Wheels Up - The Weblog of Aircraft Data Fusion

Know what you are getting

In today's economic climate, it is essential that you can accurately forecast and measure the results of your next capital investment, including any improvement in your airline's operations or infrastructure. The value of a project can only be determined by a thorough analysis of the costs, benefits and cash flow requirements for the project.

The first element to consider for a project is not how much it will cost but what the measured benefits are that result from the project. Measured benefits can be in the form of hard and soft opportunity costs. Hard opportunity costs are generally more easily measured and can be calculated using hard numbers from an airlines operations, e.g. the project's effect on Out, Off, On & In (OOOI) times. Soft opportunity costs tend to be more subjective and assumptions and estimates must be used to arrive at a measured benefit, e.g. trying to measure the benefits that are generated by reducing 50% of an employees duties. As a result of these assumptions and estimates, higher risk factors need to be applied to soft opportunity costs.

The second element for consideration is the project cost. These need to be broken down into non-recurring (Capital Investment) and recurring costs associated with operations or maintenance. Non-recurring costs have an additional element of depreciation on hardware and other tangible assets. To better manage risks on recurring costs software-as-a-service, leasing and other concepts can be used to manage obsolescence, upgrades and obtain certain functionality in a competitive market place. 

The third element for consideration is the cash flow analysis for the project. This will provide the basis of assessing both the expected and measured performance of the project. Key metrics for this analysis include: Net Present Value  (NPV), Internal Rate of  Return (IRR) and time period to cash flow positive.  

For operators who do not have the resources for this level of analysis, there are resources and models that can be accessed via the Internet to provide these and other more detailed services.

Leverage your existing Technology

Leveraging your existing technology may provide just as much capability as adding new.

The definition used here for leveraging your existing technology; is to leverage existing technology investments by using add on's to extract more capability, functionality or efficiencies. In many cases adding peripherals or middleware applications can be used to create the functionality necessary to meet the new requirements. More or improved technology may not be the best value proposition.

Airline mergers, consolidation of system or process  and or the ever changing operations requirements may require more capabilty than can be currently provided. In many cases the current support systems were installed to address specific functionality or user requirements (point solution) and was  never fully integrated into the airlines operations support systems.

Each of these applications satisfied the specific needs at the time. Fast forward to today's operational environment and requirements. In the current environment there is a  need to integrate and achieve more efficiency and functionality in operations. Earlier technologies or applications are no longer able to meet the new requirements without some assistance.

When assessing either the addition of new technology (s) or adding functionality, vigilant business practices and processes must be used to evaluate and validate the costs and outcome of any initiative. Further, the appropriate data must be recorded and performance metrics defined to ensure the stated objectives were met.  

Aircraft Data Fusion's expertise and modeling tools used during the discovery and design phase of your project can facilitate the evaluation and decison making process. With more than 60 years of collective airline and busines experience the ADF team is well positioned to work with your team assess the costs and benefits of your technology initiative.    

Collaborating with Competitors

In "Sleeping with the Enemy", an article in the May issue of Industry Week, Doug Bartholomew refers to manufacturers in the auto industry who team up with competitors to cut costs and increase market share. The auto industry is finding that “sleeping with the enemy” offers pros that far outweigh the cons. According to the article, President of Timkin Corp.'s Industrial Group, Tom Arnold sees competitors who share costs on projects they could not handle on their own in the current environment, by collaborating we are able to increase our capability, while sharing the cost and the risk.

Sharing costs is the biggest reason companies may get together. Katie Lam, a spokesperson for Northrup Grumman says "There are a lot of different aerospace companies that we team with and that we also compete with." By sharing costs and pooling brain power companies can achieve even greater capabilities that benefit the customer at an affordable cost. More companies and vendors need to take this approach when looking to cut costs and creating efficiencies. The benefactors are both the companies and their customers.

In an industry where IT markets are relatively small, collaboration can play and even greater role in the profitability of those competing. For the same functionality there may be as many as six or more vendors competing for the same business with little, if any, differentiation. Collaboration can facilitate the development and use of state-of-the-art technologies to achieve even better solutions and enhance competitive advantage.

The role of a vendor or services provider is to assist the customer in increasing productivity, efficiency and achieving competitive advantage. Affordable and custom business solutions are essential to achieving this objective. Much of the core functionality required to achieve a business solution is generic. The technology costs for this core functionality can be shared by competitors reducing the costs of the solution to the customer and creating a healthier environment.

Mobile and IT Solutions for Airlines

In the May issue of Air Transport Word, the article titled "Balancing Act" by Jerome Greer Chandler addressed the issue of using the computing power of hand held devices to refine weight and balance and performance processes and delegate them to the user level. This is another example of industries search for efficiencies by decentralizing processes and removing costly infrastructure.

The article referenced "speed and accuracy" as being key in calculating weight and balance. Correctly, the technology and capabilities that have been integrated into the smaller hand held devices have opened new opportunities. Processing speed, information storage, Wi-Fi & telephony connectivity have brought these units to life for use as decision support tools. In addition to this, and not noted in the article, applications not mentioned that are available on these devices are airport and runway calculations, reduced thrust take-off calculation, optimal cruise thrust settings, training applications and technical publications. Applications of this nature require large amounts of computing and storage capability that are easily supported.

The article doesn’t fully address shared systems, but airlines should consider centralized administration and sharing operations data across their enterprise. Centralization allows processes that were previously placed on large centralized computers to be decentralized and performed on location in real-time. High costs and delays are eliminated when complex architectures pull the data into a central system for processing and distribution. To achieve maximum benefits from digitization initiatives, the system should be designed around a services oriented architecture that supports added functionality and scalability. This architecture should also support the horizontal integration of operations data to other operations within the company and enterprise systems.

Added efficiencies can be achieved with better planning and execution tools. Operational decisions can be pushed down to the point of execution eliminating delay and increasing on-time performance. Load planning can be used to optimize aircraft performance and fuel burn. Aircraft performance can be enhanced to achieve higher payloads. Integrated weight and balance with aircraft performance facilitates greater reductions in reduced thrust takeoffs. 

Although, precision and predictability are enhanced with the addition of these tools, the risk of discovering the unknown is what keeps airlines searching for better "speed and accuracy".

The changing world of IT in the airline industry

A recent article in Information Week regarding audits of industry IT departments underscores that not only are IT budgets declining as a percentage of revenue but there is less and less time available to analyze technologies and industry trends and how it may affect their business. Further due to budget limitations, the focus has become more on day-to-day operations. Nowhere is this truer than in the airline operations.

Corporate executives are becoming less dependent on internal analysis for their assessment of technologies or IT business solutions. Increasing pressure is being placed on vendors to offer business solutions with best of breed/class technologies and applications.

IT departments business processes are being transformed more into matching business solutions to corporate objectives. As stated by Ton Nealon, CIO of Southwest Airlines:

"Technology can help," Nealon says, "but if you're starting with a fundamentally flawed business model, it's not going to fix that." Fortunately for Southwest, its business model doesn't appear to need fixing. And the IT moves it's making now indicate the airline isn't waiting for that model to break.

The IT department will provide the oversight for contracting, implementation and support.. It is also becoming increasingly clear that the airlines operations IT functionality must be installed on a services oriented architecture (SOA) that creates a free flow of information between operations and the enterprise. The extreme pressure the airline industry is under to manage costs requires that every advantage be applied to streamlining operations that drives productivity and efficiencies.

The most successful airline operations of the future will be those that are able to apply cost effective business solutions to achieve maximum affordable productivity and efficiency to their operations.

Our blog and welcome to it!

Welcome to Wheels Up, the weblog of Aircraft Data Fusion. We'll be getting under way in just a few moments. In the meantime, let's review the current situation.

The airline industry is currently undergoing change at a rate unknown throughout its history. Those of us who have spent our lives in this industry have seen it coming, and have been personally impacted in one way or another.

As a former pilot for Northwest Airlines, I have spent a great deal of time on various technology initiatives, always with the intent of improving the information flow between the aircraft and the enterprise. Think about it - the aircraft is the only thing in the airline industry that really makes any money. Yet it's the one part of the business that is disconnected from the overall enterprise network. In any other industry, this would be unacceptable. But in this industry, it's the way we've operated since the beginning.

This must change. It will change. Market forces dictate that it will change. The ability for airlines to maintain viability will rest on their using every possible bit of business intelligence and bring them to in creating competitive advantage. Doing this impacts everything: safety, delays, maintenance, fuel utilization, and of course profitability.

I founded Aircraft Data Fusion to help the industry navigate this transformation. Over my 30-plus years as a pilot, I have developed and refined a set of notions of how to use technology to streamline operations. I'd like to share some of those ideas here on this blog. Others you will be able to experience first hand through our products and services.