1 Practical use of six-sigma for the IATA Fuel Program Tom Fodor Assistant Director E&M

1

Practical use of six-sigma for the IATA Fuel Program

Tom Fodor

Assistant Director E&M

2 13-14 April 2010Ops Conference 2

230 airlines Representing 93% of scheduled international air transport

IATA is an association of:

3 13-14 April 2010Ops Conference 3

IATA’s Mission: To represent, lead and serve the airline industry Represent airlines’ interests to

governments & international organizations

Assist the airlines in developing solutionsto the issuesaffecting efficient operations

4

Fuel Price Evolution

Forecast average fuel

price for 2012

$129.2 / barrel

Platts, September 28, 2012

$138.7 / b

Nov. 5, 2012LFI Conference 2012

5

IATA’s Four-Pillar Strategy

Invest in new technology Operate more efficiently Build & use efficient infrastructure Use effective economic measures

Aviation & Climate ChangeAviation is facing the challenge


6

IATA Green Team Achievements 2005-2012

Americas: 17 Europe: 40 Africa/MENA: 27 ASIA/ASPAC: 27

111 visits 41.3 M tons

of CO2

US $9.8 B


7

IATA Green Team Identified Savings Potential

Average identified saving is 5% of the airline fuel budget

Savings range from 2% to more than 14% (higher values for airlines that did not have a structured fuel efficiency program in place)

Based on the actual fuel efficiency assessments, the major savings come from Flight Dispatch and Flight Operations

33.4%

42.7%

13.9%

10.0%

SAVINGS SUMMARY

Flight Operations

Flight Dispatch

Maintenance & Engineering

Ground Operations & Commercial


IATA Methodology for Fuel Program

Define

Measure

AnalyzeImpro

ve

Control

Lean Six Sigma Methodology Combines the Lean and Six Sigma

methodologies Lean: reduce waste and add value Six Sigma: reduce variation in

product output, data driven, uses

statistical tools

IATA uses the DMAIC process for the

fuel program DMAIC Process

8 Nov. 5, 2012LFI Conference 2012

9

Define Baseline

Phase 1 Phase 3Phase 2 Phase 4

Implementation Execution

Implementation Plan

IATA Fuel Efficiency Program – Phase 1


Fuel Program

Setup

Define Baseline

Engage Executive Management Support Define Corporate Fuel Process Define Organization Establish Fuel Team Select Program Methodology

1010

Executive Sponsor, Fuel Manager, Fuel Team

The Fuel Implementation Organization

The Fuel Efficiency Organization

Executive Sponsor

Fuel Efficiency ManagerFuel Team

CEO / COO

Executive Steering Committee

Airline Departments

Airline Departments

Airline Departments

Airline Departments


1111

The Fuel Efficiency Implementation Team

1IATA Webinar 2010

CargoCabin

Service

Ground Operations

Flight Operations

Flight Safety

Dispatch

Operations Control

Finance

Human Resource

Network Planning

Information Technology

Training

Crew SchedulingMaintenance

& Engineering

Fuel Purchasing

FUEL EFFICIENCYCORE TEAM

Commercial

FUEL EFFICIENCYSUPPORT

TEAM

FUEL EFFICIENCYSUPPORT TEAM


1212

Responsibilities and Accountabilities

Identify new policy requirements

Develop Policies, ensure corporate compliance

Complete policy design

Document policies

Approve Policies

Communicate Policies

Ensure Policies are compatible with standards and best practices

Escalate non-std or missing policies

Control new policies

Fuel Policy Task Descriptions


13

Phase 1 Phase 3Phase 2 Phase 4


Implementation Plan

IATA Fuel Efficiency Program – Phase 2

Fuel Program

Setup

Define Baseline


Perform Gap Analysis Review all five operational areas – Flight Operations,

Flight Dispatch, M&E, Ground Operations, Cabin Identify initiatives Establish preliminary savings targets

14

IATA Fuel Efficiency Gap Analysis


Areas covered: Flight Dispatch – 8 areas reviewed Flight Operations – 14 areas reviewed Engineering and Maintenance – 8 areas reviewed Ground Operations – 3 areas reviewed Cabin – 4 areas reviewed

Objectives: Reduce weight Reduce drag Reduce engine specific fuel consumption

15

Basic Data – Fuel Budget


Calculated for the previous 12 month period

1616

B747-400 Fuel Penalty for Extra Weight

B744 weight factors 4 Hours 3.9% 7 Hours 4.1% 8 Hours 4.1%12 Hours 4.7%


17

Basic Data – Fuel Penalty

Number Annual Weight Fuel penalty Fuel penalty Fuel penaltyof Aircraft Flt Hours Factor 1 kg - A/C 1 kg - Fleet 100 kg - Fleet

A330-300 12.0 57,120 3.5% 167 1,999 199,920

A320-200 28.0 74,060 3.1% 82 2,296 229,586

B747-400 06.0 28,398 4.3% 204 1,221 122,111

B777-200 12.0 58,224 3.8% 184 2,213 221,251

B737-700 28.0 76,440 3.6% 98 2,752 275,184

CRJ-200 22.0 44,000 2.0% 40 880 88,000

ATR 72 22.0 44,000 1.9% 38 836 83,600

Total 130 382,242 12,197 1,219,653

Fuel penalty to carry extra weight

17 Nov. 5, 2012LFI Conference 2012

Fuel burn (penalty) in kilograms to carry 1 kg additional weight on the entire fleet for 1 year

18

Initial Assessment of Potential Savings

Potable Water Fuel Penalty Water UpliftFuel burn to

carryOptimum

waterTarget Fuel Burn

CO2Reduction

Weight Reduction 1 kg - Fleet kgwater uplift

kg/yrreduction

kgImprovement Saving Kgs

MetricTons

A330-300 1,999 kg 1,350 kg 2,698,920 kg 702 kg 75% 1,052,063 kg 3,314 tA320-200 2,296 kg 120 kg 275,503 kg 49 kg 50% 56,196 kg 177 tB747-400 1,221 kg 1,606 kg 1,961,109 kg 559 kg 75% 511,625 kg 1,612 tB777-200 2,213 kg 1,238 kg 2,739,090 kg 495 kg 75% 821,486 kg 2,588 tB737-700 2,752 kg 108 kg 297,199 kg 36 kg 50% 50,196 kg 158 tCRJ-200 880 kg 50 kg 44,000 kg 33 kg 50% 14,707 kg 46 tATR 72 836 kg 50 kg 41,800 kg 34 kg 50% 14,379 kg 45 t

Total 8,057,621 kg 2,520,651 kg 7,940 t


Example: Potable water quantity reduction

Fuel savings calculated based on water consumption of 0.3 l / pax / hr using average flight length

19

IATA Fuel Efficiency Program – Phase 3Phase 1 Phase 3Phase 2 Phase 4


Fuel Program

Setup

Define Baseline

Implementation Plan


Perform Benefit / Effort Analysis

Prioritize Initiatives Risk Analysis / Mitigation Managing the Change

Build a Business Case Define KPIs and OPMs Identify Data

Requirements / Source Develop Implementation

Plan

2020

Implementation Management

“Formalize” in the Planning Process:

Documented and detailed implementation plansDetailed timelines with well-defined milestonesAccurate measurements and tracking results to planQuantification of periodic and cumulative benefit to the

airline


2121

Rating the ProjectBENEFIT EFFORT

ID

Fuel Saving

Sta

tus Typ

e 1

Fin

an

cia

l D

ire

ct S

avi

ng

s

Typ

e 2

Fin

an

cia

l In

dir

ect

Sa

vin

gs

Oth

er

(oth

er

fina

nci

al,

cost

-wis

e r

ea

din

ess

, p

rog

ram

su

cce

ss,

rep

lica

tion

)

TO

TA

L B

EN

EF

IT

Per

sonn

el R

equi

rem

ents

(a

vera

ge F

TE

)

Pro

ject

Dur

atio

n (w

ks)

Cap

ital R

equi

rem

ents

($

MM

)

Pro

ject

Ris

k (N

one,

Low

,Med

ium

, H

igh,

Ver

yHig

h)

TO

TA

L E

FF

OR

T

RE

CO

MM

EN

DE

D

PR

IOR

ITY

Importance Weighting: 0.85 0.10 0.05 1.00 0.25 0.25 0.25 0.25 1.001 Project 9 Reduction of Potable Water 6 6 1 5.8 1 1 1 1 1.0 1

2 FUEL EFFICIENCY PROJ ECT PRIORITIZATION GUIDE

Benefit

For each measure, determine relative impact the fuel initiative has on respective measures (1,3,6,9)

Measure Weight 0 1 3 6 9

Direct Savings 0.85 <$50K $50-500K $500 - 1M $1 - 10M >$10MIndirect Savings 0.10 <$50K $50-500K $500 - 1M $1 - 10M >$10MOther * 0.05 0 1 2 3 4 - 5

Effort

For each measure, determine relative effort level required to meet initiative requirements (1,3,6,9)

Measure Weight 0 1 3 6 9

People 0.25 < 1 FTE 1 - 1.5 FTE 1.5 - 2 FTE 2 - 2.5 FTE > 2.5 FTETime Duration 0.25 < 1.5 Mo. 1.5 - 3 Mo. 3 - 4.5 Mo. 4.5 - 6 Mo. > 6 Mo.Capital Required 0.25 $0 $0 - 50K $50 - 100K $100 - 150K > 150KRisk 0.25 None Low Medium High Very High

*

Promotes cost-wise operation Improves direct support for fuel efficiency Increases probability on initiative success Replicates across the airlineCYINTECH INFORMATION SOLUTIONSDecember 10

Confidential -F

or

Dis

cussio

n O

nly

9

CYINTECH INFORMATION SOLUTIONS

BENEFIT EFFORT

Importance Weighting: 0.50 0.30 0.20 1.00 0.25 0.25 0.25 0.25 1.00

1 Project 1 1 3 1 1.6 1 6 1 9 4.3

2 Project 9 6 1 3 3.9 1 1 1 1 1.0

3 Project 10 1 3 0 1.4 3 1 1 3 2.0

4 - -

5 - -

6 - -

7 - -

8 - -

9 - -

10 - -

Projects Input into Benefit-Effort Worksheet

November 10 5

13

6

15

1 8

3

12

9

4

7

17

14211

5

10

16

Benefit

Effort

Project 9

Effort

Be

nef

it


2222

Setting Priorities

Start Here

CYINTECH INFORMATION SOLUTIONS

Highly Desirable OpportunitiesProjects in upper left are the most desirable projects

Potentially Desirable OpportunitiesProjects in the upper right are potentially desirable, but usually require more analysis

“Potential Quick Hits”Possibility for Kaizen event or small GB project

Least Desirable OpportunitiesProjects in the lower right are the least desirable

Individual Fuel Efficiency Initiatives

Effort

Benefit

13

6

15

1 8

3

12

9

4

7

17

14211

5

10

16

BENEFIT / EFFORTMATRIX

B/E Matrix Helps to Screen Potential ProjectsC

onfid

entia

l -F

or D

iscu

ssio

n O

nly

March 11 3

Low

Med

High

Low Med High17


2323

Mitigate / Eliminate the Risk of Safety and Uncertainty

Safety Risk Management

CYINTECH INFORMATION SOLUTIONS Confidential

Identify Risks

Analyze Risks

Identify Likelihood of Risk Occurrence

Analyze Consequence of Risk

Estimate Level of Risk

Evaluate Risks

Risk Reduction / MitigationCo

ns

ult

ati

on

/ C

om

mu

nic

ati

on

Ac

tio

n /

Mo

nit

or

/ R

evie

w


24LFI Conference 2012 Nov. 5, 2012

Project Work Plan Project timeline and the milestones depend on:

Required resources, carry out survey Development of new servicing procedures based on the survey

results

Communication / Change Management

Internal communication to include: Ground Operations management and personnel Flight Attendants and Pilots Supply Chain / Contract Management Internal stakeholders

External communication: Ground Service Providers


2626

Selecting KPIs

KPIs Should be SMART

Specific – Clearly defined performance

requirementMeasurable – Defined in a quantifiable wayAchievable – Realistic, manageableRelevant – Directly related to the desired goalTime-constrained – Set to a defined time span


2727

KPIs are supported by trend graphs & performance measures to show progress against the specific targets in each initiative of the program

Example of an Executive Level Dashboard

Using Business Information (KPIs)



Key Performance Indicator (KPI) & Operational Performance Measures (OPMs) The company’s KPI and supporting OPMs for the project are:

Part of the overall weight reduction initiative (KPI) Reduction of water servicing quantity in consideration of

passenger load and flight length plus other considerations

(OPM) % of flights serviced to policy level (OPM) Resultant fuel savings when comparing actual water weights

carried to pre-initiative baseline levels (OPM)


Data Requirements

Data elements for tracking actual results Aircraft water tank capacity Projected flight time and associated policy water volume Actual water volume after servicing Volume of water remaining on arrival Number of passengers and crew Flight time (block to block) Planned consumption rate Actual consumption rate

Identify source of data Ensure data quality

3030

Implementation Plan

Project / Objective

Benefit / Effort, Priority

Target Savings

Issues / Tasks

Duration / ROI


ABC AIRLINES FUEL EFFICIENCY IMPLEMENTATION PLAN

FE Project: # 9 GO - TO1 Potable Water Carriage

Objective: Reduce the amount of unnecessary water carriage

Initiative Owner: VP Ground OperationsService Provider: ASAP Ground Servicing, Inc.Data Source: Ground Service Records / Flight History / Cabin Staff Reporting

B/E Ratio: 5.8 B / 1.0 EPriority: 1ATarget Savings: 7,940 tons of CO2 Target % 50% domestic fleets, 75% international fleets

Proposal: Tailor the amount of potable water on each flight leg

Issues: Ground Service ContractsAccurate ForecastingAccurate Measurements

Implementation Tasks: 1. Establish team2. Develop survey3. Conduct survey

Duration: 3 months

Expected ROI: 500% Timeframe: April to June 2011

31

IATA Fuel Efficiency Program – Phase 4Phase 1 Phase 3Phase 2 Phase 4

Fuel Program

Setup

Define Baseline

Tracking Results Analyze Results Adjust Policies and Procedures Sustain & Control

Implementation Plan




Build Statistics Track actual savings against plan and identify under-performing areas Savings can be calculated from weight reduction and fuel penalty value

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov DecA330-300 0.0 t 0.0 t 43.1 t 58.8 t 58.8 t 75.6 t 81.3 t 75.6 t 90.7 t 98.7 t 106.3 t 104.0 tA320-200 0.0 t 0.0 t 0.0 t 0.0 t 2.4 t 2.5 t 3.9 t 6.6 t 7.6 t 9.0 t 8.5 t 8.5 tB747-400 0.0 t 0.0 t 6.1 t 11.0 t 25.8 t 21.5 t 16.9 t 26.5 t 35.8 t 30.2 t 32.2 t 28.0 tB777-200 0.0 t 0.0 t 21.4 t 35.0 t 36.4 t 46.7 t 33.8 t 41.8 t 55.2 t 60.4 t 58.0 t 53.9 tB737-700 0.0 t 0.0 t 1.6 t 3.2 t 4.1 t 7.7 t 10.9 t 12.8 t 12.4 t 10.2 t 13.1 t 11.2 tCRJ -200 0.0 t 0.0 t 0.1 t 0.4 t 0.8 t 1.0 t 1.3 t 1.6 t 1.8 t 1.8 t 1.7 t 1.2 tATR 72 0.0 t 0.0 t 0.0 t 0.1 t 0.4 t 0.8 t 1.0 t 1.4 t 1.4 t 1.8 t 1.4 t 2.0 tMonthly 0.0 t 0.0 t 72.2 t 108.4 t 128.7 t 155.8 t 149.1 t 166.3 t 204.9 t 212.1 t 221.3 t 208.8 tCumulative 0.0 t 0.0 t 72.2 t 180.6 t 309.3 t 465.1 t 614.2 t 780.5 t 985.4 t 1,197.5 t 1,418.7 t 1,627.5 t

Actual Savings per Fleet

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov DecA330-300 1,350 kg 1,350 kg 1,100 kg 1,000 kg 1,000 kg 950 kg 900 kg 950 kg 900 kg 850 kg 800 kg 800 kgA320-200 120 kg 120 kg 120 kg 120 kg 110 kg 110 kg 105 kg 95 kg 90 kg 85 kg 85 kg 85 kgB747-400 1,606 kg 1,606 kg 1,550 kg 1,500 kg 1,350 kg 1,400 kg 1,450 kg 1,350 kg 1,250 kg 1,300 kg 1,250 kg 1,250 kgB777-200 1,238 kg 1,238 kg 1,125 kg 1,050 kg 1,050 kg 1,000 kg 1,075 kg 1,025 kg 950 kg 900 kg 900 kg 900 kgB737-700 108 kg 108 kg 101 kg 95 kg 92 kg 77 kg 62 kg 55 kg 52 kg 57 kg 45 kg 54 kgCRJ -200 50 kg 50 kg 49 kg 45 kg 39 kg 37 kg 34 kg 30 kg 27 kg 26 kg 27 kg 31 kgATR 72 50 kg 50 kg 50 kg 48 kg 44 kg 39 kg 36 kg 31 kg 29 kg 25 kg 28 kg 20 kg

Actual Average Potable Water per Flight


Monitor Performance

Potable Water Actual Versus Target and Plan A330-300

0.0 0.0

43.1

58.8 58.8

75.681.3

75.6

90.798.7

106.3 104.0

93.988.4 90.6 88.4 88.4

99.595.0

99.5106.1 103.9 101.7 99.5

0.08.4

43.1

75.684.0

104.099.3

104.0110.9 108.6 106.3 104.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Tons

/ m

onth

Actual Target Plan


Monitor Performance Look for significant variance from plan

Implement corrective action accordingly Potable Water Actual, Target and Plan A330-300 Total

(Tons / Year)

1,154.8 t947.9 t792.8 t

0.0 t 200.0 t 400.0 t 600.0 t 800.0 t 1,000.0 t 1,200.0 t 1,400.0 t

Target Actual Plan

Continuous progress check Identify any implementation issues Improve procedures as necessary Institutionalize changes for sustained results Modify organization structure if required

Adjust Policies and Procedures

LFI Conference 2012 Nov. 5, 201235

Institutionalize the ImprovementsInstitutionalize the Improvements

Establish control plan, metrics, and monitoring, transfer control to process owners

Track and Control Results

• Establish / Maintain process ownership

• Manage to new metrics• Ensure projects are linked to

strategic or financial targets

Capture and ExtendProject Knowledge

• Perform a Project Review• Validate project completion• Archive and share materials

Audit the Results

• Ensure the improved process remains intact

• Use data / statistics to validate

LFI Conference 2012 Nov. 5, 201236

To sustain and control results:

37

Fuel Book 5th Edition & Implementation Guidance Material

Fuel Book 5th edition highlights: Time dependent maintenance costs Aircraft performance monitoring (APM)

Released: October 2011

Implementation Guidance Material: Setting priorities Risk assessment Building a strong business case Program management Metrics for tracking implementation Key Performance Indicators

Released: June 20115th edition

Fuel Efficiency ProgramImplementation Guidance Material


3838IATA Fuel Efficiency Regional Workshop - Amman

Oct 6-7, 200938IATA Fuel Efficiency Regional Workshop - Geneva

June 9-10, 2009

38 23 Jan 2009Singapore Airlines

Thank you!

Thomas FODORAssistant Director,Engineering & MaintenanceOperations Department www.iata.org

International Air Transport AssociationIATA Head Office800 Place VictoriaP.O. Box 113Montreal, QC H4Z 1M1CanadaTel.: +1 +1 (514) 874 0202 Ext. 3952Fax: +1 +1 (514) 874 2661Mobile: +1 (514) 927 3249E-Mail: [email protected]

http://www.iata.org/

Documents

1 Practical use of six-sigma for the IATA Fuel Program Tom Fodor Assistant Director E&M