Sunday, 20 February 2011

Beyond Heathrow Disruptions

Heathrow is in crisis. One of the biggest world airports has reached the point from which the magnitude of disruptions and poor assistance to troubled passengers have seriously ruined its reputation and started to defer even the most loyal customers.  What are the reasons behind this decline and can Heathrow regain its place as an efficient and customer friendly airport? 

The big freeze. It was one of major disruptions just waiting to happen. In the peak of the winter season 2010 and for the second time in two years, London Heathrow was caught up unprepared for snow, causing international chaos lasting days and bringing misery to hundreds of thousands of would-be passengers stranded worldwide. People trapped at Heathrow terminals were left without information and other essentials, confused, tired and disappointed – many spent nights and days on inhospitable Heathrow floors. Similar weather disrupted operations at other airports, but not for as long as at Heathrow. This event was among the biggest and ‘chilliest’ in a series of Heathrow disruptions in recent years. It revealed the depth of decline of once modern and efficient European hub which this time turned into a place of despair, described by some newspapers as a refugee camp.

Company Law and disruptions. It was disturbing to watch how unreachable and silent BAA (British Airport Authority) and BA (British Airways) officials became when customers needed their help most. This just didn’t look right, even if these two companies might have been acting in line with British company law ‘which makes no requirement on shareholders and directors to have any obligation to be good stewards of their assets, their employees and their customers’ (The Observer, 26/12/10). Their primary objective to maximise the immediate value of shares makes them less sensitive to quality of service, unlike their counterparts in America, where airport owners and managers are obliged to put the public interest of efficient and comfortable travel first.

Airport ownership. Another factor that has contributed to this chaos was foreign ownership of BAA which made the Government ‘powerless to force the foreign owners to ensure there are necessary systems to prevent flights being grounded in bad weather. Ministers have been unable to get BAA to buy adequate snow-clearing and de-icing equipment ‘(Mail Online, 22/12/10). In addition, Heathrow bosses declined the offer from Transport Secretary to use troops to help clear the snow and speed up reopening of Heathrow. At the same time, BAA banned media from accessing Terminal 3 packed with passengers lying on the airport floor.

The competence. The practice of maximising immediate share value as a primary goal continues to create shortage of competent staff, management and information. It reduces the quality of planning, management and control, leaving less margin for an increasing number of errors, omissions, and unforeseen events, and more room for disruptions.

Hub-and-spoke business model. The seeds of this failure were planted back in the 1980s when deregulated US passenger airlines all rushed to copy the FedEx’s hub-and-spoke business model, assuming it is more efficient to fly passengers via huge hub airport instead of taking them straight to their destination (just as FedEx did with parcels). It soon proved to be a big mistake. Missed connections at hubs created huge passenger dissatisfaction and inefficiencies, and contributed to the bankruptcy of almost every big US airline. Despite obvious flaw in business model, European airlines were quick to adopt it, ending up with series of failures or near-failures, including Swissair, Sabena, KLM, and Alitalia. BA’s cracks are becoming more obvious and are still among the main drivers of Heathrow disruptions.

Congestion caps. Heathrow has been operating very close to, and sometimes over its maximum capacities for many years where even a small deviation from planned schedules may trigger a chain of flight delays, cancellations and diversions with widespread knock-on effects. The long history of caps on aircraft departures and arrivals introduced to keep the expected demand within the bounds of what the airport can handle didn’t prove to be as effective as expected. Terminal 4 was approved in 1978, subject to a cap on annual traffic movements of 275,000. Two years later BAA recorded 287,000 movements and 376,000 in 1990. When Terminal 5 was approved in 2001, the Government imposed a new planning condition capping the annual movements at 480,000. This cap is still in use. In addition to the airport congestion, the airspace and surrounding roads add up to an unpleasant customer experience.   No wonder Heathrow keeps being voted as the worst, or among the worst performing airports in Europe and in the world.

Airline contribution. Airlines based at, and operating from overcrowded Heathrow have knowingly contributed to hub congestion. By increasing the volume of traffic, they not only exposed airport schedules to high volatility, but let their own operations suffer from more disruptions, higher costs and raising inefficiencies. In order to protect connecting passengers and hide the growing number of delays they introduced buffers, building the most predictable delays into their schedules. This didn’t help improve punctuality as buffers couldn’t stretch as much to cover up for further increase in congestion. Schedule padding brought in more troubles than airlines expected. They required more aircraft, more staff, more crew, more fuel, more stands, and more equipment, created more noise and air pollution and brought in more complexity. This has led to a decline in service quality, and considerable, often hidden, increase in operating costs. As an example, the buffer on the shuttle route between London Heathrow and Paris Charles de Gaulle takes an additional five hours of aircraft utilisation each day. Or, the time British Airways planes spent in air holdings over Heathrow five years ago, was equivalent to having approximately three aircraft seating idle for the whole season. The full impact of hub induced costs at congested airport has never been thoroughly understood by hub based airlines due to the lack of integrated information systems and little interest in the longer term consequences.

Information and knowledge. The poor state of information about disrupted operation stands in the way of improvement in operational and cost efficiency of airlines and airports.  Even when standard tolerance and difficulty in achieving the high quality and accuracy of data are taken into account, existing punctuality reports could be described as unreliable, incomplete, and narrow in scope. They don’t include even the basic disruption information, like flight cancellations, true root causes of problems and their costs. In reality, this information is unavailable not only to general public, regulators, industry analysts and policy makers but often to the operators themselves. Published data shown in voluntary reports pretty much reflects what airlines and airports want to be seen. As such, they are not fit for purpose and have started to die out. Association of European Airlines (AEA) has recently stopped publishing one of the most comprehensive punctuality reports in Europe because it was heavily workloaded and did not provide added value for AEA and its members. This information gap is leaving passengers unable to make an informed choice about their travel. It is also depriving industry decision makers from taking a constructive role in minimising negative effects of disruptions - the quality of forecasts and improvement measures best illustrate the extent of their detachment from real life. This only aggravates the situation and contributes to a steady decline in the airline industry’s credibility with the public.

Who cares about passengers? Once they reach the airport, Heathrow passengers should prepare for all kind of unpleasant experiences in the air and on the ground. This includes extension in waiting times spent in airborne holding stacks, during check-in and security checks, in planes waiting in taxiing queues and at remote stands - the list needs to be extended to include new experiences during more recent Heathrow freeze. Despite the increasing volume and length of disruptions and flight cancellations, it is still not clear who bears responsibility for disrupted passengers. To whom shall they turn for consolation especially during extreme events? British Airways and BAA showed no interest in becoming good stewards to their customers, and AUC (Air Transport Users Council) proved to be unable to enforce unenforceable EU legislation on passenger protection.  Risk aware passengers are turning to travel insurance companies that guarantee their protection from disruption losses. This has become one more in series of costs that hub passengers need to account for. Those with a lower threshold of tolerance have already switched to carriers operating from more friendly airports.

The role of punitive measures. European Commission is now asking airports to ‘get serious’ about planning for severe weather conditions and to invest more to better prepare for snow seasons in the future. The Commission is preparing legislative proposals that will start to hold airports responsible for disruptions. Bad weather and volcanoes cannot be avoided - they come and go and never last too long. Allocating some space and money for eventualities and better care for disrupted passengers can soften the consequences, but cannot solve problems associated with overcongested Heathrow. Much more attention should be turned to the wide ranging hidden causes of disruptions, including strategic issues and lack of coordination that generate daily losses and a great deal of inconvenience to passengers.

Failed initiatives. Heathrow is suffering from ‘mega–airport’ syndrome caused by imbalanced development of airline, airport, and ATC (Air Traffic Control) capacities. Restoring the balance requires good understanding of their relationships, difficult to achieve without support of appropriate information. It also requires strategic shift and improvement in cross-functional and cross-system communication, discouraged by overstated culture of self-interest. These were the main reasons behind the failure of half-a decade old CAA (Civil Aviation Authority) improvement initiative to ease up disruptions at Heathrow. Coordinating the Aerodrome Congestion Working Group which was governed by complex interactions between airlines and BAA proved to be an impossible task. It will remain so as long as the predominant focus on resolving the chaotic day-to-day operational issues is not turned more towards elimination of the root causes of disruptions.

What can be done to take Heathrow out of the list of the world’s worst performing airports? It would be unrealistic to expect quick improvements due to the nature of problems and speed at which the coordinated efforts could be organised. On the other side, pouring investments in an obsolete system that can no more absorb growing number of errors and incompetence of strategic and operational nature is not an option. There is an interim solution that could be described as operational fine-tuning that supports gradual creation of efficient strategies that can keep companies’ goals adjusted to changes in operational environment. The fastest and simplest way to do this is by learning from mistakes. Instead of doing the impossible by trying to control every aspect of complex businesses, decision makers should start to monitor and control changes manifested through operational disruptions in a new, more strategic way. Knowledge about the true origins and costs of ongoing operational changes can make a profound shift in quality of decision making.  During the Heathrow freeze, disruptions helped break communication barriers bringing together airlines, airports, and regulators, to discuss the way out of problems encompassing wide range of system weaknesses. The process of managing through disruptions doesn’t require big investment and can be implemented quite quickly, but not without strong leadership and determination at organisational and industry levels. Such opportunity shouldn’t be missed.

Heathrow has reached a critical point in its development from where its future plans need to be better aligned with operational capabilities. The current economic crises created a unique opportunity for airline and airport operators to make a dignified escape from obviously unworkable strategies deferring even their most loyal passengers. Heathrow doesn’t have to be the biggest airport to better serve its shareholders, employees, customers, economy and the society - just more efficient, safe, and less expensive, with good reputation for on-time performance and friendly services. This is not an impossible task.