Smart Avi­a­tion Op­er­a­tors Fo­cus on the Fun­da­men­tals to Im­prove Their Busi­nesses

Thai-American Business (T-AB) Magazine - - Contents - Writ­ten by: Ron­ald Brick­erd and Al­bert Valen­tine

The his­tory of avi­a­tion in Thai­land be­gan in Jan­uary of 1911 at the site of what is now the Royal Bangkok Sports Club. From then un­til 2015, avi­a­tion in Thai­land had fol­lowed a fairly steady tra­jec­tory much in line with the global avi­a­tion in­dus­try. How­ever, in June of 2015, the In­ter­na­tional Civil Avi­a­tion Or­ga­ni­za­tion ( ICAO) is­sued a red flag against the Thai avi­a­tion authorities, thereby launch­ing Thai­land into one of the most chal­leng­ing times in the his­tory of Thai avi­a­tion.

The re­sponse of the avi­a­tion op­er­a­tors in Thai­land has fallen into three cat­e­gories: de­niers, pes­simists, and the strate­gists, each with their own re­sponse style. The de­niers are ig­nor­ing the sit­u­a­tion, sim­ply blam­ing the reg­u­la­tory authorities and at­tempt­ing to con­duct busi­ness as usual hop­ing that things quickly re­turn to nor­mal. The pes­simists are hun­ker­ing down, try­ing to trim ev­ery cost to the last baht and hope they have the re­sources to out­last the sit­u­a­tion. Mean­while, the strate­gists are re­act­ing de­lib­er­ately and mak­ing use of this time to re­set and im­prove their op­er­a­tions.

Strate­gi­cally think­ing op­er­a­tors within the Thai avi­a­tion sec­tor are rec­og­niz­ing the red flag sit­u­a­tion for what it is: a tem­po­rary ob­sta­cle. They rec­og­nize that other South­east Asian na­tions have re­ceived and later suc­cess­fully cleared ICAO red flags is­sued against their avi­a­tion authorities.

While no one can defini­tively state with cer­tainty that the red flag will be cleared in any spe­cific pe­riod of time, what is clear within the avi­a­tion in­dus­try is that those op­er­a­tors think­ing along a strate­gic ba­sis are tak­ing clear and pos­i­tive steps to en­sure that when Thai­land fi­nally emerges from the red flag sit­u­a­tion, they are stronger, health­ier, and bet­ter equipped to ex- pand their op­er­a­tions than those whose who are choos­ing the al­ter­na­tives.

Strate­gi­cally think­ing op­er­a­tors are fo­cus­ing on the ba­sic el­e­ments of the air­line busi­ness. They are us­ing this pe­riod to fo­cus on Team De­vel­op­ment, Safety Sys­tems as well as Air­line Ef­fi­ciency and Eco­nomics.

TEAM DE­VEL­OP­MENT

First and fore­most, avi­a­tion op­er­a­tors who are think­ing strate­gi­cally are act­ing pur­pose­fully by in­vest­ing not only in their hard skills, but by em­brac­ing and fo­cus­ing on their softer skills, the peo­ple as­pects of op­er­a­tions. They are do­ing so by look­ing at their or­ga­ni­za­tional health and im­prov­ing team de­vel­op­ment. Op­er­a­tors are re­al­iz­ing that in­vest­ing in team de­vel­op­ment has a pos­i­tive ef­fect on or­ga­ni­za­tional health. Or­ga­ni­za­tional health re­lates to the abil­ity of an or­ga­ni­za­tion to align, ex­e­cute, and re­new it­self faster than the com­pe­ti­tion so that it can sus­tain ex­cep­tional per­for­mance over time.

Com­pa­nies are re­al­iz­ing that per­for­mance is not solely based on net op­er­at­ing profit, to­tal re­turns to share­hold­ers, net op­er­at­ing costs, and stock turn. It also in­cludes re­turn on cap­i­tal em­ployed. A recipe for ex­cel­lence in­cludes their his­tory as an or­ga­ni­za­tion, their em­ploy­ees’ ca­pa­bil­i­ties and pas­sions, their in­ter­nal and ex­ter­nal en­vi­ron­ment, along with the as­pi­ra­tions of the com­pany. Or­ga­ni­za­tions are em­brac­ing coach­ing and con­sult­ing to de­velop teams in the area of op­er­a­tional ex­cel­lence, con­tin­u­ous im­prove­ment, and safety.

SAFETY

While the ICAO red flag specif­i­cally per­tains to the gov­ern­men­tal reg­u­la­tory authorities, and not the air­lines, op­er­a­tors are awak­en­ing to the re­al­ity that they need to take bold steps to­wards reach­ing in­ter­na­tional stan­dards in the area of safety. Their Safety Man­age­ment Sys­tems ( SMS) are un­der­go­ing sig­nif­i­cant re­vi­sions. They are un­der­tak­ing crit­i­cal eval­u­a­tions of their SMS and one of the key things they are do­ing is im­ple­ment­ing fully in­te­grated safety sys­tems.

Op­er­a­tors are tak­ing an ex­ten­sive look at their or­ga­ni­za­tional safety cul­ture. They are tak­ing the time to en­sure that they are build­ing a cul­ture of safety in their or­ga­ni­za­tions with spe­cial em­pha­sis on in­di­vid­ual and group at­ti­tudes, val­ues, com­pe­ten­cies, and pat­terns of be­hav­ior. These or­ga­ni­za­tions are tak­ing a sys­tem­atic ap­proach to their cul­tures by fo­cus­ing on the en­tire sys­tem ver­sus sim­ply de­vel­op­ing a set of check­lists to com­ply with the Thai reg­u­la­tory re­quire­ments.

These op­er­a­tors are seek­ing in­ter­na­tional en­dorse­ment of their prac­tices through pro­grams such as the In­ter­na­tional Air Trans­port As­so­ci­a­tion Op­er­a­tional Safety Au­dit ( IOSA) pro­gram. They are treat­ing the re­quired “min­i­mums” as ex­actly that, the min­i­mum re­quired, and seek­ing ways to ex­ceed them and es­tab­lish them­selves as bench­mark or­ga­ni­za­tions. They are ac­com­plish­ing this by in­cor­po­rat­ing the four min­i­mum com­po­nents of a true Safety Man­age­ment Sys­tem: Safety Pol­icy, Safety Risk Man­age­ment, Safety As­sur­ance, and Safety Pro­mo­tion.

Strate­gi­cally think­ing op­er­a­tors within the Thai avi­a­tion sec­tor are rec­og­niz­ing the red flag sit­u­a­tion for what it is: a tem­po­rary ob­sta­cle.

AIR­LINE EF­FI­CIENCY AND ECO­NOMICS

Strate­gic op­er­a­tors are fo­cus­ing on their eco­nomic ba­sics, pay­ing spe­cial at­ten­tion to in­creas­ing rev­enue while at the same time fo­cus­ing on their costs.

On the rev­enue side, they are look­ing into their load fac­tors and uti­liza­tion rates for air­craft. They are cre­at­ing mean­ing­ful changes to in­crease both through a com­bi­na­tion of mar­ket­ing ad­just­ments and de­tailed ef­fec­tive route anal­y­sis. In­creas­ingly, these ac­tions are re­sult­ing in a cor­re­spond­ing in­crease in their over­all yields.

On the cost side, op­er­a­tors are de­vel­op­ing de­tailed cost sav­ings strate­gies based on an anal­y­sis of in­di­vid­ual cost cen­ters as op­posed to a “slash and burn” over­all per­cent­age re­duc­tion ap­proach.

Their fi­nance teams are con­duct­ing de­tailed re­views of their over­all air­frame costs and leas­ing agree­ments, as well as en­gag­ing in fleet and net­work ra­tio­nal­iza­tion stud­ies. They are in­sti­tut­ing com­pre­hen­sive fuel sav­ings plans not fo­cused solely on pric­ing and hedg­ing op­tions but lever­ag­ing newly avail­able tech­nolo­gies to gen­er­ate sig­nif­i­cant sav­ings.

These op­er­a­tors are work­ing on cre­ative so­lu­tions to re­duce their daily maintenance costs, parts, and lo­gis­tics op­er­a­tions. They are dis­cov­er­ing al­ter­nate sources of out­side maintenance, parts, and new spares dis­trib­u­tors who of­fer spares of equiv­a­lent or higher qual­ity at lower over­all costs.

LOOK­ING TO­WARDS THE FU­TURE IN THAI­LAND

In spite of the ICAO red flag, avi­a­tion busi­ness op­por­tu­ni­ties abound. Ac­cord­ing to the Thai Board of In­vest­ment, “Thai­land’s air traf­fic is ris­ing at three times the global mar­ket rate. It has in­creased at an av­er­age an­nual rate of 13.14% to 13.54% for to­tal air­craft move­ment over the last four years.”

The busi­ness po­ten­tial for both Thai and Amer­i­can avi­a­tion com­pa­nies con­tin­ues to ex­pand un­abated across the spec­trum to sup­port this pro­jected growth. Avi­a­tion op­er­a­tors in Thai­land are ac­tively seek­ing as­sis­tance to fully de­velop their po­ten­tial. There are nu­mer­ous op­por­tu­ni­ties in maintenance & re­pair op­er­a­tions ( MRO), safety man­age­ment, for­ward sup­ply point and dis­trib­u­tor­ship op­er­a­tions, and many more ar­eas.

As a re­sult of this pro­jected growth, which some ex­perts con­sider to be the largest in Asia over the next decade, smart avi­a­tion op­er­a­tors are pre­par­ing their or­ga­ni­za­tions to cap­i­tal­ize on this ex­pand­ing op­por­tu­nity. They are en­sur­ing their fu­ture suc­cess in the mar­ket which will emerge from this red flag sit­u­a­tion.

Lo­cal op­er­a­tors are tak­ing the long view of the sit­u­a­tion and max­i­miz­ing on their ef­forts by fo­cus­ing on the fun­da­men­tals of the avi­a­tion busi­ness. Af­ter all, those haven’t changed. Only the en­vi­ron­ment where they are be­ing ex­er­cised is tem­po­rar­ily al­tered.

Ron­ald Brick­erd is Man­ag­ing Di­rec­tor at Thayaan Avi­a­tion and Al­bert Valen­tine is a Se­nior Ex­ec­u­tive Con­sul­tant at Thayaan Avi­a­tion. They can be con­tacted at info@ Thayaan-Avi­a­tion. com.

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