Global Engineering

At an average the net profit margin of the airline industry stands at around 2-3%. How can this profitability be enhanced further for long term sustenance of the industry? The key lies in the current cost structure of airlines. According to various statistics, the cost contribution for the airlines is projected as fuel cost 49%, aircraft cost 18%, crew cost 14%, maintenance cost 14% and others 5%. Costs like fuel and aircraft are beyond the control of airlines and are driven by many external factors. The next biggest cost is maintenance and airline industry can directly control this cost by improving its effectiveness and efficiency. Typically maintenance of air fleet consists of both scheduled and unscheduled maintenance activities. Scheduled maintenance involves daily checks, A, B, C, D checks. There is about 60% chance of having damages found in these checks which require repair. The unscheduled maintenance include repair of unforeseen damages caused by events like bird hit, hail storm, lightening strike etc.  It is essential to shorten the repair cycle time and increase the availability of aircrafts for operations. This is evident from the fact that each aircraft on the ground cost is estimated to be about $100k per day.  

Further introspection and analysis would help to address this problem. The cost of maintenance includes both material and labor cost. In this labor cost can be reduced to sizable extent by using advanced technologies like knowledge based engineering (KBE). Let us look at more carefully the entire repair and maintenance cycle of airframe. Through knowledge based solutions, costs involved in activities given below can be reduced drastically
–        Managing manuals like Structural repair manuals (SRM), Component Maintenance Manuals (CMM), Aircraft Maintenance Manuals (AMM) etc
–        Finding and following the instructions given in manuals
–        Diagnosing and assessing the damage
–        Identifying repair solution from manuals
–        Preparation of repair procedure and documentation
These activities consist of about 22% of the total labor costs of airframe maintenance. A conservative estimate shows that this can be reduced to about 5% by using knowledge based solutions. Hence, about 17% savings can be realized.

Posted by Dr. G. V. V. Ravi Kumar at 08:14 AM | Permalink | Comments (3) | TrackBacks (0)

At least once a year executives go through the painful process of budget allocation and project planning.  Many times an organization has clear corporate level objectives that guide the budgets and projects to be worked on over a given time horizon.  However, there tends to be a weak connection between corporate strategies and the business units’ project or portfolio list, resulting in a debate among executives between dollars/projects near the cute line. 

Typically for each debate there are slides and financial models developed to support each executive’s personal goals.  Many hours are spent by many people to develop these required views and scenarios that may be overseen during the executive level debates.

So how can portfolio management help?

Subtle changes to the budget and project planning process can have significant impacts to productivity.  The two minor steps that are missed are:

1. The corporate level objectives need to be ranked so that all the executives and planners know the company vision.
2. Each group building a project list needs to link each budget request to one of the corporate level objectives. 

Posted by Mike Mazur at 02:32 AM | Permalink | Comments (0) | TrackBacks (0)