s must be defined on well defined interfaces and with clear responsibilities within the organisation structure

The use of industry benchmarks depends on the specific needs and requirements of the respective airline

1


Through problem visibility all events indirectly impacted by a delay could be identified

122

722

400

002A-PA

A-PY

B-TC

B-TD

123 238 239

Check

401

723

001

now

- Impact / Problem Visibility -

2

- Direct Impact: A delay has a direct impact on all scheduled events of this particular resource in case it conflicts with its start / end times. To stay within the plan these events have to be cancelled or delayed either

- Indirect Impact: A delay has an indirect impact on all scheduled event with inherited dependencies. These could be related to all types of resources e.g. Passenger, Crew, Aircraft, Facility etc.

1

2

1

2

2

2

In addition to the operational impact itself all related cost & revenue figures related to the scheduled event should be provided


The most efficient recovery decision could be made based on the identified problem

Ad-hoc EffectGradual Recovery

Creeping EffectGradual Recovery

Ad-hoc Effect Ad-hoc Recovery

- Identified Irregularities & Recovery Strategies -

• Without any notification and with immediate effect• Example: Airport closure due to radar failure

• Plan able / Pre-Announced Reason• Defined Time Period• Example: Planned Airport / Airspace closure

• Unexpected deteriorating reasons or unexpected additional problems

• Example: Deteriorating weather conditions

Irregularity Impact Profile

50%

100%

t

50%

100%

t

Description

50%

100%

t

50%

100%

t

50%

100%

t

50%

100%

t

2


A centralized planning approach defines the baseline for decentralized problem solving during production

Maintenance

Flight Scheduling

Crew Management

12 month 6 month 4 weeks

Long-TermPlanning

OperationalPlanning

Production / Ops Control

TacticalPlanning

72 hours

AOG‘s

- Staged Planning Approach & Organizational Responsibilities -

Pre-Planning

Planning Base Maintenance / EO

Planning Line Maint. & Ground Events

Detailed Planning

“Frozen Plan”

Planning Activity Irregularity ManagementPlanning Result

Detailed Planning of visits within each production site

3


All specific measurements to decrease delays depends on the airlines business model and operating environment

Problem VisibilityA detailed problem assessment will provide a clear picture on current weaknesses and achievable objectives in respect to the airline specific environment

Optimized PlanningAn optimized plan as a result of an integrated planning processes could help to avoid maintenance delays

Realistic ReservesOperational Reserves could help to compensate controllable and not controllable delays but must be in-line with financial constraints

Problem Solving PerformanceOrganisation, processes and people capabilities should be aligned with the objective to solve upcoming problems as efficient as possible

the cost of delays and cancellations

Business

active cancellationsdecrease

indirect impact

direct impact

delays amp

schedule change

cancellations3

active cancellation

scheduled