How much could data analytics really reduce airline costs, especially MRO costs? Diogenis Papiomytis, global director of Frost & Sullivan, summarized the results of his company’s recent study of this question.
The world’s carriers currently have about $74 billion in annual inefficiencies spread across technical operations, flight operations and network operations, the F&S exec estimates. Network operations account for the largest share of excess spending or revenue losses, about $36 billion. Technical operations, or MRO, comes second with about $26 billion in waste. Flight operations, including excess fuel use, accounts for the other $12 billion in unnecessary costs.
These are fat targets of better data analytics, but not all waste or unnecessary spending can be removed by data analysis. Still, much more can be done. Airlines now generate about 13 thousand petabytes of data, yet only about 1.5% of this data is currently recorded and analyzed, Papiomytis estimates. Increasing the share of data generated that is both captured and analyzed could reap major gains, he insists.
Focusing on MRO, F&S identified three basic elements of waste; unplanned maintenance of $20 billion a year, obsolete or damaged inventories of $4.8 billion and time wasted managing paper documents, costing $890 million a year. The unplanned MRO is 27% of all MRO spending, and paper record keeping adds 10.1 million man-hours of effort each year.
Using just analytic tools that exist today, F&S estimates that about half, or $10.3 billion, in unplanned maintenance costs could be avoided. This includes reducing unscheduled component repairs that today cost $6.2 billion, cutting no-fault found rates, lowering unplanned line work that costs $5.3 billion today and boosting MRO productivity. Major reductions in unplanned engine removals are also possible. Taken together, these reductions would cut unplanned maintenance from $20 to $10 billion, or from 27% to 14% of MRO costs.
The other two categories of MRO waste offer slimmer but still real targets. F&S estimate that $800 million could be chopped off the cost of holding obsolete or damaged inventories, and that $400 million could be saved by digitizing paper records.
Even these lesser gains offer important benefits. About 14,000 airline aircraft are still not covered by digital records, Papiomytis says. He puts the cost of paper management at $31,000 per aircraft per year, and says that an extra half-million dollars is spent at lease return for those aircraft still on paper records. These are hardly trivial costs from the point of view of the lessors or lessees that must bear them
How realistic are the F&S estimates? Papiomytis says the study was based on extensive research using aviation data, case studies of analytic efforts and interviews with airline execs. And Milesh Gogad, chief marketing officer of GE Aviation’s Digital Group, supported at least the general magnitudes of possible gains by noting that GE work with Emirates had enabled a 56% reduction in unplanned engine removals.