Airline Benchmarking

Performance Improvement
By

Ramakrishna Krovvidi

AGIFORS May 2005

Ramakrishna Krovvidi

Presentation Structure
1. Benchmarking: A refresher
2. Case study
3. Challenges, paradigms, and benefits
4. Benchmarking scope in airlines
5. Role of international institutes
6. Beyond benchmarking

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking

A Refresher

AGIFORS May 2005

Ramakrishna Krovvidi

What is benchmarking?
Benchmarking is the continuous process of
measuring products, services and practices
against the toughest competitors or those
companies recognised as industry leaders (best
in class)
There are numerous
essentially it involves

definitions

of

benchmarking,

but

Learning

Sharing information

And adopting best practices to improve performance

AGIFORS May 2005

Ramakrishna Krovvidi

Why should we benchmark?

The purpose is to promote EXCELLENCE, generate new levels of
performance, and new standards in the organisation

Load carried per employee: RTK/Emp

700

RTK/Emp ('000)

650
620

600

500

400

300
Year 1

year 2

year 3

Annual trend

AGIFORS May 2005

Ramakrishna Krovvidi

Last Year

This year

Industry
LEADER
Competitor

Who should we benchmark with?

Internal benchmarking
internal benchmarking is likely to meet with less resistance from managers

Benchmarking with competitors (international benchmarking)

those competitors who are performing better than us

Best in the Industry

with Industry leaders who achieved the best performance

Cross Industry
some measures could be compared with best performance of any industry
e. g. Finance, HR measures

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking

Case Study

AGIFORS May 2005

Ramakrishna Krovvidi

Case Study of Airline XX

Airline XX is selected for demonstrating the concepts
Airline XX is IATA registered growing airline
Airline XX is making profits year after year
Sample data for 5 years
Airline A, Airline B, Airline C, Airline Y and Airline Z
are close competitors with Airline XX
Analysis of Airline XX performance using

Internal benchmarking

International benchmarking

AGIFORS May 2005

Ramakrishna Krovvidi

Internal Benchmarking

AGIFORS May 2005

Ramakrishna Krovvidi

Right MeasuresInternal Benchmarking?

Airine XX: Capacity & Load carried per employee
900
730

800

millions

700

610

820

640

600
500
400
300

420

500

460

540

200
100
0
Year 01

Year 02
Capacity/Emp (ATKM)

Year 03

Year 04

Load/Emp (RTKM)

The measures indicate a positive trend

But is it true the airlines manpower productivity is improving?
Let us analyse with a different metrics...
AGIFORS May 2005

Ramakrishna Krovvidi

Right MeasuresInternal Benchmarking?

Airine XX: % improvement over 4 years
140

120
105

percentage

120
100
80
60
30

40

22

20
0
ATK

RTK

overal grow th in 4 years

grow th per em ployee

The measures indicate altogether a different trend

Is the airline able to leverage economies of scale successfully?

Selecting
appropriate
measures
and
intelligent
interpretation/modelling is vital in building effective Management
Decision Support Tool

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking with Competitors

International Benchmarking

AGIFORS May 2005

Ramakrishna Krovvidi

Manpower productivity: Airline XX Trend

Manpower per Aircraft

Year 5

Load carried per employee ('000 RTKM)

600

Year 4

550

245

Year 3

500
248

Year 2

450
245
250
400

Year 1
240

350

10
00

95
0

90
0

85
0

80
0

75
0

70
0

65
0

60
0

55
0

50
0

300

Capacity per employee ('000 ATKM)

Is airline productivity improving?

Let us compare the recent performance with close competitors and analyse

AGIFORS May 2005

Ramakrishna Krovvidi

International Benchmarking
Load carried per employee ('000 RTKM)

Manpower per aircraft : Year 5

Cluster 01
% Narrow-body fleet
@ 35-50%
% domestic capacity
@ 3-8%
Avg. distance flown per Pax (Km)
<= 3000
Capacity per aircraft (million ATKs)
Avg. aircraft utilisation (hrs)
<= 10.5
Capacity per employee ('000)
<= 500
Load carried per employee ('000)
<= 400

1000
900
160
800

Airline
XX

700

180

Cluster 02

Airline Business Model

600

Almost all
services
inculded

500
245
400
200

175

300

Cluster 01

200
340

14
00

13
00

12
00

11
00

10
00

90
0

80
0

70
0

60
0

50
0

40
0

30
0

20
0

100

Capacity per employee ('000 ATKM)

Is the Airline XX productivity better than competitors?

Is there an opportunity for the Airline XX to revisit its Business Model?
AGIFORS May 2005

Ramakrishna Krovvidi

Cluster 02
ZERO
ZERO
> 3000
>= 150
>= 11
>= 700
> 400
Excludes
certain
services
(e.g.
Catering)

Benchmarking

Challenges

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking Challenges
Business Model variations
Differences in annual periods
Accounting methodologies and data reporting
Environment impact
Identifying right measures
Balancing lag and lead indicators
appropriate analytical tools and techniques
Management commitment & Leadership
Employee engagement and motivation

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking

Myths & Paradigms

AGIFORS May 2005

Ramakrishna Krovvidi

Myths & Paradigms?

Benchmarking is not:

Copying or imitating others

In rapidly changing circumstances, good practices become dated very
quickly. Also, the fact that others are doing things differently does not
necessarily mean they are better

A quick fix, done once for all time

Merely competitor comparison

The objective is to figure out how the winner got to be best and determine
what we have to do to get there. Benchmarking is best undertaken in a
collaborative way.
The aim is to learn about the circumstances and processes that underpin
superior performance

Spying or espionage

Industrial tourism

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking

Benefits

AGIFORS May 2005

Ramakrishna Krovvidi

What are the benefits?

Effective wake-up-call
Identifying performance gaps
Awareness about performance
Learning from others experiences
Willingness to share information and solutions
Innovate and generate new ways of doing things
Encourage individual and organisational learning
Adopting best practices
Many more.

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking

Scope in Airlines

AGIFORS May 2005

Ramakrishna Krovvidi

Airline Scope
Financial Measures

Yield, Unit Cost, break even load factor, Value add and profitability

Operational measures

Load factor, seat factor, fuel consumption, crew productivity.

Qualitative and Customer Measures

On Time Performance, denied boarding, mis-handled bags, customer complaints,

customer satisfaction.

People Measures

Average pay, Attrition, T&D investment, value add per employee

Process Measures
Recruitment lead time, annual accounts closing lead time,
Service delivery GAP analysis models
Benchmarking has become a management tool that is being applied almost anywhere..

AGIFORS May 2005

Ramakrishna Krovvidi

Benchmarking

Role of International Institutes

AGIFORS May 2005

Ramakrishna Krovvidi

Role of International Institutions

There is role for everyone
Airline Management:

Institutionalising the benchmarking process

and leadership

All of us:

Promoting and changing mindset and paradigms

AGIFORS:

working group

IATA, ICAO, FAA:

standardise & regulate information needs

Research Institutes:
Vendors:
Airline

R&D

developing appropriate tools

consortiums:

Partnering

extending expertise

AGIFORS May 2005

Ramakrishna Krovvidi

in

sharing

information

and

Beyond Benchmarking..

AGIFORS May 2005

Ramakrishna Krovvidi

Beyond Benchmarking
Benchmarking is a process and not an end in itself
Management through Key Performance Indicators
Balanced Score Card
Continuous improvement as the way of life
Reengineering
Six Sigma
Embrace new systems and technology
Invest in new capabilities and facilities
Above all..Engage Employees

AGIFORS May 2005

Ramakrishna Krovvidi

Questions?
Contact:
ramakrishna@emirates.com

AGIFORS May 2005

Ramakrishna Krovvidi