Airline business – operations is the key!!

Dr.Vijay Mallya, who calls himself VJM has been featuring in the national dailies for all wrong reasons. His appetite for risk taking was equated to Richard Branson of the virgin group. A close scrutiny of his up rise indicates a series of entries and profitable exits from numerous businesses. Unfortunately, the entry into the airline industry enchained him into such predicaments that he was dislodged from the Forbes list of billionaire’s, was named willful defaulter by a couple of banks, has a non-bailable warrant against him and ultimately compelled to exit the country.

He was reduced to penury from flamboyance in less than a decade. Thanks to an industry that has both bailout seekers and wealth creators. The national carries relies on currency nourishment year after year and a fairly young player has its customers aligned, maintains operational prudence to post profits quarter on quarter.

Airline business is riddled with operational and efficiency challenges that needs to be smartly worked around. Some challenges are inherited and some are imposed. Right from the material used in the aircraft, the braking system, the cabin space, the in-flight entertainment system every ingredient of an aircraft is operationally an irritant. The imposed ones are by watch dogs such as DGCA and the ministry of civil aviation.

With all due respect, Mr.Mallya had lineage in the business that uses coercion and graft as a venerated practice, the liquor trade. Obviously, the profoundness required to fathom the operational nuances of the business was missing.

Running an airline requires truckloads of cash . Hefty bills are raised daily by the oil companies because the bird guzzles ATF (aviation turbine fuel) in tons.  The longer the aircraft remains afloat with passengers; it spins more cash to its owners. While achieving higher asset utilization seems a straight forward objective, it’s intriguing to see why success is a rarity in the field.

Some elementary details that few companies fathom:

Braking: The pressure applied by the brakes determines the rate of retardation which in turn determines the extent of heat generation. A successful take off could often be risky unless the brakes cool down to ambient temperature. The cooling typically takes about 20 mins and is susceptible to seasonality. Until the cooling drill isn’t complete, the aircraft needs to stay-put in the hanger.

Passenger on-boarding: The number of passengers to be boarded imposes a time constraint. The other extraneous factors are number of cabin baggage per passenger, aero bridge retraction rate, and push on bridges retraction rate etc. One of the reasons Indigo strictly imposes the one baggage per passenger rule is to hasten boarding. They have also switched from series to parallel passenger security briefing at the emergency exits, the gain may not be significant but, adds to quicker turn around.

Fleet standardization: Having a common sized aircraft has manifold impact on flight scheduling, spare management, skilling of pilots, engine and aircraft maintenance staff.  Having many variants of aircraft’s has to be commensurately compensated with systems, practices and manpower in maintenance such that the mean time to repair (MTTR) remains uniform across variants.

Pilot fly hours: unlike other traditional jobs, the job hours for a pilot is not calculated from the time they enter the aircraft. Instead, it starts from the time they depart the home/hotel. This could become candidate for complication since the local conditions/traffic snarls though out of control, impact the scheduling of pilots. A common practice to address this constraint is to have a star hotel in the vicinity of the airport.

Altitude: DGCA the civil aviation watch dog canes airlines every-time they falter. Apart from Delhi IGI airport, most of the other Indian airports have a single operational runway to be shared between domestic and international flights. The desired time slot for a sector is chosen by the airline which is approved by DGCA. Large air crafts are designed to fly at 39000-40000 ft. i.e. about 10km above ground. Maximum fuel efficiency can be obtained if the air crafts are flown at their prescribed altitude. Apart from a marginal tolerance, delays in push back from the specified time slot attract punishment in flying altitude by DGCA. A justifiable action since there are established air routes and a delayed entry into a route could lead to a fatal mid-air collision. So, if an aircraft is not flying at its prescribed altitude the resistance faced by the engines in the stratosphere could result in increasing the fuel consumption than anticipated. ATF is taxed heavily, imported and hence exorbitant.

Another related aspect is the tail and head winds that assist in take-off and impact travel speeds. Wind speeds and directions are seasonal. It would be very congenial for airlines to dynamically align the sectors with the wind patterns to improve profitability. Unfortunately, we aren’t there yet!

From an optimization stand point, imagine fitting these variables mathematically into an equation with an attempt to maximize profits. Mind boggling, isn’t it?

It was not a matter of surprise that an ostentatious player who failed focus on the details went out of business with a despicable balance sheet. Whilst, the second big player has managed to stay afloat on account of the life support provided by its Middle Eastern step mother. The leader who is stringent, disciplined and mindful of the operational challenges is serving as an epitome for the rest to follow. With many new entrants joining the fray, let’s hope that everyone stays above the ground and no one goes under!!

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