2016 EDITION 1 - ALTA€¦ · ICF International Industry Insights 2016 Edition 1 3 A Broad Team of Experts Supports the Lean DMAIC Lean Six Sigma to Reduce Aircraft Turnaround Time

Industry Insights, 2016 Edition 1 1 ICF International

2016 EDITION 1


Latin American Carriers Elbow Their Way Into a Rich Market ........................................................................................................... 1

Lean Six Sigma to Reduce Aircraft Turnaround Time and Improve On-Time Performance ..................................................... 3

Best Practice in Aircraft Lease Returns —Part Four of Four ............................................................................................ 6

Aviation Game Changer: New Technology Aircraft —How E-Enablement Will Disrupt Business As Usual ..................... 9

Prepared by ICF SH&E, Inc.

INDUSTRY INSIGHTSQUARTERLY AVIATION BRIEFING

2016 EDITION 1


Latin American Carriers Elbow Their Way Into a Rich Market

Latin American carriers know all about operating at

congested airports. IATA classifies nine of the region’s airports

as Level 3—where there is not enough capacity to meet

demand. On the other side of the Atlantic, Europe’s airlines

face the complications of gaining access at more than 100

Level 3 airports across the continent. That number includes

the most famously congested airport in Europe, London

Heathrow.

Heathrow is the largest gateway to one of the world’s most

economically vibrant cities and regions—London and the

South East of England. It offers the prospect of a rich market for

airlines, with huge demand for air travel, including significant

high-yield demand generated by the wealth and attractions

of a global financial, trade, and tourism center. But, Heathrow

is effectively full, being limited to 480,000 air transport

movements a year which are over 98% used.

Neighboring Gatwick airport, the world’s busiest single-

runway airport, is also near capacity. In 2015, Gatwick had

270,000 movements, with more than 40 million passengers

on its flights—slightly more than found at Latin America’s

busiest airports, Sao Paulo Guarulhos and Mexico City. Gatwick

is attracting carriers with its new product offering connections

with low cost carriers, and British Airways is adding new routes

to Lima and San Jose, Costa Rica beginning in May 2016,

bolstering the airport’s credentials as a long haul gateway.


Edmond RoseVice President ICF International [email protected]

summer Avianca managed to obtain slots to increase flights

to a daily frequency.

As a result, passenger traffic between Latin America and

Heathrow has risen to 1.2 million—a long way short of

Madrid’s 6.7 million Latin America passengers last year, but

double the numbers at Heathrow eight years ago.

Heathrow may be “full”, but for patient Latin American carriers,

there is room to enter and grow.

So, how do airlines make their way into Heathrow? One

answer is to take part in the market for slots, which are the

right to use the runways and facilities at the airport during a

specific time. Carriers at Heathrow regularly sell slots they no

longer want to other carriers that need them. The latest deal

for slots was widely reported as achieving a record price—

Oman Air paid US$75 million for a daily slot pair so that it could

add a second daily frequency to its Muscat–Heathrow route.

It is not always necessary to pay astronomical amounts of

money for Heathrow access though. A very small number

of slots may become available each year from the slot

coordinator as some carriers return handfuls of slots or

lose slots because they failed to use them. Often these slot

opportunities are only available on two or three days a week,

and usually they are at times less favored by the main airlines

at the airport.

Two Latin American carriers have entered Heathrow by

waiting patiently for slots to become available. Aeromexico

was first, starting its service in December 2012 with three

flights a week, and subsequently building to five frequencies

a week. This summer, Aeromexico obtained another daily

slot-pair so that it can operate six flights a week. Avianca

was also patient. For five years, Avianca sought to obtain

slots for its re-entry to Heathrow. Finally, in July 2014 it was

able to commence service with four flights a week. And, last

Latin American Carriers at Heathrow International Airport 2008–2016

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A Broad Team of Experts Supports the Lean DMAIC

Lean Six Sigma to Reduce Aircraft Turnaround Time and

Improve On-Time Performance

In the simplest terms, airlines need to maximize the value of their aircraft by increasing profits from time in the air while decreasing the costs and time on the ground.

Efficient aircraft ground operations are fundamental to

meeting customer service expectations and maximizing

aircraft utilization. Unfortunately, the turnaround of a modern

aircraft in a congested airport is a complex, cross-functional

operation. Until existing processes and value streams are truly

understood, systemic improvement is impossible. ICF has

successfully applied Lean Six Sigma methodology to streamline

and standardize processes, resulting in shorter turnaround

time, and associated quantifiable benefits. Lean experts

and professionals from each airline function work hand-in-

hand with the airline’s personnel to drive each phase of the

project—Define, Measure, Analyze, Improve, and Control

(DMAIC)—to gain the highest degree of efficiency and

repeatable success.

The following table delineates the theoretical elements of

each DMAIC phase, along with the practical application of

these concepts in the airline context.


The following table delineates the theoretical elements of each DMAIC phase, along with the practical application of these

concepts in the airline context.

Phase 1: Define Practical Application in Airline Context

• Teaming and working norms; joint reviews.

• Validating the project goal, success metrics.

• Define high level ‘as is’ value stream map, current standard work.

• Representatives from all functional areas participate in workshops to create current state process maps, which highlight the dependencies between functions and formulate group discussions to start identifying opportunities for improvement.

• This value stream mapping is done to provide a big-picture visualization of the flow of information and activities.

Phase 2: Measure

• Establish baselines for ground time performance.

• Document current turn processes & interviews.

• Identify the current standard work plan and its critical path.

• Ground time observations are conducted to get a preliminary view of the mean timing to help validate the critical path and individual processes and activities to focus on.

• A Critical Path Model tool is used to define critical paths, using mean cycle time, providing a visual diagram of each swim lane and highlight those in the critical path. The tool also allowed users to toggle cycle time and dependency and observe how the overall process will change.

Phase 3: Analyze

• Develop a discrete event simulator model of current state performance.

• Identify potential ‘bottlenecks’ & improvement opportunities.

• Simulate multiple future-state state scenarios.

• Observations from aircraft turns and other data gathering feed a Ground Time Model (GTM) to show variations in the critical path and identify optimization opportunities.

• Multiple ‘what-if ’ scenarios provide insights into how to re-sequence activities or prepare for certain activities to eliminate/ reduce time to execute.

• Simulations are conducted to produce statistically reliable results for each baseline and ‘what if ’ scenario. The measurement data and model construction go through a rigorous process of cleaning and validation.

Phase 4: Improve

• Prioritize opportunities for improving performance.

• Continuous improvement events with key stakeholders and implementation improvements.

• Outputs from the GTM determine new performance targets requiring changes to process, resources, and culture.

• A Lean laboratory and analytical rigor assess tradeoffs of additional resources in certain areas.

• Implementation phase in based on risk and reward.

Phase 5: Control

• Framework to monitor and control future ground time performance.

• Correct trends that indicate a sustained deviation from target levels.

• Successful implementation depends on a clear understanding communications requirements and the establishment of processes including performance tracking, issue identification and accountability.


Martin HarrisonLeader, Airlines PracticeICF International [email protected]

Bottom LineEven the smallest improvement in turnaround time can make

a substantial difference to the fleet’s utilization, to an airline’s

On-Time Performance (OTP), and their ability to connect

passengers efficiently. Using a Lean Six Sigma approach to

ground-time optimization, opportunities for improvement

can be identified, which can then lead to the establishment

of new turn around processes captured in a Precision Timing

System (PTS).


Returning aircraft off lease to lessors is not a new process, yet so many established operators often find it difficult to complete scheduled lease returns on time, in compliance with the lease agreement, and within budget, for the simple reason it is not core business for an airline.

In the previous articles of this four-part series, we discussed

industry trends, contract negotiation and application, and

how they affect a redelivery. In this final article, we will look at

the issues affecting the actual redelivery check and inspection.

Preparation A typical lease agreement has provisions for the lessor to

perform an initial redelivery inspection 6 months prior to the

expiry. The intention of this is to get all parties prepared for

an on time redelivery, yet so often this inspection is either

not performed or has a low priority on one or both sides.

As a lessee, the opportunity to go through the lessor’s view

of the aircraft and records should be welcomed and acted

upon. The findings of previous “mid-term” inspections must be

actioned and rectified and the lessee should appoint a senior

level person to oversee the redelivery programme.

Airlines are set up to fly passengers and earn revenue, not

return aircraft off lease. Once an aircraft is taken out of service,

the airline is often no longer interested in it and we have found

that given the focus is naturally the daily operation, there are

limited staff on hand to respond to the needs of a lessor and

an “out of service” aircraft.

PlanningAll too often many airline departments make assumptions

that the redelivery maintenance check is just a normal

“C” check and that their organisation is approved by the

aviation authority, so the aircraft and its records must be OK.

However, most lease agreements have requirements that

reach far beyond the basic regulatory compliance. Typically

a level of maintenance clearance such as 18 months, 6,000

hours and 4,000 cycles may be required, which means the

maintenance check needs to planned on a task by task basis,

not just sequential block checks, as bridging back to MPD

will undoubtedly also be needed. The latest version of the

MPD is likely to be definitive guide, but many airline planning

departments can only integrate revisions at periodic intervals,

Best Practice in Aircraft Lease-Returns

Part Four of Four


therefore creating a gap between the approved programme

and the obligations of the lease.

Engine clearance normally requires either a minimum time

remaining to next or time since last overhaul, but for an

on-condition engine—which is the majority of commercial

engines—the time remaining is subjective, so evidence

should be prepared to support any claim of time remaining.

Back to birth history is not a regulatory requirement by

definition, but it will be required to support life limited parts,

so unless attention is paid to the shop visit reports during

the term, this can often result in replacement of serviceable

undercarriage assemblies and all the time and associated

costs that go with it simply because the correct request was

not made at the time of overhaul.

Whilst many of the items listed above may seem to be

common sense to most technical staff, it is surprising to see

just how many sets of records when presented for return

fail to meet the most basic requirements for traceability,

primarily because the filing system does not support a per

major assembly process.

Aircraft ConditionStructural repairs and modifications continue to be a source

of delay, with many perfectly good repairs being removed

and reworked simply because the certification or evidence of

materials used is not compliant or not transferrable. Up to date

The common view amongst many lessees is the “the lessor wants a new cabin” but this is often a case of interpretation and misinformation.

The cabin and interior is often one of the hardest fought areas of a redelivery. Subjective clauses regarding return conditions can be costly.

The aircraft will be in the same working order and condition as at delivery; reasonable wear and tear from normal flight operations excepted.

and detailed damage and repair files should be maintained

at all times to a standard that will stand up to scrutiny, as it is

often the MRO that may have more detail on the repair than

the operator, but with document retention regulations for

MRO’s being less stringent than that of operators, it is much

harder to go back to an MRO—if they still exist—4 years after

a repair event than it is to get the data at the time.

Consider the examples below. In both cases it can be argued

that the seats pictured are acceptable for return as this is what

happens in operation, but it is clear that most lessors would

not accept seats in such condition, as the argument will be

had about what is acceptable and what is normal.

All of the seats will be ser-viceable, in good condition, secure, clean, free of cracks, tears, deformation, disco-louration and stains.

Whilst the above clause may seem more costly to the lessee,

as there is no room for movement, it actually reduces the

element of doubt and sets a clear standard about which there

will be less discussion. With cabin and seat parts having some

of the lower costs per item but longest lead time for orders,

it is worth investing in stock well in advance of a redelivery

programme.

A more defined version of the same clause is shown would be:


good working relationship is vital, as there will be difficult

conversations to be had at some point in the process. A

budget with contingency needs to be prepared and one

should expect to spend money to phase out aircraft.

Given the need for all of the above and the fact that

engine boroscope inspections, lessor inspections, next lessee

inspections (in many cases) and a flight test need to be

performed and closed out, it is also imperative that any

MRO involved in this process understands your needs.

Scheduling standard “C” check down time will not be enough

and there is nothing worse than having your aircraft pushed

out of a hangar to make way for the next input prior to your

inspections being completed.

The final point to note is that whilst compliance is a

requirement, negotiated deviations are always possible and

most lessors will enter into trading off deviations for other

assistance such as additional work-scope, modifications and

of course cash in lieu of certain conditions.

ICF International would be pleased to provide further insight,

information and services in relation to any of the areas that

have been covered over the four articles concerning lease

returns and lease management.

David Louzado PrincipalICF [email protected]

Cash CompensationMany lease agreements have specific cash compensation

clauses and formulae as part of the return conditions,

especially if maintenance reserves have not been collected

during the term, but even those with reserves can have

additional clauses for “true up” of the current balance at return

in order to compensate for any differences in prevailing costs.

Such clauses are often overlooked where the lessee assumes

payments are whole and can cost a significant amount of

unbudgeted compensation.

The primary compensation clause is where no reserves

have been paid and one party is made good in terms life

consumed compared to that at delivery, which is straight

forward to calculate and plan for, however, both parties

can often benefit from non-contractual return condition

compensation agreements.

For many lessors, taking an aircraft back which meets a

comprehensive set of return conditions is not always the

most economically beneficial or practical condition. Many

aircraft are parted out earlier than first anticipated or may

take longer to remarket and deliver on, or may be going

into a freighter conversion, in which case it is in both parties

interest to discuss the potential options available. Buy out

from a counterparty is not a panacea for performing all

return obligations, and must be negotiated and documented

to clearly redefine the obligations and expectations on

both sides. Paying cash is often looked upon as an exit from

a problem, but if it is for a maintenance condition it does

not remove the obligation for records and documents to

clearly reflect the current condition in accordance with the

provisions of the lease agreement.

SummaryThe most important aspect of successful redelivery

programmes is planning and preparation, not forgetting that

preparation for redelivery begins at the point of contract

negotiation. Investment in dedicated project managers

to oversee the preparation and the process of return far

outweighs the additional costs that may be incurred

by presenting non-compliant aircraft for redelivery.

Communication with your lessor and maintenance of a


Aviation Game Changer: New Technology Aircraft

The aviation industry is

poised for a period of

unprecedented techno-

logical change, providing

significant opportunities

and challenges for

airlines and suppliers alike.

E-enablement’s connec-

tivity solutions are able

to transmit data between

e-enabled aircraft and

outside sources. But, how

is the aviation industry responding to the far-reaching

implications of that connectivity?

Unprecedented Change

In this decade, the air transportation fleet will undergo rapid

technological change as airlines introduce six new aircraft

types with ramped up production. The rate of ramp-up

and fleet rollover is important because the introduction of

new technology aircraft provides airlines with the unique

opportunity to reconsider the traditional way in which they

previously managed their aircraft. A frequent theme heard

from aircraft operators is that the e-enabled 787 and A350

can, are, and will be managed differently. Forward-thinking

airlines are leveraging this opportunity to seek new and

innovative maintenance, repair, and overhaul (MRO) sourcing

strategies. For example, we now see airlines such as ANA,

Qantas, Singapore Airlines, British Airways, and JAL out-

sourcing their 787, A380, or A350 component maintenance

to companies like LH

Technik, SR Technics,

Air France Industries/

KLM E&M, and now

(another change

happening in the

MRO supply chain)

Airbus.

How E-Enablement Will Disrupt Business As Usual

A baseline definition of e-enablement:

“…the strategic connec-tion and integration of business processes, people, airplanes, information, as-sets, and knowledge into a single focused business system…”

(Boeing, 2006)

Commercial Air Transport Fleet Transformation

Over the next decade, the global fleet of new technology aircraft will grow by over 530% to nearly 19,000 aircraft.

Source: ICF International (excludes turboprops)


The “accelerator” effect of incoming technologies and the

resulting tsunami of available data and information that

airlines and OEMs will have available to them is unprec-

edented. While the 767 offered up to 10,000 aircraft

health management parameters, the 787 offers 100,000.

Combine this dramatic increase in per-aircraft data

generation with the 45 percent per annum growth rate of the

new technology fleet, and the MRO value chain will see a

1,100 percent increase in available data being generated. Put

bluntly, the majority of operators utilize antiquated MRO IT

systems that can no longer manage the data complexity. Nor

do they have the skills—or necessarily, the desire—to turn

these data into beneficial information.

New technology aircraft will inevitably challenge the

competitive landscape and balance of power in the after-

market. As the MRO supply chain continues to become

more OEM-centric, there will be a battle for access and

control of operational and maintenance data. Those who

have the capacity and capability (financially and technically)

to leverage “Big Data” will likely benefit the most. Smaller and

less sophisticated players will need to focus their energy and

resources on core competencies where they can win and/or

find new ways to access the opportunities available in this

more e-enabled aircraft support environment.

New Technology Creates Opportunities

The data generation potential of the new technology fleet is

not only limited to e-related technology impacting aircraft

operations and support. Other related new developments

include the cloud, Big Data analytics, Electronic Tech Log,

xml, and greater electronic data interchange/automation. The

impact to operators, suppliers, and investors will be profound.

First, these new technologies will drive greater operational

efficiency and facilitate improved schedule reliability and

passenger services. The interoperability of systems, Elec-

tronic Flight Bag, connectivity, and data analytics will impact

air traffic management, fuel management, and day-to-day

operations control (on the ground and in the air), providing

utilization, cost, and service benefits.

Second, e-enabled–related technologies in the MRO supply

chain will drive significant cost reduction. The integration

of technologies such as mobile maintenance devices, xml,

data analytics, and Aircraft Health Management prognostics

offers the opportunity to reduce MRO supply chain costs

by hundreds of millions of dollars. The day will come when

aircraft and maintenance records are not stored in rooms full

of paper, but rather in the cloud and accessible to those who

need them—the operators, MRO suppliers, aircraft owners/

lessors, and respective OEMs.


Third, new technology aircraft will provide numerous

opportunities to enhance the passenger experience. Airlines

and airports will undoubtedly seek to provide a seamless

experience from ticketing to arrival. Onboard entertain-

ment and cabin systems will be consistent with passengers’

experiences elsewhere. Passengers’ personal devices will

likely become the onboard media and communications

interface of choice. Airlines will no longer be required to

provide the individual seat hardware embedded with In-Flight

Entertainment (at least in coach class). Throughout a

flight, passengers will seek to shop, converse, and watch

personalized content with reliable, affordable Wi-Fi

connectivity. Suppliers will be challenged to keep up with

passenger expectations for constant engagement, faster and

more reliable connection speeds, and of course the latest and

greatest content.

All these opportunities will facilitate disruptive change in

aircraft management, provided supply chain participants

embrace, invest in, and manage the transition.

David StewartVice PresidentICF [email protected]

Jonathan BergerVice PresidentICF International [email protected]

Bottom Line: The Time to Act Is Now

The arrival of thousands of new technology aircraft over the

coming decade will disrupt business as usual for aviation

stakeholders and will drive a myriad of opportunities for new

value propositions and innovations. Companies across the

whole airline and aircraft supply chain are recognizing that

significant change is on the way. It is an uncertain world,

however, with airlines and suppliers alike in only the very

early stages of the learning curve for understanding the true

potential of these new technologies. There are many risks to

be managed. For example, will there be adequate standard-

ization to facilitate leveraging and integrating the various

technologies across aircraft and IT platforms?


ICF International Aviation Expertise

For more than 50 years, ICF International (formerly ICF SH&E) has been serving the air transportation industry. ICF provides trusted aviation and aerospace expertise to airlines, airports, governments, international agencies, manufacturers, and financial institutions.

ICF’s core aerospace capabilities include strategy and network planning, forecasting, operations, and logistics; revenue management; asset management and appraisals, supply chain and maintenance management, safety, and security and regulatory compliance; financial due diligence; and privatization, alliances, mergers, acquisitions, and alliances. For airports, ICF is a leader in air service development, demand forecasting, commercial planning, system and economic impact studies, sustainability, ground handling, and cargo operations. In addition to aviation, ICF is a leader in the energy, environment and transportation industries, public safety and defense, health, social programs, and consumer and financial business. This breadth of expertise further enhances the wealth of knowledge and experience available to its aviation clientele.

Committed to providing expert and impartial advice, ICF is both results and value driven. By participating directly in many emerging trends, ICF’s aviation consulting group is especially well equipped to assist its clients in adapting to a rapidly changing environment.

The firm’s staff of nearly 100 professionals dedicated to aviation is based in offices in New York, Boston, Ann Arbor, London, Beijing, Singapore, and Hong Kong. ICF draws from a network of associates worldwide.

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Documents

2016 EDITION 1 - ALTA€¦ · ICF International Industry Insights 2016 Edition 1 3 A Broad Team of Experts Supports the Lean DMAIC Lean Six Sigma to Reduce Aircraft Turnaround Time