A structural change in approach is required to airline schedule planning supported by new AI tools.
The airline industry has long been known for low-profit margins. A small number of airlines have succeeded in delivering sustainable levels of profitability through disciplined and continued focus on costs and by continuously innovating and seeking new efficiencies.
The casualty rate has been high as the industry has faced numerous crises of many varieties over the years but the challenge delivered by the Covid pandemic is unlike any other experienced and has brought the global airline industry to its knees. Survival is the name of the game. Even the strongest players have been haemorrhaging cash and record losses have been recorded. Cash conservation has been preeminent, unnecessary expenses and investments have been curtailed. Yet at the same time, as flying has recovered in some markets, airlines have found themselves having to react more quickly and flexibly than ever to the planning and optimisation of their schedules.
As a former network planner, I understand the day to day complexity of airline scheduling. External market and operational influences combine with internal constraints and trade-offs to make the job ordinarily demanding. I’ve lived through a number of crises but the pandemic, like nothing before, is a catalyst to change on a scale not witnessed before.
Numerous government restrictions and quarantines have added complications, creating massive uncertainty for travellers and a lack of confidence in booking. Historical data used to predict patterns of demand pre-pandemic has become irrelevant and airlines have had to make increasingly intricate and frequent changes to capacity and timetables on a weekly, or even daily basis and to do so with much less information.
Modifying aircraft and crew deployment has to be accomplished with more agility and flexibility whilst still protecting the bottom line, keeping a clear focus on reliability and punctuality and respecting slots at constrained airports.
Many airlines certainly talk about having become more agile but undertaking this level of change is difficult even without a pandemic, creating enormous pressures on the operational and commercial management of the flying programme.
Reliance on human manual intervention to perform this critical work is costly both in speed and in achieving optimum commercial results. Increasingly archaic software systems are available to facilitate the process but new AI (artificial intelligence) now offers step-change improvements in commercial schedule optimisation, productivity and efficiency gains, whilst also delivering improved operational reliability. Ultimately these feed through to cost reductions and higher profitability.
Time to rethink the process
If you believe that tried and tested methods can continue to be depended on and that now is not the time to invest in new systems and processes, then think again.
The pandemic has wiped out much conventional wisdom, the airline customer world is changing. We are witnessing a growing importance of leisure and VFR (visiting friends and relations) traffic, much more driven by price and requiring increasingly dynamic schedule and capacity adjustments.
For airlines that have relied on high margin business traffic, this revenue source can be expected to be structurally reduced or significantly subdued for some years ahead. Responding to leisure and VFR demand both rapidly and effectively will be essential for all airline business models.
Structurally changed approach to network and schedule planning
It is not only LCC’s (low-cost carriers) or point to point airlines who are seizing the opportunity. Network airlines too, for whom short-haul networks were traditionally focussed primarily on providing feed, are increasingly developing point to point leisure routes. This trend predates the pandemic but had been accelerated by it.
As long-haul capacity remains subdued and larger aircraft (such as Boeing 747’s and Airbus A380’s) are replaced by smaller aircraft (such as Airbus A350’s, Boeing 787’s and now narrow bodies), less feed will be required. This will dictate a closer focus on short-haul point to point routes as a means to improve productivity and profitability whilst respecting slots at constrained airports.
Every sector added is another opportunity for incremental passenger and increasingly important ancillary revenues, it’s equally critical to driving down unit seat costs from increased productivity. This is the way forward but it is much more demanding in terms of frequency of schedule and capacity updates.
No airline can afford to ignore such opportunities and the requirement for agility, efficiency and cost focus which they dictate. There is a critical imperative for open-mindedness and a willingness to look at doing things differently.
Optifly a proven concept for airlines
Optifly, new to the airline industry, has an established track record of schedule optimisation in other industries including health, rail and education.
It has, however, proved its concept and value for the airline business with industry leader Ryanair. The airline has consistently delivered record profits and margins over many years. While it has not been spared by the pandemic’s impact, it sees the crisis as an opportunity to invest in accelerated growth and has recently upgraded its forecast to exceed 200 million passengers per annum by 2026 with a fleet of more than 600 aircraft. To achieve this, Ryanair takes a disciplined approach to cost reduction and improved efficiency to boost profitability. It sees its use of Optifly as an integral part of the process.
Ryanair currently has a fleet of 450 aircraft, approaching 100 bases and a significant slot portfolio. It faces all the challenges of tackling daily operational issues, reacting quickly to the crisis whilst being able to respond rapidly to opportunities.
It employed Optifly to initially manage scheduling of its Italian aircraft fleet for Summer ’22 with 91 aircraft (20% of the total fleet) and has been highly impressed by the results achieved. The teams are currently finalising planning for the development and deployment of the full Winter ’22-23 schedule across Ryanair’s entire network. Ryanair has been able to make more money from its schedule, delivering substantially more flight sectors per week from better productivity with no extra aircraft required. The system allows Ryanair to build a new schedule in a matter of minutes and while commercial sensitivity prohibits sharing full details of their productivity gains, in Proof of Value work being completed by Optifly with a number of other airlines, a 5-7% increase in sector count is being seen on a consistent basis.
Breaking down silos
A frequent challenge faced by airlines in trying to improve performance is a siloed approach. The commercial team pushes for the maximum profit-producing schedule, the planning and logistics teams push to maximise punctuality and operational reliability. There can be mistrust between functions. Optifly has demonstrated an ability to break silos, by delivering optimisation that produces not only commercial improvements but also a more recoverable robust schedule, highly important in terms of customer satisfaction and given EU consumer legislation to which Ryanair is exposed, requiring significant financial compensation for delayed or cancelled flights. In Ryanair buy-in has been achieved from all stakeholders in the schedule planning and delivery process and barriers to cooperation reduced.
In other words, a commercial and operational win-win has been achieved. The Optifly Italian schedule will run for Summer 2022.
Artificial intelligence isn’t just a buzzword, it’s live today. If you want to see it in action, just go to the Ryanair website and book a flight to or from Italy, the schedule that is on sale today was 100% created by an Optifly AI algorithm.
Seeing is believing
The Time to Value (TTV), simply the proof that it actually delivers and the ROI on the Optifly product is truly remarkable. It’s a standalone application that does not require any integration. The concept has been proven with Ryanair and the team now offer Proof of Value to potential airline customers. This enables each airline to see, first hand, the potential value of the system over any other scheduling product on the market. Irrespective of the measurement criterion which an airline may select, whether increasing sector count, building schedules in minutes, or creating a more robust and recoverable schedule, Optifly will deliver a Proof of Value against that metric. This means that airlines will know and understand the value of the product from the outset, allowing them to make an informed decision on whether they want to purchase.
Having seen demos of what it can deliver, I would have been delighted to have such a tool available! Being easy and intuitive to use is combined with the ability to learn how to use it in a matter of hours, all of which translates in being able to realise value sooner.
A Standalone System
The Covid pandemic, more than anything else I have witnessed in my near 40 years in the industry, is a catalyst for a permanent shift in the requirement for airlines to respond effectively to continuous and unpredictable changes in market conditions and demand patterns. Optifly makes a dramatic contribution to the ability to do this by:
– Allowing the building of schedules in minutes instead of weeks or months
– Permitting experiments with moving aircraft between routes or bases to capitalise on shifting demand based on travel restrictions
– Maximising sectors so fixed costs can be spread more broadly
Optifly is designed to replace other scheduling tools, it is not simply a “bolt-on”.
Is Optifly for your airline?
At this challenging time the instinctive response may be to say:
– Our schedule already maximises utilisation and to push further would damage operational integrity and the ability to recover from delays and disruption
– We already have the best systems and processes available
– We have cut our capital investments currently
– We are not a low-cost airline (LCC)
– We have to meet different customer needs
– We have to manage a complex slot portfolio
The reality is that Ryanair faces all of the above challenges on a daily basis. It maintains a zealous focus on costs, the company DNA is not to incur any unnecessary expenditure but it invests where it sees a clear benefit in doing so. Optifly is seen as an essential element underpinning its recovery and growth strategy, contributing clearly to increased revenues and profits whilst delivering a more robust operation in a post-pandemic world.
The world is changing fast. Optifly can be a key partner in achieving growth without the requirement for additional aircraft and crews. For example, an airline with a fleet of 20 aircraft, using Optifly could produce an optimised schedule equivalent to having 21 aircraft.
If you want to know more, you can contact me directly or reach out to the Optifly team through their website or LinkedIn.