Solutions

Analytics Based Software Health Check
Analytics Group Health Check
Revenue Management Health Check
Network Planning Health Check
Crew Resources Health Check
Customer Insights and Merchandizing Health Check
Implementation Support for Health Check Recommendations
Reserve Resource Analysis
Carrier Preference
Variable Block Times
Intelligent Pre-Removals

Analytics Based Software Health Check

Opportunity

  • Senior management often don’t know how good their decision support systems are nor where they stand competitively with these strategically important systems
  • There is a need for an objective 3rd party health check for these crucial systems
  • Once the requirement for a new system has been established, airlines can often use help in making the make or buy decision
  • If the decision is to buy a solution some airlines need help conducting the RFP process to ensure the selection of the best software solution with an optimal contractual agreement

Questions to be answered

  • How do my analytics based systems stack up against the best in the business?
  • Do we need to implement new model based systems and what is our best choice?
  • What are the strengths and weaknesses?
  • What investments are needed?
  • How should the investments and resources be prioritized?
  • What is the ROI of potential investments to upgrade analytics based systems?

Value to the airline

Because the impact of the decisions made by these systems are very significant even modest improvements are typically worth many times the cost of upgrading these systems For example–Changing the analytics within the Flight Planning System was estimated to be worth 2.3% in fuel burn

Analytics Group Health Check

Opportunity

  • Nearly all top tier airlines have analytics groups
  • Many groups are small and ineffective and have only a minor impact on the business
  • When structured and enabled effectively, Analytics groups typically have a major impact on business performance
  • Some airlines may need to build a new analytics group. To maximize the probability of building an effective group that will have a major impact on business performance most airlines that don’t currently have such a group need help in developing and executing an appropriate business plan for the group

Questions to be answered

  • Is the group organized, sized and skilled correctly
  • Is the group working on the right projects
  • Does the group have the correct processes / methods?
  • Is the group highly leveraged & maximizing impact on the airline enterprise wide?
  • Is the product produced of high quality / how is it perceived by the customer?
  • Does the group have access to important functional departments and senior management?
  • What is the right plan for building an analytics group?

Value to the airline

An effective analytics group can create competitive advantage for the airline and typically delivers greater than 10X return on the investment

Revenue Management Health Check

Opportunity

  • The state of the art in RM is constantly being updated due to its complexity and impact on profitability
  • There is potential for misuse of the system due to the fact that there are only a few people in a company that fully understand RM
  • There is a large variance in RM effectiveness amongst companies that are using RM but even the best have room for improvement

Questions to be answered

  • Do we have the right system and data sources in place?
  • Are there process/resources to continually upgrade?
  • Do we have the right people making critical system and operational decisions?
  • What is the profitability improvement opportunity?
  • Are planned upgrades in the right direction and can their cost be justified?
  • What should the upgrades be and what are the priorities?
  • What is the cost/benefit of recommendations?
  • How should social media channels be leveraged for revenue maximization?

Value to the airline

It is commonly understood that revenue management using best practices is worth 7-8% in incremental revenue and many airlines are not employing best practices.

Network Planning Health Check

Opportunity

  • Capacity planning defines where, when and what to fly and is one of the most highly levered functions in an airline
  • Capacity planning is extremely complex and analytical
  • Improvements in forecasting and optimization can create competitive advantage

Questions to be answered

  • Are the best analytics imbedded in our CP system?
  • Do we have the right systems and data sources?
  • Are we using the system to its fullest?
  • Are there processes/resources to continually upgrade?
  • Do we have the right people making critical decisions?
  • What is the profitability improvement opportunity?
  • What would the upgrades be and what is the priority?
  • What is the cost/benefit?

Value to the airline

Capacity Planning is one of the two highest levered areas within an airline for analytics. For a large airline a best practice application of analytics is worth hundreds of millions of dollars annually

Crew Resources Health Check

Opportunity

  • Flight crew costs are the second largest line item cost after fuel
  • Because of the complex nature of labor contracts, analytics/ optimization is critical in reducing costs
  • Key areas of opportunity in Crew Resources Management are:
    • Manpower Planning
    • Pairing optimization and bidding
    • Real-time pairing repair
    • Reserve forecasting and allocation
    • Domicile placement and sizing
    • Flight Training optimization

Questions to be answered

  • Are the best analytics imbedded in our crew systems?
  • Are we using the systems to their fullest?
  • Do we have the right people making critical decisions?
  • What would the upgrades be and what is the priority?
  • What is the cost/benefits?
  • Do we have the optimal crew reserve levels?

Value to the airline

Optimizing crew pairings can save millions of dollars and many airlines do not optimize. A major carrier cancelled over 1000 flights in one month due to running out of pilot time because of poor manpower planning

Customer Insights and Merchandizing Health Check

Opportunity

  • Most airlines have robust frequent flyer data bases that have huge potential for generating incremental revenue through intelligent target marketing
  • Social media data is also a rich source for merchandizing
  • Identify / segment & manage customers & profiles to better understand needs and market more accurately and effectively

Questions to be answered

  • Are the best analytics imbedded in our CRM system?
  • How do we know if our initiatives are successful in reaching the right customers and increasing our revenues?
  • How can we take advantage of new merchandizing opportunities?
  • What can airlines learn about CRM best practice from other verticals?
    • Are opportunities in social media channels being exploited and what is the direction?

Value to the airline

Upgrading to best practices can increase revenue significantly. Current merchandizing is adding hundreds of millions of dollars to the bottom line and many airlines are just scratching the surface

Implementation Support for Health Check Recommendations

Opportunity

One of the major deliverables from each health check is an implementation road map that defines:

  • Priorities based on cost/benefit and the availability of resources Resources required for each task
    • Precedence relationships amongst the tasks The duration of the tasks and the level of effort required The integrated schedule with major milestones identified

Our approach

Although our involvement during implementation is totally dependent on what is needed and what is requested by our client airline, DAI takes pride in being able to partner with our clients to execute the implementation road map. We don’t feel that we have succeeded until our clients actually have realized the benefits of our recommendations.

Too often companies that reengineer important processes fail to reap the full benefits not because of a faulty design but failure to execute the necessary transformation/implementation plan. Our involvement in implementation can vary from very strong project leadership and project staffing to a periodic advisory role where one or more of our partners do periodic progress reviews and report findings and recommendations to senior management.

This commitment to insuring that our clients realize the full value of the identified benefits sets DAI apart from many other firms.

Value to the airline

Whatever benefits have been identified during the diagnostic health check are possible but fragile. Our involvement during implementation increases the probability that the airline will realize the full benefits identified during the health check.

Reserve Resource Analysis

Opportunity

  • Airlines carry many types of resources in reserve such as spare parts, pilots, flight attendants, spare gates, spare aircraft, fuel over destination, block times and other diverse resources in order to compensate for forecasting errors and operational irregularities
  • Often there is no explicit tradeoff made between the cost of the surplus and cost of a shortage
  • The implicit cost of a shortage is often inflated by the manager making the decision
  • Cost of the surplus is not always uppermost in the mind of the decision maker i.e., “more is better” is often the mindset
  • Analytics can be use to credibly estimate the cost/benefit of various levels of surplus for a wide range of resources

Questions to be answered

  • What is the savings opportunity of reducing a wide variety of resources designed to protect the schedule?
  • What is the “right” number of reserve crews, spare aircraft, rotable parts, etc.?
  • Can intelligent cuts be made with no material impact on dependability? What is the resource cost/benefit trade-off?

Value to the airline

  • 1 pilot can cost several hundred thousand dollars per year
  • A 10% reduction in spares can be worth tens of millions of dollars
  • 1 minute of average block time can be worth millions of dollars to a medium to large carrier

Carrier Preference

Opportunity

Analytics can be used to Identify and estimate relative importance of product attributes such as schedule performance, seat comfort, WiFi, frequent flyer programs, etc. that impact customer carrier preference so that senior management can set optimal performance standards and better define the attributes of the product

Questions to be answered

  • What drives carrier preference?
  • Can the attributes be identified and value be estimated?
  • What decisions would be impacted by a better knowledge of what drives carrier preference?
  • What are the optimal standards for cancellation & on-time performance?
  • What are the risks?
  • Are opportunities in Social Media channels being exploited and what is the direction?

Value to the airline

Significant increases in market share and cost reductions by enabling senior management to more intelligently set operational standards and make capital intensive product design decisions to create real competitive advantage. For example, what is the spill cost/market value of increased pitch in coach?

Variable Block Times

Opportunity

  • Block times have a significant impact on market share and on time performance
  • Block times are typically set several times per year using historical data by truncating an historical statistical distribution ignoring competition block times and dependability implications
  • Analytics could be used to set block times taking competition and schedule dependability into account as well as historical block times

Questions to be answered

  • Are there revenue and market share benefits associated with changing how airlines set block times?
  • Can on-time performance and market share be enhanced?
  • Can on-time performance be improved without sacrificing market share?
  • If on- time performance is kept constant, what incremental revenue can be generated?

Value to the airline

Setting block times intelligently market by market to optimize revenue and on time performance would have significant value to the airline. Studies have shown that 1 minute of average block time can be worth several millions of dollars annually due to screen presence and customer preference

Intelligent Pre-Removals

Opportunity

  • Imperfect forecasts often create an over allocation of deep discount fare classes resulting in spill at higher fare classes
  • Analytics could enable an intelligent and systematic pre-removal process for closed flights or flights forecasted to close using internet technology to create significant incremental revenue by reducing spill

Questions to be answered

  • What can we do to better match capacity with demand?
  • What is the next leap forward in revenue management?
  • Is there one analytically based idea to generate 1-2% incremental revenue creating competitive advantage?
  • What is value of implementing intelligent pre-removals?
  • How would we implement intelligent pre-removals?
  • What are the risks?
  • How should Social Media channels be leveraged for revenue maximization?

Value to the airline

  • Simulation studies based on an actual pilot study estimates the value from captured spill ranged from $80 – $300 M/year
  • The technology can be used to vastly improve the current pre-removal process and eliminate the over sales auctions at the airport