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The cost of delays and cancellations



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  • 1. The Costs of Delays & Cancellations- Analysis & Means for Cost Reductions -AGIFORS Dubai 2006m2p Consultingwww.m2p.net • Frankfurt (Germany) • New York (USA) • Dubai (United Arab Emirates) • www.m2p.net
  • 2. - 2 -Dubai AGIFORS Operations Conference 2006 Mai 0612 Causes & Cost AnalysisIntroduction “Delays & Cancellations”3 Opportunities to Decrease Costs
  • 3. - 3 -Dubai AGIFORS Operations Conference 2006 Mai 06In 2004 more than 20% of all scheduled flights in the USand EU were either delayed or cancelledAccording to most transportation reporting statistics (such as those of the US DOT) only flightsthat 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: 7,129,270Delays & Cancellations US 2004 Delays & Cancellations EU 2004Ontime79,5%Delayed17,5%Cancelled3,1%Total Departures: 3,751,842* Source: AEA Annual Report 2004* Source: DOT OTP Statistics 2004
  • 4. - 4 -Dubai AGIFORS Operations Conference 2006 Mai 06A delay is an event that causes the change in schedule ofa flight and/or aircraft’s planned departure or arrival122722400002A-PAA-PYB-TCB-TD123 238 239Check- Definition of a Delays -401723130014- Late Arrival / Finish: During an event the finished time will be delayed. In case of a flight eventthis is a delayed arrival.- Late Departure / Start: The start of an event will be delayed. This is in case of a flight event adelayed departure.- Schedule Change: The length and/or timing of an event will be changed before it has started. Inrespect to change publication constraints this is a schedule change.- Early Arrival / Finish: A scheduled event will start earlier than scheduled. This happens in casea flight arrives before schedule.21234now
  • 5. - 5 -Dubai AGIFORS Operations Conference 2006 Mai 06According to the delay cause, many delays are outside theresponsibility 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 ControllableLimitedYesNoNoLimitedNoYesNo
  • 6. - 6 -Dubai AGIFORS Operations Conference 2006 Mai 06A cancellation describes a particular flight which is theairline 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 notavailableenvironmental conditions are not in-line to operatethe flight according to safety rules (Weather)external capacity constraints regulated by ATC and /or Airport authoritiesA scheduled flight will be cancelled because …the ongoing delay of the previous event will cause amajor delay of the scheduled event and could not becompensated (Lack of reserves)economical reasons in case of low passengerbookingsRe-Active Cancellation (Stochastic) Pro-Active Cancellation (Strategic)Because of rotational dependencies of flight events, a cancellation has an impact on its relatedreturn pair with respect to A/C and crew rotation
  • 7. - 7 -Dubai AGIFORS Operations Conference 2006 Mai 06The handling of delays and cancellations are within thedecision making governance of operations controlDecisionMakingGovernanceBusiness ObjectivesAirportIrregularity ReasonsConstraintsATC CrewAircraft Weather …RotationCrewRotationAircraftHubCapacityFleetSlots…ProductProfitabilityRegularitySafetyPunctualityInterfacesCommercialATCEngineering…Cargo
  • 8. - 8 -Dubai AGIFORS Operations Conference 2006 Mai 0612 Causes & Cost AnalysisIntroduction “Delays & Cancellations”3 Opportunities to Decrease Costs
  • 9. - 9 -Dubai AGIFORS Operations Conference 2006 Mai 06At least 1/3rd of all delays are within the responsibility ofthe airlines and / or its suppliers- Delay Cause Analysis -Delays Causes US 2004 Delays Causes EU 2004* Source: FAA Statistics 2004ATC37,1%Airport Authorities0,2%Airline Control30,7%Connection28,3%Weather3,6%Total Noof delayed flights: 1,568,439 Total Noof delayed flights: 676,211* Source: AEA Statistics 2004Approximately 10% of all Airline related delays are caused by maintenance problems. Themajority is caused by rotational problems (Aircraft, Crew, etc.)Weather2%ATC25%Connection4%Airline Control58%Airport Authorities11%
  • 10. - 10 -Dubai AGIFORS Operations Conference 2006 Mai 06Maintenance delays are not only caused by a poor Aircraft/ Component reliabilityAircraft Defects during transit or after positioning ofaircraft (AOG)Maintenance equipment, -facilities, -tools, lack of orbreakdownNon-scheduled maintenance, special checks and/oradditional workLack of sparesMaintenance work execution issues (Shortages ofstaff etc).…Poor Aircraft & Component ReliabilityInsufficient line maintenance process / quality (basestation / outstation) according to operatingrequirementsCheck cycles / visit plan & work scope with regardsto utilization constraintsVisit plan quality (Level of detail, accuracy, etc.)Lack of buffers / reserves (Tools, Spares, Staff etc.)…Maintenance Delay Reasons Causes Analysis- Maintenance Delays -
  • 11. - 11 -Dubai AGIFORS Operations Conference 2006 Mai 06LGAYROSNSKJUOKCYIG AZJKLO LHAFMAJP IBOUTKBDOS KLBALXFI OAKMTP65,0%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 indicatepoor on-time performanceOn-TimePerformanceNo of DeparturesAverage OTP 82.0%* Source: AEA Annual Consumer Report 2004
  • 12. - 12 -Dubai AGIFORS Operations Conference 2006 Mai 06The analysis of regularity within Europe intends to showthat big carriers cancel more flights than smaller ones- European carriers Regularity 2004 -AYROSNSKJUCYIGAZLOLHAFMAJPIBOUBDOSKLBALXFIOAKMTPLGOK97,8%98,3%98,8%99,3%99,8%100,3%0 100 200 300 400 500 600 700Regularity* Source: AEA Annual Consumer Report 2004Average Regularity 98.7%No of Departures
  • 13. - 13 -Dubai AGIFORS Operations Conference 2006 Mai 06A specific model is used to calculate the overall Profit /Loss for each single flight eventSalariesAdministrationInsurance...Landing FeesCateringFuelTravel CostsFlight DeckATC charges...Version ChangeAircraft ChangeEquipment ChangeDiversionRe-RoutingCancellation...PassengersCargo...Irregularity CostsVariable CostsFixed Costs RevenueCostProfit / Loss- Profit & Loss Calculation Model for a single flight event -
  • 14. - 14 -Dubai AGIFORS Operations Conference 2006 Mai 06The duration of a delay has a major impact on the overalldelay costs of a particular flight event- Delay Costs according to Delay duration -$Jet FuelPassenger Re-BookingsCrew Duty-Time CostsAerodrome SurchargesSnacks / MealsCrew Per Diem + Acc + TransPassenger Acc + TransHandling SurchargesCargo Rev / GHC / QRTAirport ServicesM&E Repair / Man HoursNCC SupportM&E Spare Provisioningt1h 2h 3h 4h 5h 6h 7h 8h* Source: m2p Delay Cost Analysis
  • 15. - 15 -Dubai AGIFORS Operations Conference 2006 Mai 06Maintenance & aircraft ownership costs represent 35% ofthe estimated operating delay costs- Delay Cost Analysis US carriers 2004 -Distribution of Operating Costs Delay Costs per Minute* Source: ATA Statistics US Carriers 2004Jet Fuel $17,05Crew $16,77Maintenance $10,16Ownership $9,74Other $3,36Total $57,08Fuel30%Crew29%Maintenance18%Ownership17%Other6%In the US a total of 86.5 million ATC delay minutes were recorded in 2004 with an estimated $4.8billion in direct operating costs
  • 16. - 16 -Dubai AGIFORS Operations Conference 2006 Mai 06In addition to Operating Costs the total delay cost shouldalso include Passenger’s Time- A320 Delay Cost Example -Passenger Cost$57.08Cost per MinuteOperating Cost$66.00Cost ItemTotal per Minute $123.08*1 Source: FAA StatisticsCost per Passenger / Hour1Cost per Passenger / MinuteTotal Cost / Minute2$33.25$0.55$66.002 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 equalsapproximately $1,846Taking passenger costs into account requires aircraft type specific valuesA linear cost figure simplifies the overall cost calculation but does not provide exact costing at any point of time
  • 17. - 17 -Dubai AGIFORS Operations Conference 2006 Mai 0612 Causes & Cost AnalysisIntroduction “Delays & Cancellations”3 Opportunities to Decrease Costs
  • 18. - 18 -Dubai AGIFORS Operations Conference 2006 Mai 06In many cases a more accurate plan could help to avoidcontrollable delays and its related costsEstablish Problem / ImpactvisibilityImprove organizationalReactiveness1 32Increase PlanningAccuracyMost of controllable delays arecaused by an unstable plan whichhas not sufficient buffers tocompensate minor problemsPlanning quality indicators have tobe implemented and measured.Results have to be feedback intothe planning processAt the point a delay occurs theimpact of an uncontrollable delay isvery often not clear which couldcause additional cost because ofsuboptimal decisionClear visibility on delay impact willprovide baseline for cost efficientcounter-measuresDecrease of uncontrollable delaysthrough pro-active cancellationsDecrease of controllable delaysand re-active cancellationsDecrease of controllable anduncontrollable delaysIn case of any delay the duration ofthe delayed event is a major costdriverProcesses, Organization and StaffSkills should be aligned to supportpro-active decision making andflexible problem solving- Opportunities to decrease costs -
  • 19. - 19 -Dubai AGIFORS Operations Conference 2006 Mai 06Efficient and accurate planning requires aligned keyprocesses and business objectivesFlight Scheduling & OperationBusinessObjectivesMaintenance Planning & ExecutionOn-TimeProvisioningAircraftReliabilityCostEfficiencySafetyBusinessObjectivesPunctuality Regularity ProfitabilitySafetyProvides AircraftAircraftDemands Aircraft Demands AircraftProvides Aircraft- Maintenance Planning & Execution -M&EDepartmentAirlineFlightOperations1
  • 20. - 20 -Dubai AGIFORS Operations Conference 2006 Mai 06A consistent, integrated, and stable planning processaligns maintenance planning with flight schedulingMaintenance PlanningFlight Scheduling Operations ControlMaintenance ControlPlanning is done toensure a stableproductionBusinessObjectivesPunctuality Regularity ProfitabilitySafetyBusinessObjectivesOn-TimeProvisioningAircraftReliabilityCostEfficiencySafetyPlanning will be doneacross departmentbordersPlanning in-line withagreed businessobjectivesIntegratedConsistentStable- Recommended Planning Approach -1
  • 21. - 21 -Dubai AGIFORS Operations Conference 2006 Mai 06The planning quality across all planning stages could bemeasured with specific Performance IndicatorsFlight Scheduling & OperationMaintenance Planning & Execution- Establish Measurement Points (KPI’s) -KPIKPIKPIKPIKPIKPIMeasureProductivity&Quality ofServiceMaintenance&EngineeringAirline /FlightOperationsThe KPI concept should reflect the relationship between the two core processes Flight Scheduling & Operation as well asMaintenance Planning & ExecutionKPI’s must be defined on well defined interfaces and with clear responsibilities within the organisation structureThe use of industry benchmarks depends on the specific needs and requirements of the respective airline1
  • 22. - 22 -Dubai AGIFORS Operations Conference 2006 Mai 06Through problem visibility all events indirectly impactedby a delay could be identified122722400002A-PAA-PYB-TCB-TD123 238 239Check401723001now- Impact / Problem Visibility -2- Direct Impact: A delay has a direct impact on all scheduled events of this particular resource incase it conflicts with its start / end times. To stay within the plan these events have to becancelled or delayed either- Indirect Impact: A delay has an indirect impact on all scheduled event with inheriteddependencies. These could be related to all types of resources e.g. Passenger, Crew, Aircraft,Facility etc.121222In addition to the operational impact itself all related cost & revenue figures related to thescheduled event should be provided
  • 23. - 23 -Dubai AGIFORS Operations Conference 2006 Mai 06The most efficient recovery decision could be made basedon the identified problemAd-hoc EffectGradual RecoveryCreeping EffectGradual RecoveryAd-hoc EffectAd-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 unexpectedadditional problems• Example: Deteriorating weather conditionsIrregularity Impact Profile50%100%t50%100%tDescription50%100%t50%100%t50%100%t50%100%t2
  • 24. - 24 -Dubai AGIFORS Operations Conference 2006 Mai 06A centralized planning approach defines the baseline fordecentralized problem solving during productionMaintenanceFlight SchedulingCrew Management12 month 6 month 4 weeksLong-TermPlanningOperationalPlanningProduction /Ops ControlTacticalPlanning72 hoursAOG‘s- Staged Planning Approach & Organizational Responsibilities -Pre-PlanningPlanning BaseMaintenance / EOPlanning Line Maint. &Ground EventsDetailed Planning“Frozen Plan”Planning Activity Irregularity ManagementPlanning ResultDetailed Planning of visits within each production site3
  • 25. - 25 -Dubai AGIFORS Operations Conference 2006 Mai 06All specific measurements to decrease delays depends onthe airlines business model and operating environmentProblem VisibilityA detailed problem assessment will provide a clear picture on current weaknesses andachievable objectives in respect to the airline specific environmentOptimized PlanningAn optimized plan as a result of an integrated planning processes could help to avoidmaintenance delaysRealistic ReservesOperational Reserves could help to compensate controllable and not controllable delaysbut must be in-line with financial constraintsProblem Solving PerformanceOrganisation, processes and people capabilities should be aligned with the objective tosolve upcoming problems as efficient as possible