Airports Manpower Planning Case Study and Best Practice
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Transcript of Airports Manpower Planning Case Study and Best Practice
AGIFORS
Airports Manpower Planning Case study and Best Practice
Sadiq Gillani, Vice President
May 2009
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009
Seabury Aviation & Aerospace
With over 175 professionals, Seabury is the largest global advisory practice dedicated to the aviation and aerospace industries
Founded in 1995, Seabury Group provides Management Consulting, Investment Banking and Corporate Reorganization advisory services to the aviation and aerospace industries
Seabury professionals have an unparalleled range of expertise in:
- Strategy consulting; cost reduction; contract negotiations & outsourcing; organizational effectiveness; process improvement; supply chain optimization; M&A advisory; business planning; network and alliance optimization; fleet selection, acquisition and financing; and, investment and recapitalization
Recent or current clients include Airbus, Air Canada, Aveos, Etihad, jetBlue, Frontier, Goodrich, Northwest, Onex, Qantas, Malev, South African Airways, Safran, ST Aerospace, US Airways and Virgin Atlantic
The majority of our recent consulting engagements relate to operational performance The majority of our recent consulting engagements relate to operational performance improvement, business planning and / or corporate-wide restructuring- Comprehensive operational benchmarking across all key functions and cost reduction implementation- MRO productivity and supply chain optimization- Manpower/labor cost optimization across MRO, Flight Ops, Airports, Catering and Call Centers- Business plan development, review and revision for all types of airlines and investors, in all geographies- Corporate-wide restructuring / transformation of both distressed and successful carriers
Seabury’s proprietary suite of performance measurement and analysis, network, fleet and schedule planning tools are considered the best globally for in depth analysis, multiple
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009 2
p g g y p y , pscenario modeling and supporting rapid decision making
Seabury Airports capabilities
Seabury has a wide range of Airports capabilities
Build comprehensive transformation plan to improve relative cost positionDevelop outsourcing strategy for functions within home marketDevelop labor or union negotiations
Reduce labor cost through review of labor standards, leave planning process, absenteeism and rosteringcapabilities
Manpower
Strategic advisory
Ancillary
Develop labor or union negotiations strategy
Identify cost savings or process improvements within:
capabilitiesImprove rostering through optimizing labor mix, cross utilization, penalty hour staffing, shift lengths and shift patterns
Airports
Manpower planning
Ancillary services
Review airport flows, staffing levels, processes,
within:GSE: equipment levels & maintenanceCabin cleaning: cleaning spec, rostering & outsourcing
Operational improve-
ment
M&A / due diligence
g , p ,productivity and efficiencySupport implementation of automation and realisation of benefitsImprove mid-handled bags and bag revenue collection
Lounges: footprint, expenses & access
Conduct due diligence
Client profitability and pricing
Evaluate client profitability to identify unprofitable clients
and bag revenue collectiong
to assess value from acquiring competitor or merging with partnerEvaluate disposal of in-house Airports
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009 3
Determine cost competitiveness of in-house Airports business
Case study: Airports Turnaround
Seabury recently conducted a major transformation of a large network i ’ Ai t di i i
Situation ResultsMajor network carrier with a large ground operations business also serving third party
1. Identified $50M of profit improvement initiatives across the division
carrier’s Airports division
operations business, also serving third party clients (5500 employees; $0.3B labor cost) Client faced a 25% pure labor rate disadvantage compared to other ground handlers as well as gaps in productivity
initiatives across the division
2. Implemented complete transformation of manpower planning at 6 major ports
Identified a further 7% of labor cost Airline was about to go through labor negotiationsSeabury was engaged to develop a plan to reduce labor cost and improve market competitiveness
savings from a port-by-port reviewImproved coverage of work to enhance serviceDeveloped and conducted skills transfer of a 4 person central competitiveness transfer of a 4 person central manpower planning teamImproved leave planning process
3. Developed a labor transformation strategy to outsource non core
ApproachConducted an in-depth 12 month review to identify, validate and plan initiatives to
d l b t 4 j h b strategy to outsource non-core functions and achieve market labor rates for all new hires
4. Demonstrated that third party Airports
reduce labor cost across 4 major hubs, as well as outstationsReviewed service levels, headcount levels, rostering, outsourcing and labor strategyAssessed financial benefits, operational
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009
p y pcontracts were priced at 15% below the parent airline and identified unprofitable clients to exit
, pimpact and IR sensitivity of potential changesDeveloped implementation pan
4
Levers to reduce labor cost
Seabury used a combination of strategies to improve the labor cost position
Labor cost control
Labor productivityLabor rate
Labor negotiation Labor sourcing
Process and service level
design
Operations management
Manpower planning
Wage rate Outsourcing Automation Labor d d
Day of ops l i
Benefits
Work rules
Labor caps
strategy
B-scale
Part-time labor
Temps
Process re-engineering
Cross utilization
standards
Demand-capacity matching
planning
Risk / disruption management
AbsenteeismLocal roster agreements
TempsService level specification
Shift & roster design
Leave planning (sick, training, vacation)
Overtime usage
Performance management
5
vacation)
Client situation
The client faced up to a 25% pure labor rate disadvantage vs. other ground handlers (excluding productivity or seniority impact)
Average ramp employee payslip ($ per hour)
All
4036.1
34.7
30 8
AllowancesShift penaltiesOvertimeBenefitsBase pay
3030.8
27.825.3
Base pay
10
20
0Airline X Vendor
AVendor
BVendor
CVendor
D
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009
A B C D
6
Client situation
The parent airline was paying a 15% premium relative to other airlines using the carrier’s ground handling services – subsidizing competitors
Cost per transit ($)
City 1 City 2 City 3City 1 City 2 City 3
6000
7000
5360
6245
5579
3000
4000
5000
2682
368835403269
44504557
3165
3818
476521%
23%
28%
22%
6%
7%
1000
2000
3000 2682 22%
B747 B767 B747 B767 B747 B767
0Airline ZClientAirline XClientAirline YClientAirline ZClientAirline YClientAirline XClient
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009 7
Ramp Check-in Cleaning Load control Value add
Labor transformation plan
We developed a comprehensive labor transformation strategy to improve the titi f th b i
Consolidate to a core set of services and ports where it can use scale and service advantage to be parent airline’s vendor of choice:
competitiveness of the business
advantage to be parent airline s vendor of choice:- Deliver quality and scale of service which cannot be replicated by alternative vendors- Deliver ongoing cost reductions to the airline, with the long-term goal of market
competitiveness
Review and exit functions where it is unlikely to become competitive and where Review and exit functions where it is unlikely to become competitive and where exit is feasible
Implement a market rate for new hires as the driver of true long-term cost competitiveness for retained functionsp
Deliver airlines’ desired customer experience and operational performance, particularly through above-wing process redesign and infrastructure investment
Address manpower planning and productivity as the primary drivers of short- to Address manpower planning and productivity as the primary drivers of short to medium-term improvements in service levels and cost
Build a team and organisation which has the ability to deliver real and sustainable business improvement
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009 8
Labor transformation plan (1 of 2)
Seabury worked hand-in-hand with the client to develop and implement a
1. Consolidate to core services and ports
2. Exit functions where subscale and feasible
3. Enhance manpower productivity
comprehensive rationalization and internal improvement plan
Examined each area of the business (by port, function, parent airline vs. 3rd party) to determine gap to full potential,
l d f
Based on strategic plan developed, drew up detailed implementation plans for exit of selected non-core functions
Conducted port-by-port manpower planning reviews:- Reviewed labor standards to
ensure accurate assessment including assessments of:- Baseline productivity
- Labor rates vs. competitors
Accounting for financial,
- Cabin cleaning
- Second tier port ramp handling
- All third tier port services
Activities included:
of demand
- Optimized labor mix
- Revised headcount levels to better cover demand
D l d t t t it g
industrial, political and operational factors, determined optimal strategy for each area- Including which areas to
Activities included:- Analytical and strategic support
for full RFP process in functions / ports to be exited
- Financial evaluations of one time costs (redundancy and
- Developed strategy to exit surplus employees without redundancies
- Improved labor management processes (e.g. annual leave, sick leave recruitment Including which areas to
retain in-house vs. outsource, where to change labor mix, which third-party contracts to retain vs. exit
time costs (redundancy and setup of new operator) and run-rate savings associated with each exit
- Optimal timing and sequencing, based on industrial and political
sick leave, recruitment, training)
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009
pfactors
9
Labor transformation plan (2 of 2)
Seabury worked hand-in-hand with the client to develop and implement a
C d d b h k
4. Implement market labor rate for new hires
5. Improve operational performance
6. Build team and organization
comprehensive rationalization and internal improvement plan
Conducted benchmarking of rates / grades of client airline’s employees against those of their competitors
Worked as part of a joint S b / li t t t
Client had recruiting freeze in place for 3 years- Created higher cost position
through reliance on overtime
Caused deterioration in
Created central manpower planning team to conduct more analytical and standardized process across all ports
Seabury / client team to determine all potential options for introduction of market rates for new employeesRegrade functions
- Caused deterioration in service levels
Developed plan to recruit 280 part-time staff
Client had invested $50M
Developed plan to improve quality of management team
Setup project office to ll- Regrade functions
- New labor vehicle (new fleets or JV)
- Wage concessions
- B Scale for new hires
Client had invested $50M in a new ‘silver-bullet’ rostering system, but had not successfully implemented itRequired skilling up of central
manage all initiatives centrally
Substantially bolstered communications program to ensure that employees
- Wage freeze
Evaluated each option against a matrix of legal, industrial and financial metrics
- Required skilling up of central manpower planning team
- Ensured that work demand and staffing are systematically matched so as to enhance operational as
to ensure that employees and stakeholders were kept well informed throughout change process
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009
Developed labor rate strategy
to enhance operational as well as financial performance
10
Manpower optimization
Optimizing manpower productivity requires a comprehensive review across 4 main areas
Manpower optimization
1. Demand forecasting
4. Leave management3. Rostering2. Labor supply
Schedule
Passenger behavior
Full-time
Part-time
Shift patterns
Relief lines
Vacation
Training
Process design
Service levels Temporary labor
Overtime
Risk management Absenteeism
Systems Performance management
Standards B-scale
Third party work
Capabilities
management
11
Third party work
1. Demand forecasting
Demand is generated from application of standards to the current flight
20
Ramp Demand
Seasonal flight scheduleKey factors:- Disruption
schedule in dynamic areas and compared to roster
10
15
Heads Demand
Current
Proposed
p- Load factors- Destinations- Passenger arrival profile
Ti f
0
5
- Time of day/week
5:00 8:00 11:00 14:00 17:00 20:00 23:00
Labor standards RosterKey factors:- Service levels- Airport layout
Key factors:- Union agreementsAirport layout
- Accuracy of standards- Consistency of standards
agreements- Roster sociability- Fatigue
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2. Labor supply: part-time
There are 3 main sources of permanent labor and also have 5 other levers to
There are three main types of permanent labor available
manage the operation
Ramp example
Full-time, Part-time, Temporary
In addition, managers have other levers to manage the operation without adding permanent labor, which
60
70
without adding permanent labor, which often result in higher cost:
Increasing overtime
Bringing in contractors, for which no approval is required
40
50
ads
approval is required
Working part-time labor as full-time, providing sub-optimal usage of that group
Not fully covering demand
20
30
Hea
Not fully covering demand, deteriorating operational performance
Denying leave requests, contributing to a build up in leave backlog
In most airport divisions there is a
0
10
5:00 10:00 15:00 20:00
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In most airport divisions there is a shortage of labor, resulting in higher cost through using these levers
8 hr shift better covered by PT
Demand8 hr FT shift
2. Labor supply: overtime
Overtime is often inappropriately used to cover sick leave rather than
40Employees on OT (heads) Other
5%
operational disruptions
30
40 5%
Sick+leave49% Uncovered work
27%
Operational19%
20
30
10Oth
4:00 8:00 12:00 4:00 8:000 Operational
Uncovered workSick+leaveOther
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009
4:00 8:00 12:00 4:00 8:00
3. Rostering tools
Seabury’s experience with rostering tools is that they are powerful planning and operations management systems, but IT systems do not intrinsically produce savings
Benefits LimitationsBenefits Limitations
• Increased transparency and granularity of cost drivers and
ti l f
• Not an automated solution –Rosters manually designed
d t t i hi hl operational performance
• Ability to validate and cost rosters with a given set of parameters
and strategies highly dependent on user controlled parameters (incl. work standards, shift structures)
p
• Real time workforce management to adjust for operational changes
• Significant benefits require a change in planning philosophy and procedures (e.g. relief coverage, overtime usage, service level tolerance)• Improved integration with
other management information systems
service level tolerance)
• Talented planners and operational managers, not the system, are necessary to t l t d t i t i
15
translate data into savings
3. Rostering tools
Maximizing manpower planning benefits from new roster tools requires a complete reorganization
Prepare Leverage toolImplement tool
• Revise standards and performance levels across ports to ensure consistency and best
ti
• Provide in-depth training for resource planners and allocators and manpower planning and management
• Conduct a rigorous port-by-port re-rostering to achieve a step change in manpower optimization
practice
• Conduct time-and-motion studies to determine standards for check-in, gate, baggage cabin and ramp
• Provide support during the initial period to make sure planners are able to use system effectively
• Use the system to pro-actively monitor and manage performance of workforce and planners
baggage, cabin and ramp activities
• Review passenger profiles and behavior (e.g likelihood of checking baggage)
• Define and implement leave planning best practice across all ports
E t l t l f
• Keep standards up-to-date and consistent by regular revisions (e.g. for process, technology or passenger
• Review service levels (e.g. check-in wait times)
• Revise manpower requirement for static
• Ensure central control of new procedures and standards
• Define responsibilitiesh l d
behavior changes)
• Hold regular training and best practice workshops for system users
16
requirement for static work areas (e.g. ticketing, baggage room, ticketing)
within planning process and develop central manpower planning team
y
4. Leave management: absenteeism
Absenteeism is often highly predictable and can be actively reduced
Absence by time of day (Wash)
Port B examplePort A example
One day absences (Transport)
294300
Sick leave 25
30%
Absence by time of day (Wash)
Sick leave is highest on
non-penalty day time shifts
One day absences (Transport)
156
188200
250Sick leave
is lowest on penalty
weekends20
25
58
98
156139141
100
150
10
15
ThFri
58
0
50
Sat SunMon Tue Wed Thu Fri2:00 6:00 10:00 14:00 18:00 22:000
5
MonTueWedThu
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Several initiatives can be introduced to reduce absenteeism
4. Leave management: absenteeism
Initiative Details
Issue clear communication of what is
th i d
Ensure everyone understands the leave policy and that it will be strictly enforced going forward: reason, notice & proof
t b t blauthorised vs. unauthorised
must be acceptable
Launch ‘first contact’ scheme
Provide nurse as point of contact for people that are sickImprove tracking and recording of sick by individual
fCentral leadership & tracking of improvement within each dept.
Port Manager to take ownership for sick leave reductionSick leave in each department by supervisor to be tracked
Make supervisors accountable for reducing
Obtain supervisor’s signature after incident, providing employee accountability with face to face contactaccountable for reducing
sick leaveemployee accountability with face to face contact
Send out letters to those with high Bradford scores or low sick leave
Send out regularly letters notifying that management is concerned with recent absences or grateful for their strong attendance
Reduce overtime through increased relief staffing
There is clear correlation between working overtime and sick leave
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Detailed staff communication is needed to inform employees of new enforcement and program should be driven from the Port Manager
Leave lines should be inversely proportional to expected passenger traffic
4. Leave management: vacation
y p p p p gfactor throughout the year
Leave lines Load factor
50 100%
Load factor 2007
30
40
60
80
FT leave linesPT leave lines
20 40
3/3/2008 6/2/2008 9/1/2008 12/1/20080
10
0
20
3/3/2008 6/2/2008 9/1/2008 12/1/2008
Manpower optimization: results
Savings from manpower planning optimization came from across all of these areas and amounted to an overall 10% reduction in labor cost
10.3%
0.7%
Sources of identified savings in a recent project (as % of baseline cost)
0.8%
1.0%
1.0%
1.5%
1.3%
2 1%
1.9%
2.1%
Headcount levels
Overtime Shift lengths
Shift penalties
Policies & procedures
Part-time/full-time mix
Process redesign
Total Savings
Re-grading
Confidential – not for third party distribution © Seabury Aviation & Aerospace 2009 20
Questions?
Sadiq Gillani
d C lVice President, Consulting
Seabury Aviation & Aerospace
1350 Avenue of the Americas, 25th Floor
New York, NY 10019
21
Web: www.seaburygroup.com