How much does your flight operation really cost?
Why bother with detailed cost analysis for your flight operation? And how can data be used to maximize productivity and benefits to the company and flight department personnel? Andre Fodor highlights with some examples…
Sitting at Helsinki airport with an AOG situation, it was almost impossible to stop thinking about the budget as we awaited the arrival of maintenance and parts. A routine flight from Budapest had deteriorated into a major exercise in logistics, creative thinking and international commerce.
Resolving the issue took considerable coordination between our Director of Maintenance in the US, the OEM’s maintenance control in Canada, a parts depot in Germany and the only available FAA-qualified technician hailing from France but dispatched by a service center in Portugal.
Looking at this operational challenge, it was only natural to worry about our bottom line. Nevertheless, it was important to take the view that ultimately, our efforts would still deliver a balanced budget that would hopefully render this event a hiccup in our cost-averaged budget.
If solid management practices and historical data could be adhered to, it would be possible for these unexpected AOG costs to harmonize over time.
That’s because effective use of budget data should account for the unexpected.
The Challenge of Unscheduled Surprises
Factoring unscheduled surprises into a budget is certainly a challenge. It must be consolidated as part of a viable plan that gets your airplane back in the air from an AOG situation, for example, using effective cost management and procurement controls.
Last month we discussed budgeting and the importance of having a business plan that incorporates predicted costs, data accumulation, analysis and transparency. Without these components, the flight department is essentially a ‘pay-as-you-go’ operation, leaving too much room for unknowns and anxiety.
As a flight operation matures, past budgets provide historical data to help you accurately understand the financial challenges ahead, and how annual cost oscillations change and affect delivery of a positive bottom line. With historical budgeting data, it’s easier to identity and manage the areas where a leaner budget is required without sacrificing service excellence or crew lifestyle.
Historical Data Delivers Savings
By way of example, one operation I worked for billed each department of the company for their aircraft utilization. However, balancing the trip costs at one of our regular destination airports was proving problematic.
For several months, I monitored the costs specific to that operation and discovered that the rogue expenses were for de-icing fluid. As it transpired, most of the operations at this airport occurred during the winter, and the only available option at that airport was to leave the aircraft parked outside in heavy wintery accumulation.
Only one type of de-icing fluid was available – type IV fluid that required longer holdover times.
We were burning hundred-dollar bills the moment that nozzle began spraying liquid!
Armed with that knowledge, we developed a procedure to mechanically remove snow and frost. We invested in soft brooms, step ladders and safety equipment, and agreed on an hourly rate for the use of two FBO workers.
We paid for an experienced de-icing operator to train them in the ice removal application process and paid to install a dosimeter on the de-icing nozzle, which ensured we paid for how much fluid was dispensed instead of being subject to an estimated charge. The result was a more sophisticated, safer and ultimately cheaper operation.
In other examples, over a period of years as our data was migrated into spreadsheets, fuel purchases and fuel burns were added together with the name of the fuel provider in our flight logs. Analyzing the data enabled us to leverage our buying power with the provider who the data showed was hungrier for our business.
That data also meant that when our home airport attempted to impose accessibility limitations to outside vendors, we were able to demonstrate to the airport authority the revenue impact of fuel taxes on local business.
Historical Data Helps Retain Good Staff
Finally, historical data has also been used to retain talented flight crew and support staff. Sometimes, it’s not enough to be competitive with salaries and benefits. To retain valued staff, it’s important to know what else could be done to sweeten the overall employment experience.
The cost analysis data we accumulated allowed us to offer our crews credit towards perks during long-haul international trips, allowing each person to tailor their stay and add value to life on the road.
Never one to excel at math, it ultimately took for me to become an aviation manager to discover the applicative power of numbers and how effectively they can develop understanding of what things will cost.
This is a valuable skill that provides the real-life data necessary to quantify, explain, validate and manage the ever-rising costs of flying private.