FUELING up a Look at the Rising Cost of Fuel and Turboprops Make Strong Its Effect on the Industry

A MAGAZINE FOR AIRLINE EXECUTIVES 2007 Issue No. 1

T a k i n g y o u r a i r l i n e t o n e w h e i g h t s

A conversation with Wolfgang Prock-Schauer, the chief executive ofﬁcer of Jet Airways.

Special Section I N SID E FUELING UP A look at the rising cost of fuel and Turboprops make strong its effect on the industry. 6 comeback

1892.7 L 500 gl WestJet saves US$5 million

1514.16 L 400 gl 36 annually

1135.62 L 300 gl

757.08 L 200 gl GOL scores big in Latin 78 America

By Rakesh Narayanan and Sam Shukla | Ascend Contributors

After thoroughly

evaluating its

operations,Yemen’s

national carrier institutes

a turnaround plan to

boost profitability.

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s fuel prices began their upward climb “We are pleased with the results of The project started with an initial during the last few years, it led offi- our partnership with Sabre Airline Solutions,” assessment. During this phase, a commer- Acials at Yemenia (Yemen Airways) to said Abdulkalek Al-Kadi, chairman of Yemen cial, financial and operational evaluation of the take a thorough look at its entire operations. Airways. “Sabre Airline Solutions consul- airline was performed to identify major issues The spiraling cost of fuel was putting pres- tants worked side by side with our staff to and assess and evaluate the corresponding sure on the carrier’s financial position, creat- implement the changes they recommended, impact and potential for improvement. The ing an urgency to restructure the airline and and in the process, transferred knowledge initial assessment consisted of four steps: put it back on the path of profitability. to our staff. It has enabled us to improve Characteristic analysis — Specific charac- Given the airline’s need to improve its our business significantly and position us for teristics of Yemenia were gathered through financial performance, it sought to examine growth.” interviews and data. every aspect of its operations with the goal In addition, more than 300 people Comparative analysis — Characteristics of of turning around its business as soon as have been taught various disciplines in more Yemenia were compared with industry possible. The airline, which dates back to the than 30 training sessions. During the project, data, previous performance, budgets and early 1960s, serves more than 30 markets in consultants worked onsite with Yemenia standards to identify gaps, considering Africa, Asia, Europe and the Middle East with personnel in various departments on a daily regional and corporate environment. its fleet of nine aircraft. But with the difficul- basis rather than taking an “ivory tower,” or Normative analysis — Results of charac- ties facing the industry in the past few years, purely theoretical, approach that only pro- teristic and comparative analyses were the Yemen national carrier based in Sana’a duces reports. Also, more than 4,000 pages analyzed against a context of expected had begun facing challenges of its own. of custom-written material was provided to financial and operational impact. In September 2005, Yemenia began work- help the airline train new personnel on busi- Prescriptive analysis — All characteristics ing with consultants to conduct a detailed ness practices as well as act as a refresher and comparisons identified as requiring review of its business with the objective of course for existing personnel. change during the normative analysis were returning to profitability within a year. The turnaround program was a com- examined and specific “prescriptions” A special team comprising eight mem- prehensive and tactical, result-oriented were suggested for the changes that must bers from Yemenia was dedicated full time approach. Sabre Airline Solutions consultants occur to improve Yemenia’s performance. to work with a team of more than 10 con- used a specific methodology associated with A detailed turnaround project plan was sultants from the Sabre Airline Solutions® airline commercial assistance designed to built based on the conclusions of the initial consulting practice for one year to identify meet the unique needs of Yemenia. This assessment. opportunities for improvement in the airline’s exhaustive methodology helped identify the Certain easy-to-implement prescriptions commercial, operational and financial areas. specific needs of the airline and tailor the that could yield significant benefits within During that year, Yemenia personnel right solutions. The implementation approach the first 120 days were identified as “quick were trained on various aspects of the turn- constituted of six major steps: hits,” and the team started working on them around project as well as analysis techniques 1. Initial assessment, immediately after the assessment. This was so they could effectively solve the issues 2. Development of turnaround plan, followed by implementing remaining prescrip- facing the airline. Yemenia now utilizes these 3. Quick hits, tions with changes in the airline’s procedures resources in senior management roles to 4. Procedures and practices, and practices. Once the implementations head critical functions. 5. Training and consolidation, were underway, training and consolidation 6. Tracking and enhancing. began. During training, key concepts, specific skills, procedures and practices were taught Photo by Ralf Drews/Airliners.net Ralf by Photo to Yemenia personnel through formal class- room training and active mentoring. During consolidation, key performance indicators were examined closely to ensure maximum benefits. Finally, tracking and enhancing measured the progress of the changes and fine tuned the business to further enhance benefits. The turnaround program at Yemenia resulted in positive tangible results that began aggressively ramping up 90 days after the start of the project. The analysis revealed specific changes that could be implemented in the commercial, operational and financial areas.

Commercial The turnaround team worked on net- work, schedule, revenue management, pricing, sales and distribution in the commercial area at Yemenia. Each area was thoroughly evaluated and procedures put in place to The high cost of oil fueled the need for Yemenia to conduct a thorough evaluation of its improve the quantitative and qualitative per- entire operations to determine how it could get turned around and once again become formance of the carrier. profitable. Using the Sabre® AirFlite™ Planning and Scheduling Suite to optimize the winter sched-

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ule, the airline closed three major money-los- ing stations, despite extensive internal and external pressure. General Turnaround Sequence The turnaround team provided sci- entific training to all sales personnel and worked on target setting, incentive plans, sales visits and agency commission plans 150-210 days Period 90-150 days: The results of consolidation, to maximize sales. Yemenia’s sales force become very measurable and refinement and currently uses a number of data and tools to ramp up quickly. Also the ensuring burn in. time of greatest turmoil as monitor as well as proactively and reactively resistance to change sets-in. address market needs. In the area of distribution, connectiv- ity levels to global distribution systems results

were increased to assist in booking and ticketing. Subscriptions to bank settlement 0-90 days Period plans and providing authorization resulted of construction when approaches in thousands of new travel agencies selling are decided and tickets for Yemenia. Today, the carrier sells tried, people begin Measurable to work together. its products through a variety of channels including the Internet. Fare-class realign- ment, revenue management practices and a new pricing structure enabled Yemenia to increase revenue per available seat kilome- 0 30 60 90 120 150 180 210 ter. Readjusting fuel surcharges and excess baggage policies made significant contribu- Elapsed time (days) tions to revenue. Moving from manual fare filling to ATPCO reduced errors and ensured The year-long turnaround process has several phases from initial planning consistent fares in the market regardless of through implementation and execution to consolidation and refinement. channel. New waitlist and passives policies reduced GDS costs. In addition, control of booking churn/abuse while improving the quality of booking is also lowering GDS Last year, Yemenia received International The turnaround team worked on profit- expenses. Communications costs have been Air Transport Association operational safety ability analysis, revenue accounting, revenue reduced by introducing better procedures audit certification. realization, budget management, cash man- and control measures. With the implemen- agement and key performance indicators. tation of a number of recommendations Financial Industry best practices and management and positive cultural changes, the airline is expected to post a revenue increase in excess of 20 percent. Turnaround Process

Operational The turnaround team worked in airport management; crew management; fuel Initial cost control; maintenance, repair and over- assessment haul; and operations control. Each area was thoroughly evaluated and procedures put in place to maximize benefits. Start “Quick hits” The team worked on restructuring the Full plan of airline’s operations control center. Optimized turnaround flight plan techniques were employed to developed Procedures reduce fuel consumption and flight time. and Tracking & practices OCC personnel were trained in industry best knowledge practices. The carrier’s on-time performance transfer improved due to better coordination between Tracking & various entities at the airport. Another End enhancing major breakthrough was fuel conservation. Utilizing optimized flight plans, significantly Consolidation reducing excess fuel uplift, judiciously using of auxiliary power units and better flight practices helped the airline improve fuel efficiency. Existing tools at Yemenia were used to automate and improve efficiency of crew planning and rostering. The team The turnaround project at Yemenia involved several key stages that helped the also assisted the Sana’a Airport authority to airline improve its bottom line significantly. make modifications to improve space usage.

48 ascend profile Photo by Vatche Mitilian/Airliners.net Vatche by Photo Photo by xxx/ Airliners.net xxx/ by Photo

Operating a fleet of nine aircraft — two Airbus 330-200s, four Airbus 310-300s and three Boeing 737-800s — Yemenia Airways plans to expand its fleet dramatically during the next few years to satisfy customer demand.

reports enable the carrier to monitor and schedules to maximize benefits for its manager. “In cooperation with the Sabre control its performance like never before. members. Yemenia is an active participant Airline Solutions team, we have achieved For the first time, Yemenia now in Arabesk and has a number of codeshare big improvement in our work process. The has monthly profit and loss reports to agreements with member airlines. team’s broad knowledge of the airline busi- track its business, including management Today, Yemenia has a new organiza- ness and extensive experience in such reports and tracking KPIs. This was a tion structure in line with industry best projects have opened for us new horizons monumental task considering that new practices and carriers’ individual needs. of understanding and practicing this busi- cost centers had to be created to increase The new organization structure brings in ness. Yemenia’s turnaround team and control and accountability. Consolidation better business practices and clear key per- Yemenia staff in various departments have of bank accounts assisted in better cash formance indicators that assist in tapping gained a lot of knowledge and experience management and use of credit facilities. the best individuals in the company. working with the Sabre Airline Solutions Renegotiation of credit terms resulted in Toward the end of the turnaround consulting team. We believe that on con- lower working capital requirement and project, Yemenia started the implementa- clusion of this project, Yemenia will be industry best practices were implemented tion of Sabre® AirMax® Revenue Manager to more successful and more competitive in for better account receivable manage- automate a number of processes, enhance our market.” a ment. For the first time, the airline will revenue and consolidate all the learning in have a monthly budget; a major step the areas of revenue management. toward achieving a target-oriented culture. The turnaround program has resulted In 2006, Yemenia was able to recover in significant improvement in the airline’s excess taxes paid to government authori- bottom line while aligning business practic- ties around the world. This was possible es to position for growth. Further improve- because of diligent and extensive research ment in financial strength, product quality into past accounts. On the recommenda- and image is expected as the carrier moves tion of the turnaround team, Yemenia also ahead with the strategic plan. has outsourced revenue recovery, which is “One of the most important projects Rakesh Narayanan is a partner and expected to yield substantial benefits. that Yemenia undertook was the turn- Sam Shukla is senior engagement Apart from the turnaround project, around project, which was signed with the manager for the Sabre Airline Solutions Arabesk is contributing to Yemenia’s bot- Sabre Airline Solutions consulting practice consulting practice. They can be tom line. Arabesk is the alliance of seven in August 2005,” said Abdulla AlKibsy, contacted at rakesh.narayanan@sabre. Middle Eastern airlines that coordinate chairman advisor and turnaround project com and [email protected].

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