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

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Introduction Delays & Cancellations Causes & Cost Analysis Opportunities to Decrease Costs

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In 2004 more than 20% of all scheduled flights in the US and EU were either delayed or cancelled
- Delays & Cancellations US / EU in 2004 Delays & Cancellations US 2004 Total Departures: 7,129,270
Cancelled 1,8%

Delays & Cancellations EU 2004 Total Departures: 3,751,842

Cancelled 3,1%

Delayed 21,6%

Delayed 17,5%

Ontime 76,6%
* Source: DOT OTP Statistics 2004

Ontime 79,5%
* Source: AEA Annual Report 2004

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
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A delay is an event that causes the change in schedule of a flight and/or aircrafts planned departure or arrival
- Definition of a Delays 1

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723 2 401 238 4 001

Check

239

- 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.
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According to the delay cause, many delays are outside the responsibility of the airline
- Delay Causes -

Delay Group Ground Handling Maintenance Weather ATC Connection Airport Authorities Rotational Others

Controllable Limited Yes No No Limited No Yes No

Description Delayed loading (Passenger, Baggage, Cargo, etc.), cleaning, fuelling etc, Aircraft maintenance issue (defects, late arrival from check etc.) Enroute weather, weather at departure / arrival station etc. Enroute traffic congestions, ATFM / ATC capacity restrictions etc. Departure delay because of late arrival passenger, baggage, cargo etc. Mandatory Security (Pax / Bag offload), immigration / customs issues etc. Aircraft rotation, flight or cabin crew rotation etc. Other exceptions (Industrial Action within / outside Airline)

Dubai AGIFORS Operations Conference 2006

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

Re-Active Cancellation (Stochastic)

Pro-Active Cancellation (Strategic)

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

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
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The handling of delays and cancellations are within the decision making governance of operations control
Irregularity Reasons
Aircraft ATC Cargo Airport Engineering Weather Crew Rotation Crew Rotation Aircraft Hub Capacity Fleet Slots Product

Constraints

Interfaces

Commercial

Decision Making Governance

Profitability

ATC

Regularity Safety Punctuality

Business Objectives
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Introduction Delays & Cancellations Causes & Cost Analysis Opportunities to Decrease Costs

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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 Total No of delayed flights: 1,568,439
Airport Authorities 0,2% Airline Control 30,7%

Delays Causes EU 2004 Total No of delayed flights: 676,211

Airport Authorities 11% Airline Control 58%

Connection 28,3%

Connection 4%

ATC 25%
Weather 3,6% ATC 37,1%
* Source: FAA Statistics 2004

Weather 2%
* 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.)
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Maintenance delays are not only caused by a poor Aircraft / Component reliability
- Maintenance Delays -

Maintenance Delay Reasons 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).

Causes Analysis 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.)

Dubai AGIFORS Operations Conference 2006

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Airline departure volume does not automatically indicate poor on-time performance
- European carriers On-Time Performance 2004 On-Time Performance
95,0%

RO
90,0%

LG SN

AY SK

85,0%

JU OK CYIG JK LO MA JP OU

AZ IB TK OS LX KL BA

AF

LH

Average OTP 82.0%

80,0%

BD

75,0%

FI OA KM

70,0%

TP

65,0% 0 100 200 300 400 500 600 700

No of Departures

4 out of 5 Europes top carriers are above the calculated OTP average of 82%
* Source: AEA Annual Consumer Report 2004

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The analysis of regularity within Europe intends to show that big carriers cancel more flights than smaller ones
- European carriers Regularity 2004 Regularity
100,3%

FI RO
99,8%

AY CY KM

99,3%

JP MA LG TP OK OA BD IG

LX KL IB BA LH

98,8%

SN

OS AZ

Average Regularity 98.7%

LO
98,3%

SK JU OU

AF

97,8% 0 100 200 300 400 500 600 700

No of Departures

* Source: AEA Annual Consumer Report 2004

Dubai AGIFORS Operations Conference 2006

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A specific model is used to calculate the overall Profit / Loss for each single flight event
- Profit & Loss Calculation Model for a single flight event -

Profit / Loss

Cost

Fixed Costs Salaries Administration Insurance ...

Variable Costs Landing Fees Catering Fuel Travel Costs Flight Deck ATC charges ...

Irregularity Costs Version Change Aircraft Change Equipment Change Diversion Re-Routing Cancellation ...

Revenue Passengers Cargo ...

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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 $

Crew Per Diem + Acc + Trans Passenger Acc + Trans M&E Spare Provisioning Cargo Rev / GHC / QRT Snacks / Meals Handling Surcharges Passenger Re-Bookings Crew Duty-Time Costs Aerodrome Surcharges NCC Support Airport Services M&E Repair / Man Hours Jet Fuel
1h 2h 3h 4h 5h 6h 7h 8h

* Source: m2p Delay Cost Analysis

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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

Ow nership 17%

Other 6%

Jet Fuel
Fuel 30%

$17,05 $16,77 $10,16 $9,74 $3,36 $57,08

Crew Maintenance Ownership

Maintenance 18% Crew 29%

Other Total

* Source: ATA Statistics US Carriers 2004

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
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In addition to Operating Costs the total delay cost should also include Passengers Time
- A320 Delay Cost Example -

Cost Item Operating Cost Passenger Cost Total per Minute

Cost per Minute $57.08 $66.00 $123.08

*1 Source: FAA Statistics
2

Cost per Passenger / Hour1 Cost per Passenger / Minute Total Cost / Minute2

$33.25 $0.55 $66.00

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

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Introduction Delays & Cancellations Causes & Cost Analysis Opportunities to Decrease Costs

Dubai AGIFORS Operations Conference 2006

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

1
Increase Planning Accuracy

2
Establish Problem / Impact visibility

3
Improve organizational Reactiveness

Most of controllable delays are caused by an unstable plan which has not sufficient buffers to compensate minor problems Planning 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 decision Clear visibility on delay impact will provide baseline for cost efficient counter-measures

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

Decrease of controllable delays and re-active cancellations

Decrease of uncontrollable delays through pro-active cancellations

Decrease of controllable and uncontrollable delays

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Efficient and accurate planning requires aligned key processes and business objectives
- Maintenance Planning & Execution -

Business Objectives

Punctuality

Regularity

Safety

Profitability

Airline Flight Operations Flight Scheduling & Operation

Demands Aircraft Demands Aircraft

Aircraft
Provides Aircraft Provides Aircraft

M&E Department
Business Objectives

Maintenance Planning & Execution

On-Time Provisioning

Aircraft Reliability

Safety

Cost Efficiency

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A consistent, integrated, and stable planning process aligns maintenance planning with flight scheduling
- Recommended Planning Approach -

Business Objectives

Punctuality

Regularity

Safety

Profitability

Planning is done to ensure a stable production Stable Planning will be done across department borders Consistent Planning in-line with agreed business objectives
Business Objectives

Flight Scheduling Integrated Maintenance Planning

Operations Control

Maintenance Control

On-Time Provisioning

Aircraft Reliability

Safety

Cost Efficiency

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The planning quality across all planning stages could be measured with specific Performance Indicators
- Establish Measurement Points (KPIs) -

Flight Scheduling & Operation Airline / Flight Operations Maintenance & Engineering

KPI

KPI

KPI

KPI

KPI

Measure Productivity & Quality of Service

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

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Through problem visibility all events indirectly impacted by a delay could be identified
- Impact / Problem Visibility 2

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- 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. In addition to the operational impact itself all related cost & revenue figures related to the scheduled event should be provided
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The most efficient recovery decision could be made based on the identified problem
- Identified Irregularities & Recovery Strategies -

Irregularity Impact
100%

Profile

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

Ad-hoc Effect Gradual Recovery

50%

100%

Creeping Effect Gradual Recovery

50%

Unexpected deteriorating reasons or unexpected additional problems Example: Deteriorating weather conditions
t

100%

Ad-hoc Effect Ad-hoc Recovery

50%

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

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A centralized planning approach defines the baseline for decentralized problem solving during production
- Staged Planning Approach & Organizational Responsibilities -

Long-Term Planning

Tactical Planning

Operational Planning

Production / Ops Control

Crew Management Flight Scheduling Maintenance

Detailed Planning Planning Line Maint. & Ground Events Planning Base Maintenance / EO Pre-Planning
12 month

Detailed Planning of visits within each production site

AOGs
Frozen Plan

6 month

4 weeks

72 hours

Planning Result

Planning Activity

Irregularity Management

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

Problem Visibility A detailed problem assessment will provide a clear picture on current weaknesses and achievable objectives in respect to the airline specific environment
Optimized Planning An optimized plan as a result of an integrated planning processes could help to avoid maintenance delays

Realistic Reserves Operational Reserves could help to compensate controllable and not controllable delays but must be in-line with financial constraints
Problem Solving Performance Organisation, processes and people capabilities should be aligned with the objective to solve upcoming problems as efficient as possible
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