Spirit Airlines in the US, and Ryanair in Europe, continue to attract media scorn while churning out highly enviable profits.
As many have noted, the principal driver of those profits has been low fares, various types of add-on fees and a spirited(!) enforcement of various rules that trigger those add-on fees. Here’s Derek Thompson of The Atlantic, on Spirit, in a recent article:
The subtext of most Spirit hate is that the fees are unfair and we’re being fleeced. Indeed, Spirit earns “40% more per airplane than any other U.S. airline,” according to the Wall Street Journal. This is a direct result of the high-fee, no-mercy strategy employed with such ruthless efficiency in Chicago. Maxim Group airline analyst Ray Neidl concludes Spirit exists for one reason only: “To make money.” Spirit is a business, yes, but few businesses are so nakedly businessy than Spirit.
But unfortunately for other airlines, they can’t fully transform themselves into Spirit (though they haven’t exactly lagged behind in terms of converting various hitherto-free items into charged-for items with great success – 53 of the world’s airlines reported $27.1B in “ancillary revenue”, for 2012) because of the target market, consumer behavior, etc.
So what else can airlines instead do?
Kaizen – the Japanese “lean” system – said a couple of people from McKinsey, back in 2003. In a longish article, they argued that lean techniques, long applied to manufacturing across industries, including airline manufacturing, should be applied to airport and maintenance hangar operations – two areas that they posited have the highest amount of resource, time and money wastage – so that airlines can increase throughput and realize some pretty impressive cost savings.
On airport ground operations, for example, they had this to say:
When operations leaders take their newfound lean vision beyond maintenance, they see additional opportunities. Consider ground operations. Aircraft worth $100 million or more routinely sit idle at gates. Turnaround times between flights typically vary by upward of 30 percent. Lean techniques cut hours to minutes with a changeover system that mimics the A-check. The process is disciplined to the standard: one person is responsible for the job; each function is in place and ready to go before the plane arrives; passengers are briefed prior to boarding; flight attendants help stow carry-on baggage to speed seating. We have seen turnaround times at two internationally based carriers reduced by 20 to 40 percent in this way (Exhibit 4).
Baggage handling is another lean candidate. Most business travelers would now rather lug a 20-pound bag through a mile of airport walkways and security checks than put up with the current system. But just as in maintenance, lean techniques can reorganize work flows, standardize tasks, and improve visibility. At most airports, there is no physical reason airlines can’t deliver baggage with 100 percent accuracy in the time it takes a passenger to walk to the baggage claim—and would that systemically speed up boarding!
Lean techniques can also help customer service. A lean check-in system would lift throughput by segmenting passengers: most would be handled routinely, the rest by special-service agents. It would also carefully match staffing to passenger-arrival rates, standardize best practices, and monitor processing times. (A casual review of an airport check-in counter reveals that process times vary among agents by more than 50 percent.) In addition, such a system would systematically eliminate the root causes of slowdowns and supply a well-rehearsed set of protocols to deal with uncontrollable events, such as weather-driven cancellations.
Interesting article…but that was 2003 and this is 2013. Surely at least a couple of airlines must have taken this advice to heart and tried to realize savings. Wonder how successful (or not) they were in real life.
Should be a good candidate for a future post.