The cost of delays and cancellations

The Costs of Delays & Cancellations
- Analysis & Means for Cost Reductions -
AGIFORS Dubai 2006
m2p Consulting
www.m2p.net • Frankfurt (Germany) • New York (USA) • Dubai (United Arab Emirates) • www.m2p.net

- 2 -Dubai AGIFORS Operations Conference 2006 Mai 06
1
2 Causes & Cost Analysis
Introduction “Delays & Cancellations”
3 Opportunities to Decrease Costs

In 2004 more than 20% of all scheduled flights in the US
and EU were either delayed or cancelled
According to most transportation reporting statistics (such as those of the US DOT) only flights
that departs or arrives 15+ minutes behind schedule are rated as delayed
- Delays & Cancellations US / EU in 2004 -
Ontime
76,6%
Delayed
21,6%
Cancelled
1,8%
Total Departures: 7,129,270
Delays & Cancellations US 2004 Delays & Cancellations EU 2004
Ontime
79,5%
Delayed
17,5%
Cancelled
3,1%
Total Departures: 3,751,842
* Source: AEA Annual Report 2004* Source: DOT OTP Statistics 2004

A delay is an event that causes the change in schedule of
a flight and/or aircraft’s planned departure or arrival
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- Definition of a Delays -
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- Late Arrival / Finish: During an event the finished time will be delayed. In case of a flight event
this is a delayed arrival.
- Late Departure / Start: The start of an event will be delayed. This is in case of a flight event a
delayed departure.
- Schedule Change: The length and/or timing of an event will be changed before it has started. In
respect to change publication constraints this is a schedule change.
- Early Arrival / Finish: A scheduled event will start earlier than scheduled. This happens in case
a flight arrives before schedule.
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According to the delay cause, many delays are outside the
responsibility 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 Controllable
Limited
Yes
No
No
Limited
No
Yes
No

A cancellation describes a particular flight which is the
airline 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 not
available
environmental conditions are not in-line to operate
the flight according to safety rules (Weather)
external capacity constraints regulated by ATC and /
or Airport authorities
A scheduled flight will be cancelled because …
the ongoing delay of the previous event will cause a
major delay of the scheduled event and could not be
compensated (Lack of reserves)
economical reasons in case of low passenger
bookings
Re-Active Cancellation (Stochastic) Pro-Active Cancellation (Strategic)
Because of rotational dependencies of flight events, a cancellation has an impact on its related
return pair with respect to A/C and crew rotation

The handling of delays and cancellations are within the
decision making governance of operations control
Decision
Making
Governance
Business Objectives
Airport
Irregularity Reasons
Constraints
ATC Crew
Aircraft Weather …
Rotation
Crew
Rotation
Aircraft
Hub
Capacity
Fleet
Slots
…
Product
Profitability
Regularity
Safety
Punctuality
Interfaces
Commercial
ATC
Engineering
…
Cargo

1

At least 1/3rd of all delays are within the responsibility of
the airlines and / or its suppliers
- Delay Cause Analysis -
Delays Causes US 2004 Delays Causes EU 2004
* Source: FAA Statistics 2004
ATC
37,1%
Airport Authorities
0,2%
Airline Control
30,7%
Connection
28,3%
Weather
3,6%
Total No
of delayed flights: 1,568,439 Total No
of delayed flights: 676,211
* Source: AEA Statistics 2004
Approximately 10% of all Airline related delays are caused by maintenance problems. The
majority is caused by rotational problems (Aircraft, Crew, etc.)
Weather
2%
ATC
25%
Connection
4%
Airline Control
58%
Airport Authorities
11%

Maintenance delays are not only caused by a poor Aircraft
/ Component reliability
Aircraft Defects during transit or after positioning of
aircraft (AOG)
Maintenance equipment, -facilities, -tools, lack of or
breakdown
Non-scheduled maintenance, special checks and/or
additional work
Lack of spares
Maintenance work execution issues (Shortages of
staff etc).
…
Poor Aircraft & Component Reliability
Insufficient line maintenance process / quality (base
station / outstation) according to operating
requirements
Check cycles / visit plan & work scope with regards
to utilization constraints
Visit plan quality (Level of detail, accuracy, etc.)
Lack of buffers / reserves (Tools, Spares, Staff etc.)
…
Maintenance Delay Reasons Causes Analysis
- Maintenance Delays -

LG
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CYIG AZJKLO LH
AFMA
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LX
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KM
TP
65,0%
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 indicate
poor on-time performance
On-Time
Performance
No of Departures
Average OTP 82.0%
* Source: AEA Annual Consumer Report 2004

The analysis of regularity within Europe intends to show
that big carriers cancel more flights than smaller ones
- European carriers Regularity 2004 -
AY
RO
SN
SK
JU
CY
IG
AZ
LO
LH
AF
MAJP
IB
OU
BD
OS
KL
BA
LX
FI
OA
KM
TP
LG
OK
97,8%
98,3%
98,8%
99,3%
99,8%
100,3%
0 100 200 300 400 500 600 700
Regularity
* Source: AEA Annual Consumer Report 2004
Average Regularity 98.7%
No of Departures

A specific model is used to calculate the overall Profit /
Loss for each single flight event
Salaries
Administration
Insurance
...
Landing Fees
Catering
Fuel
Travel Costs
Flight Deck
ATC charges
...
Version Change
Aircraft Change
Equipment Change
Diversion
Re-Routing
Cancellation
...
Passengers
Cargo
...
Irregularity CostsVariable CostsFixed Costs Revenue
Cost
Profit / Loss
- Profit & Loss Calculation Model for a single flight event -

The duration of a delay has a major impact on the overall
delay costs of a particular flight event
- Delay Costs according to Delay duration -
$
Jet Fuel
Passenger Re-Bookings
Crew Duty-Time Costs
Aerodrome Surcharges
Snacks / Meals
Crew Per Diem + Acc + Trans
Passenger Acc + Trans
Handling Surcharges
Cargo Rev / GHC / QRT
Airport Services
M&E Repair / Man Hours
NCC Support
M&E Spare Provisioning
t1h 2h 3h 4h 5h 6h 7h 8h
* Source: m2p Delay Cost Analysis

Maintenance & aircraft ownership costs represent 35% of
the estimated operating delay costs
- Delay Cost Analysis US carriers 2004 -
Distribution of Operating Costs Delay Costs per Minute
* Source: ATA Statistics US Carriers 2004
Jet Fuel $17,05
Crew $16,77
Maintenance $10,16
Ownership $9,74
Other $3,36
Total $57,08
Fuel
30%
Crew
29%
Maintenance
18%
Ownership
17%
Other
6%
In the US a total of 86.5 million ATC delay minutes were recorded in 2004 with an estimated $4.8
billion in direct operating costs

In addition to Operating Costs the total delay cost should
also include Passenger’s Time
- A320 Delay Cost Example -
Passenger Cost
$57.08
Cost per Minute
Operating Cost
$66.00
Cost Item
Total per Minute $123.08
*1 Source: FAA Statistics
Cost per Passenger / Hour1
Cost per Passenger / Minute
Total Cost / Minute2
$33.25
$0.55
$66.00
2 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 equals
approximately $1,846
Taking passenger costs into account requires aircraft type specific values
A linear cost figure simplifies the overall cost calculation but does not provide exact costing at any point of time

1

In many cases a more accurate plan could help to avoid
controllable delays and its related costs
Establish Problem / Impact
visibility
Improve organizational
Reactiveness
1 32
Increase Planning
Accuracy
Most of controllable delays are
caused by an unstable plan which
has not sufficient buffers to
compensate minor problems
Planning quality indicators have to
be implemented and measured.
Results have to be feedback into
the planning process
At the point a delay occurs the
impact of an uncontrollable delay is
very often not clear which could
cause additional cost because of
suboptimal decision
Clear visibility on delay impact will
provide baseline for cost efficient
counter-measures
Decrease of uncontrollable delays
through pro-active cancellations
Decrease of controllable delays
and re-active cancellations
Decrease of controllable and
uncontrollable delays
In case of any delay the duration of
the delayed event is a major cost
driver
Processes, Organization and Staff
Skills should be aligned to support
pro-active decision making and
flexible problem solving
- Opportunities to decrease costs -

Efficient and accurate planning requires aligned key
processes and business objectives
Flight Scheduling & Operation
Business
Objectives
Maintenance Planning & Execution
On-Time
Provisioning
Aircraft
Reliability
Cost
Efficiency
Safety
Business
Objectives
Punctuality Regularity ProfitabilitySafety
Provides Aircraft
Aircraft
Demands Aircraft Demands Aircraft
Provides Aircraft
- Maintenance Planning & Execution -
M&E
Department
Airline
Flight
Operations
1

A consistent, integrated, and stable planning process
aligns maintenance planning with flight scheduling
Maintenance Planning
Flight Scheduling Operations Control
Maintenance Control
Planning is done to
ensure a stable
production
Business
Objectives
Punctuality Regularity ProfitabilitySafety
Business
Objectives
On-Time
Provisioning
Aircraft
Reliability
Cost
Efficiency
Safety
Planning will be done
across department
borders
Planning in-line with
agreed business
objectives
Integrated
Consistent
Stable
- Recommended Planning Approach -
1

The planning quality across all planning stages could be
measured with specific Performance Indicators
Flight Scheduling & Operation
- Establish Measurement Points (KPI’s) -
KPIKPI
KPI
KPI
KPI
KPI
Measure
Productivity
&
Quality of
Service
Maintenance
&
Engineering
Airline /
Flight
Operations
The KPI concept should reflect the relationship between the two core processes Flight Scheduling & Operation as well as
KPI’s must be defined on well defined interfaces and with clear responsibilities within the organisation structure
The use of industry benchmarks depends on the specific needs and requirements of the respective airline
1

Through problem visibility all events indirectly impacted
by a delay could be identified
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- Impact / Problem Visibility -
2
- Direct Impact: A delay has a direct impact on all scheduled events of this particular resource in
case it conflicts with its start / end times. To stay within the plan these events have to be
cancelled or delayed either
- Indirect Impact: A delay has an indirect impact on all scheduled event with inherited
dependencies. These could be related to all types of resources e.g. Passenger, Crew, Aircraft,
Facility etc.
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In addition to the operational impact itself all related cost & revenue figures related to the
scheduled event should be provided

The most efficient recovery decision could be made based
on the identified problem
Ad-hoc Effect
Gradual Recovery
Creeping Effect
Gradual Recovery
Ad-hoc Effect
Ad-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 unexpected
additional problems
• Example: Deteriorating weather conditions
Irregularity Impact Profile
50%
100%
t
50%
100%
t
Description
50%
100%
t
50%
100%
t
50%
100%
t
50%
100%
t
2

A centralized planning approach defines the baseline for
decentralized problem solving during production
Maintenance
Flight Scheduling
Crew Management
12 month 6 month 4 weeks
Long-Term
Planning
Operational
Planning
Production /
Ops Control
Tactical
Planning
72 hours
AOG‘s
- Staged Planning Approach & Organizational Responsibilities -
Pre-Planning
Planning Base
Maintenance / EO
Planning Line Maint. &
Ground Events
Detailed Planning
“Frozen Plan”
Planning Activity Irregularity ManagementPlanning Result
Detailed Planning of visits within each production site
3

All specific measurements to decrease delays depends on
the airlines business model and operating environment
Problem Visibility
A detailed problem assessment will provide a clear picture on current weaknesses and
achievable objectives in respect to the airline specific environment
Optimized Planning
An optimized plan as a result of an integrated planning processes could help to avoid
maintenance delays
Realistic Reserves
Operational Reserves could help to compensate controllable and not controllable delays
but must be in-line with financial constraints
Problem Solving Performance
Organisation, processes and people capabilities should be aligned with the objective to
solve upcoming problems as efficient as possible

The cost of delays and cancellations

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