Airline Benchmarking and Performance Improvement

8/10/2019 Airline Benchmarking and Performance Improvement

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Ramakrishna KrovvidiAGIFORS May 2005

Airline Benchmarking

Performance Improvement

By

Ramakrishna Krovvidi


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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


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Benchmarking

A Refresher


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What is benchmarking?

Benchmarking is the continuous process ofBenchmarking is the continuous process of

measuring products, services and practicesmeasuring products, services and practices

against the toughest competitors or thoseagainst the toughest competitors or thosecompanies recognised as industry leaders (bestcompanies recognised as industry leaders (best

in class)in class)

There are numerous definitions of benchmarking, butThere are numerous definitions of benchmarking, but

essentially it involvesessentially it involves

LearningLearning Sharing informationSharing information

And adopting best practices to improve performanceAnd adopting best practices to improve performance


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Load carried per employee: RTK/Emp

300

400

500

600

700

Year 1 year 2 year 3 Last Year This year

Annual trend

RTK/Emp('000)

Why should we benchmark?

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

Competitor620

IndustryLEADER

650


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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



Benchmarking

Case Study



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 Zare close competitors with Airline XX

Analysis of Airline XX performance using

Internal benchmarking

International benchmarking



Internal Benchmarking



Airine XX: Capacity & Load carried per employee

610 640

730

460500

540

820

420

0

100

200300

400

500

600

700

800

900

Year 01 Year 02 Year 03 Year 04

millions

Capacity/Emp (ATKM) Load/Emp (RTKM)

Right MeasuresInternal Benchmarking?

The measures indicate a positive trend

But is it true the airlines manpower productivity is improving?

Let us analyse with a different metrics...



Airine XX: % improvement over 4 years

120

105

3022

0

20

40

60

80

100120

140

ATK RTK

percentage

overal growth in 4 years growth per employee

The measures indicate altogether a different trend

Is the airline able to leverage economies of scale successfully?

Selecting appropriate measures and intelligentinterpretation/modelling is vital in building effective ManagementDecision Support Tool

Right MeasuresInternal Benchmarking?



Benchmarking with Competitors

International Benchmarking



Manpower productivity: Airline XX Trend

Year 5

Year 4

Year 3

Year 2

Year 1

Is airline productivity improving?

Let us compare the recent performance with close competitors and analyse

Manpower per Aircraft

248

240

250

245

245

300

350

400

450

500

550

600

500

550

600

650

700

750

800

850

900

950

10

00

Capacity per employee ('000 ATKM)

Loadcarriedperemployee('000

RTKM)


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Manpower per aircraft : Year 5

180

160

245

340

200 175

100

200

300

400

500

600

700

800

900

1000

20

0

30

0

40

0

50

0

60

0

70

0

80

0

90

0

100

0

110

0

120

0

130

0

140

0

Capacity per employee ('000 ATKM)

Loadcarriedperemployee('000RTKM)

International Benchmarking

Cluster 02

Cluster 01

Cluster 01 Cluster 02

% Narrow-body fleet @ 35-50% ZERO

% domestic capacity @ 3-8% ZERO

Capacity per employee ('000) = 700

Load carried per employee ('000) 400

Airline Business Model

Almost all

services

inculded

Excludes

certain

services

(e.g.

Catering)

Avg. distance flown per Pax (Km) 3000

Capacity per aircraft (million ATKs) >= 150

Avg. aircraft utilisation (hrs) = 11

AirlineXX

Is the Airline XX productivity better than competitors?

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


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Benchmarking

Challenges


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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


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Benchmarking

Myths & Paradigms


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Myths & Paradigms?

Benchmarking is not:

Copying or imitating others

In rapidly changing circumstances, good practices become dated veryquickly. Also, the fact that others are doing things differently does notnecessarily 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 determinewhat we have to do to get there. Benchmarking is best undertaken in acollaborative way.

The aim is to learn about the circumstances and processes that underpinsuperior performance

Spying or espionage

Industrial tourism


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Benchmarking

Benefits


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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.


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Benchmarking

Scope in Airlines


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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..


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Benchmarking

Role of International Institutes


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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: R&D

Vendors: developing appropriate tools

Airline consortiums: Partnering in sharing information and

extending expertise


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Beyond Benchmarking..


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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


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Questions?Contact:

[email protected]

Airline Benchmarking and Performance Improvement

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