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Airports Manpower Planning Case study and Best Practice Sadiq Gillani, Vice President May 2009
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
Recent or current clients include Airbus, Air Canada, Aveos, Etihad, jetBlue, Frontier, Goodrich, Northwest, Onex, Qantas, Malev, South African Airways, Safran, ST Aerospace, US Airways and Virgin Atlantic The majority of our recent consulting engagements relate to operational performance improvement, business planning and / or corporate-wide restructuring
Comprehensive operational benchmarking across all key functions and cost reduction implementation MRO productivity and supply chain optimization Manpower/labor cost optimization across MRO, Flight Ops, Airports, Catering and Call Centers Business plan development, review and revision for all types of airlines and investors, in all geographies Corporate-wide restructuring / transformation of both distressed and successful carriers
Seaburys proprietary suite of performance measurement and analysis, network, fleet and schedule p planning g tools are considered the best g globally y for in depth p analysis, y , multiple p scenario modeling and supporting rapid decision making
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
Strategic advisory
Ancillary services
Manpower planning
Airports
Operational improvement Client profitability and pricing
M&A / due diligence Conduct due diligence g to assess value from acquiring competitor or merging with partner Evaluate disposal of inhouse Airports
Review airport flows, staffing g levels, , processes, p , productivity and efficiency Support implementation of automation and realisation of benefits Improve mid-handled bags and bag revenue collection
Evaluate client profitability to identify unprofitable clients Determine cost competitiveness of in-house Airports business
3
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
Results
1. Identified $50M of profit improvement initiatives across the division 2. Implemented complete transformation of manpower planning at 6 major ports Identified a further 7% of labor cost savings from a port-by-port review Improved coverage of work to enhance service Developed and conducted skills transfer of a 4 person central manpower planning team Improved leave planning process 3. Developed a labor transformation strategy to outsource non-core non core functions and achieve market labor rates for all new hires 4. Demonstrated that third p party y Airports p contracts were priced at 15% below the parent airline and identified unprofitable clients to exit
4
Approach
Conducted an in-depth 12 month review to identify, validate and plan initiatives to reduce d labor l b cost t across 4 major j hubs, h b as well as outstations Reviewed service levels, headcount levels, rostering, outsourcing and labor strategy Assessed financial benefits, , operational p impact and IR sensitivity of potential changes Developed implementation pan
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
Labor rate
Labor productivity
Labor negotiation
Labor sourcing
Manpower planning
Operations management
Wage rate Benefits Work rules Labor caps Local roster agreements
Labor standards d d Demandcapacity matching Shift & roster design Leave planning (sick, training, vacation)
Day of ops planning l i Risk / disruption management Absenteeism Overtime usage Performance management
Client situation
The client faced up to a 25% pure labor rate disadvantage vs. other ground handlers (excluding productivity or seniority impact)
Average ramp employee payslip ($ per hour)
All Allowances
40
Shift penalties 36.1 Overtime 34.7 30 8 30.8 Benefits Base pay 27.8 25.3
30
20
10
0
Airline X Vendor A Vendor B Vendor C Vendor D
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
Client situation
The parent airline was paying a 15% premium relative to other airlines using the carriers ground handling services subsidizing competitors
Cost per transit ($) City 1
7000
City 2
City 3
6245
6000
5360
5000 4000
21%
5579 4765
28% 6%
4557
4450 3269
23%
3540
3688 2682
22%
3818 3165 7%
Client Airline Y
Client Airline X
Client Airline Z
B747 Ramp
B767 Check-in
B747 Cleaning
B767
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
Review and exit functions where it is unlikely to become competitive and where exit is feasible Implement a market rate for new hires as the driver of true long-term cost p for retained functions competitiveness Deliver airlines desired customer experience and operational performance, particularly through above-wing process redesign and infrastructure investment Address manpower planning and productivity as the primary drivers of short short- to medium-term improvements in service levels and cost Build a team and organisation which has the ability to deliver real and sustainable business improvement
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
2. Exit functions where subscale and feasible Based on strategic plan developed, drew up detailed implementation plans for exit of selected non-core functions
- Cabin cleaning - Second tier port ramp handling - All third tier port services
Accounting g for financial, industrial, political and operational factors, determined optimal strategy for each area
- Including which areas to retain in-house vs. outsource, where to change labor mix, which third-party contracts to retain vs. exit
Activities included:
- Analytical and strategic support for full RFP process in functions / ports to be exited - Financial evaluations of one time costs (redundancy and setup of new operator) and run-rate savings associated with each exit - Optimal timing and sequencing, political based on industrial and p factors
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
5. Improve operational performance Client had recruiting freeze in place for 3 years
- Created higher cost position through reliance on overtime - Caused deterioration in service levels
6. Build team and organization Created central manpower planning team to conduct more analytical and standardized process across all ports Developed plan to improve quality of management team Setup project office to manage all ll initiatives centrally Substantially bolstered communications program to ensure that employees and stakeholders were kept well informed throughout change process
Developed plan to recruit 280 part-time staff Client had invested $50M in a new silver-bullet rostering system, but had not successfully implemented it
- Required skilling up of central manpower planning team - Ensured that work demand and staffing are systematically matched so as to enhance operational as well as financial performance
Evaluated each option against a matrix of legal, industrial and financial metrics Developed labor rate strategy
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
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Manpower optimization
Optimizing manpower productivity requires a comprehensive review across 4 main areas
Manpower optimization
1. Demand forecasting
Schedule
2. Labor supply
3. Rostering
4. Leave management
Vacation
Full-time
Shift patterns
Passenger behavior
Part-time
Relief lines
Training
Service levels
Temporary labor
Risk management
Process design
Overtime
Systems
Standards
B-scale
Capabilities
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1. Demand forecasting
Demand is generated from application of standards to the current flight schedule in dynamic areas and compared to roster
Ramp Demand
Key factors: p - Disruption - Load factors - Destinations - Passenger arrival profile - Time Ti of f day/week
20
15
Heads
Key factors: - Service levels - Airport layout - Accuracy of standards - Consistency of standards
Labor standards
Roster
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
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In addition, managers have other levers to manage the operation without adding permanent labor, which often result in higher cost:
Increasing overtime
Hea ads
60
50
Bringing in contractors, for which no approval is required Working part-time labor as full-time, providing sub-optimal usage of that group Not fully covering demand, demand deteriorating operational performance Denying leave requests, contributing to a build up in leave backlog
40
30
20
10
In most airport divisions there is a shortage of labor, resulting in higher cost through using these levers
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
30
Sick+leave 49%
20
0
4:00
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
3. Rostering tools
Seaburys experience with rostering tools is that they are powerful planning and operations management systems, but IT systems do not intrinsically produce savings
Benefits Limitations
Increased transparency and granularity of cost drivers and operational ti l performance f Ability to validate and cost rosters with a given set of parameters p Real time workforce management to adjust for operational changes Improved integration with other management information systems
Not an automated solution Rosters manually designed d strategies t t i highly hi hl and dependent on user controlled parameters (incl. work standards, shift structures) Significant benefits require a change in planning philosophy and procedures (e.g. relief coverage, overtime usage, service level tolerance) Talented planners and operational managers, not the system, are necessary to t translate l t d data t i into t savings i
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3. Rostering tools
Maximizing manpower planning benefits from new roster tools requires a complete reorganization
Prepare Revise standards and performance levels across ports to ensure consistency and best practice ti
Implement tool Provide in-depth training for resource planners and allocators and manpower planning and management Provide support during the initial period to make sure planners are able to use system effectively Define and implement leave planning best practice across all ports E Ensure central t l control t l of f new procedures and standards Define responsibilities within h planning l process and d develop central manpower planning team
Leverage tool Conduct a rigorous portby-port re-rostering to achieve a step change in manpower optimization Use the system to proactively monitor and manage performance of workforce and planners Keep standards up-to-date and consistent by regular revisions (e.g. for process, technology or passenger behavior changes) Hold regular training and best practice workshops for system y users
Conduct time-and-motion studies to determine standards for check-in, gate, baggage cabin and ramp baggage, activities Review passenger profiles and behavior (e.g likelihood of checking baggage) Review service levels (e.g. check-in wait times)
Revise manpower requirement for static work areas (e.g. ticketing, baggage room, ticketing)
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Port B example
One day absences (Transport)
294
Sick leave is lowest on penalty weekends
25
20
15
10
100 50 0
0 2:00
6:00
10:00
14:00
18:00
22:00
Mon
Tue
Wed
Thu
Fri
Sat
Sun
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
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Detailed staff communication is needed to inform employees of new enforcement and program should be driven from the Port Manager
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
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Leave lines
Load factor
100%
40
80
60
20
40
10
20
0
3/3/2008 6/2/2008 9/1/2008
0
12/1/2008
0.7%
1.5%
1.9%
2 1% 2.1%
Headcount levels
Overtime
Parttime/fulltime mix
Shift penalties
Shift lengths
Re-grading
Process redesign
Total Savings
Confidential not for third party distribution Seabury Aviation & Aerospace 2009
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Questions?
Sadiq Gillani
Vice President, d C Consulting l