Srilankan Airlines todaySri Lankan Airlines today
As for the airlines themselves, they have suffered 108 billion rupees in accumulated deficit (since the last profit payment in 2008) and the accumulated deficit is an astonishing 461 billion rupees (to be borne by the governments and the impoverished taxpayer). A high-ranking secretary of state even likened the airline's 28 billion rupees last year's historic deficit to double the 15 billion rupees for the 15 billion rupees for composting ordered by the Aruvakkalu administration.
CCEM is chaired by Premier Ranil Wickremasinghe, an advisor to the Ministry of Finance, Mano Thittawela, who is now succeeded by Charitha Ratwatte, an advisor to the Ministry of Finance, Dr. Roshan Perera, Director of the Ministry of Public Enterprise Development, and Sri Lankan Chairman Ajith Dias and CEO Suren Ratwatte. It' interesting for the smart readers to remember what the airline's two flight attendants had to say at the end of 2016, almost a year after PM Dias had named them chairman, "We have to void orders for four Airbus Industrie A350-900s (long-haul aircraft).
Fortunate expenses for the operation of these facilities were assessed at $480 million (loss) per year. It becomes a local air company with services to Maldives/India and Southeast Asia. groundhandling functionality (see my first paper titled "The Tedious Job of Turning the NOC around ", December 2015, on ways to cut costs), to be hived off as Going Concern/SWU.
What is the position of the carrier with this strategical orientation? Air traffic: Rationalization of the fleets with the above mentioned policy in mind. Streamline AC service to lower cost. McKinsey (World Wide) had identified two kinds of aircraft failures: For those who are behind schedule and at threat of failing, the challenge is to concentrate on restoring consumer confidence and retention and restructure routing systems, businesses and cost in a realignment effort of "improvement and innovation".
These are inefficient airlines faced with the challenges of the downturn in conventional aviation fleets and recognize the opportunity that exists elsewhere; they concentrate on the creation of products and services. However, Sri Lanka is in the second group, where the policy misalignment, exacerbated by competitive globalisation and rising operational expenses, has been too challenging for the present Executive Team.
Mc Kinsey was described as a "k-type" or "r-type" decrease in an airline's operations. The majority of respondents agrees that the predominant cause of airlines' (or other companies') success is some kind of lack of competence in managing. Strategy misalignments can lead to a situation where a corporation is not synchronized with its surroundings, often as a consequence of top executive decision making, to make careless expansions, or if it fails to upgrade production line, address functionality issues and reduce operational costs.
In general, this can be regarded as the case with Sri Lanka. It' s not hard to see that as established businesses that have created demanding but intricate businesses develop to market maturity, they are under enormous strain to find less expensive solutions that satisfy wide consumer needs with minimum product and process complexities.
Under these circumstances, the company may know that the costs of complexities are pulling it down, but finds it hard to change its overall operating mode. There is no example that exemplifies this predicament more clearly than the major US and major EU hub-and-spoke airlines (McKinsey quarter of September 2017). Your buisness paradigm - basically geared to bringing everyone smoothly from anywhere to anywhere - was a great one.
However, this paradigm in its present state is no longer competitive sustainably. This is the case in Asia, as many airlines show. Insolvencies pollute the sector - Sabena, Swissair, United Airlines in the West, Air India (until recently), Garuda and even Malaysian Airways are good practices for airlines on the verge of insolvency.
Sri Lanka: How ill is it? Curiously, SriLankan's CEO Captain Suren Ratwatte said that SriLankan could be proud of the extension of its networks to seven India based cities from four to seven, with Hyderabad, Coimbatore and Vishakaptnam as new arrivals. However, the recent Mc Kinsey survey reveals that large airlines in the US are facing a bright green ahead, while economies of scale such as Southwest Airlines, JetBlue Airways and Ryanair (in the US) and Air Asia (in Southeast Asia) are thriving on an enormous operating expense benefit.
It' easily recognizable how quickly the cost of the often complicated hub-and-spoke operating system increases. It is based on its ability to offer customers a greater number of travel locations, a high degree of responsiveness (from last-minute re-allocation and upgrade to full route and route change) and "frills" (such as speciality dishes and home lounges).
It' is a hypothesis encumbered by the built-in expense penalty of synchronised lift operation, with long turn-around and slip in flight plans to enhance the connectivity by making sure there is still enough free space for passenger and luggage to make calls. However, the fact is that this hub-and-spoke system depends on advanced information technology and infrastructures to optimise its intricate workflows.
On the other hand, the SLLs have developed a focussed, straightforward and high productivity nonstop aviation to and from medium to high dense market at a significantly lower cost. NWAs are the most costly in terms of speed, complex processes and ticketing. It' the relatively easy or complex nature of their processes that really sets them apart.
The weakest for NWAs is their ability to surmount their costs. Due to the fact that company transport had lowered the number of trips by streamlining the belt, the number of passengers on regular flights, which accounts for up to 60 per cent of sales with airlines, has fallen to below 40 per cent. Therefore, NWAs will not reach a viable level of competition if they do not address the basic costs sanctions associated with their commercial models.
What can you do to get your employees to reduce cost? Those indictors are distributed across 37 managerial practice (within nine clusters/results). SriLankan, in a nutshell, would not be able to achieve all its goals, but it can certainly put into practice the four combination of practice (or "recipes") that together should improve one' s overall wellbeing - and quickly.
The most important of these is how the company prioritised punctual arrival and departure and deliverables (with unparalleled benefits) in the past, often at the detriment of production costs. Practically, the engineer believed that their task was to construct and maintain airplanes, with costs being an expenditure rather than an asset.
In order to change this mindset, executives must demonstrate that value creation for customers/passengers and effective process efficiency are as important as on-time delivery and fiscal execution. Unfortunately, this view was lacking in Sri Lanka - especially in the areas of technology development, operation and sourcing. It is an area in which Sri Lankan managers seem to have finally collapsed.
Equipped with a legacies system of assessment (originally developed by Hay Management Consultants in the 1980's/improved by Emirates in the 1990's), many of the later innovation (e.g. incentive compensation schemes or VPPs coupled to KPIs) were ignored to keep the highest performers high and cool.
Top executives enjoyed over Rs.3. 0 million per months in salary and gave no credit to their "restructuring cry" from the huge potentials within the company. Even more serious, some of the managerial practice within the three main findings (see OHI Table 1) were pitifully rejected and abandoned to their own suffering.
Conversely, the JAL Chairman/CEO, named in 2010, took the helm and hired the talents within three years to change airlines within three years (see box). The Nyras Aviation Consultants hired by SriLankan include many airlines (including many that have vanished from the scene - see Table 2) and belong to PA Consulting Group (UK), which is a third level consulting firm in comparison to other turnaround leaders.
Under the leadership of ehemaligen head of Aviation Consultancy von PricewaterhouseCoopers (PwC) Richard Davey und Lain May, Turn-around und End of Lease Lead. Goal: Reducing high costs for turn-arounds, improving connection time, implementing new workflows and procedures and reducing the number of employees. Faster and more effective lead time, 30 per cent fewer turn-around crews, new ways of working in operation, new value models with staff reductions, automatic check-in and bag counting, new luggage processing methods that accelerate lead time.
Goal: Improvement of productiveness, suggestion of increases in effectiveness to decrease personnel expenses, cost-effective use of hanging room, provision of gaps analyses, improvement of document layout. First, since the counsellor inevitably has to look at some of the non-commercial areas in order to cut down prices, the above mentioned instances are good ones. Secondly, it is an unalienable deduction that staff reductions (not only to cut payroll costs) are a must to maintain the effectiveness and productiveness of the airline's operations:
Sri Lanka did not bargain with trade unionists in this crucial area for a win-win situation. It' s worth recalling what the former Chair (responsible for the JAL 2013 turnaround) said before we start looking for possible ways forward (which SriLankan can put into practice with the help of its new trading partner).
Case histories (see box) illustrate what the Sri Lankan leaders could have learned from him. Of course, this turn-around was supported by the government's assumption of the $4.0 billion debts and nine years of depreciation of taxes. The following are some of the ways in which the operating cost of timetables and connection passenger services for further objectives can be reduced:
Currently, hub-and-spoke airlines generally plan services in a corrugated system, i.e. departure and arrival are focused on peaks to maximise efficient connection of people. However, given today's price strategy and fleets, the carrier relies on the connection of customers to occupy places that would otherwise be empty.
The reorientation of the airline's route infrastructure to meet the needs of non-stop users and the systemic links should enable large airlines to halve lead time, maximise capacity utilisation, relieve traffic jams and significantly enhance labor efficiency. Much of the personnel cost is caused by how long an airplane remains at the gates.
Implemented customized workflows. Elsewhere, in sectors such as manufacture, reduced complexities were reduced by using a tailor-made streaming solution. Basically, the operation is divided into different operational processes: separation of tasks from tasks is required to manage routines and tasks; skills and attitudes are adapted to the intrinsic complexities of the job and to what clients are willing to spend.
This often means that the routinely and robust operations must be standardized or "industrialized", while the more complex and varied parts of the plant are segmented and isolated. On the whole, the NWA airlines have done exactly the opposite. As a result, there has been needless cost to the operations and they have been difficult to automatize and modify, which requires extensive staff re-training when a operations is modified.
By simplifying its key operations, the carrier can meet the essential needs of most clients and dramatically cut the number of operations at aerodromes. Under such circumstances, the reservations and check-in procedures would be organised in such a way that travellers would not require short-term changes or long, repeated interaction with carrier personnel at the terminal.
Build discrete operating sys-tems for different client seg-ments. To simplify the air carrier's operating mode, it must be mindful of the need to maintain the loyalties of its most profitably and frequently served clients through sophisticated conveniences, lounge and on-board facilities. As a result, both airports and in-flight service could be divided into two (or more) categories, focusing on either recreational or professional travellers.
Experience in other sectors suggests that mixing complexity and simplicity, each with different goals and tasks, often raises expenses and reduces the standard of services. Our aim is to provide a higher degree of servicing where it is needed, with low running expenses. In addition to delivering more convenience, this would help generate cleaner flows of businesses that mirror the different needs of different client segment.
Modify the way you do business to better service all your clients by making the experiences more effective and less time-consuming and offering special service (and flexibility) to the client segment willing to buy for them. In the same way that the above is a solid policy, I trust that the argumentation that is going on will convince the Sri Lankan partners that LCC and NWA are two different things.
Assuming that this is the course the administration wants to take, it is imperative that besides the change in the operational paradigm (in line with the business strategy), senior managers also have the necessary experience in implementation. Former CEO of Tech Giant'Honeywell', Larry Bossidy, and Ram Charan (research-based managerial thinker), famous writers of the eponymous 2002 Discipline of Getting Things Done, the executive paper, complement the above by saying that "the connection between humans and surgery is critical.
A further interesting finding was that in their ranking, only eight of their chief executive officers were good at developing strategies and implementing them. It has been considered useful to have identified three of these as very useful for Sri Lanka, derived from the above mentioned gaps in order to accelerate the turn-around.
Much of their work had already been relocated, airports redesigned and improved. In the presence of the managers and some heads of departments, the manager of the aerodrome said that some apparently small operative difficulties - long tariff lanes, sluggish boards and insufficient primary supplies - were not only implementation difficulties, but were preventing the aim of the nation to become a trade and logistic centre for Africa, Asia and Europe.
Subsequently, the director of the aerodrome (aerodrome manager) held intensive follow-up meetings with the staff on the dismantling of storage bins and the improvement of operation. In your daily business - wherever you are and at whatever levels - your staff are constantly challenged to make choices on your organization's behalf. Every decision you make is a challenge. Unless they are committed to implementing the strategic plan, the strategic plan will not work.
VPPs can be targeted at KPIs (which are well publicized and make a lot of money) that help save valuable resources, save valuable resources and save valuable resources. Instead, it is better to get people to fully embrace the company's strategic vision and evaluate it for its ability to solve customers' and passengers' issues. Spreadsheets are no longer sufficient to record and analyze this amount of detail; you can use large information handling tools that are designed to provide meticulously engineered output information.
For example, Air India (now vice versa) uses the Horizon (SITA) Passenger Service System (Loyalty and Revenue Integration Suites) to help airlines' employees avoid loss of income. Naturally, in a large carrier the implementation is quite complicated. Our own R&D department designs new projects or procedures without advising each other. Even though you occasionally tidy the home, inconsistency and complexities sneak back in, along with the associated cost and red tape, through corporate storage sheds.
A benefit of focusing your strategies on your skills is that you can better understand your processes. Differentiate the complexities that really add value (e.g. a delivery pipeline customized to your most important business class) from the complexities that stand in your way (e.g. multiple vendors when only one or two are needed).
According to the A Guide to Strategic costutting, restructuring and renewal (Couto/Caglar and Plansky. )2017, the writers argue that efficient costs control relies on the capacity to reduce recklessly those assets that do not add value. Although some clients require tailor-made offers or complex procedures, many do not. Typically this is the case for most NWA airlines.
Lenovo, for example, a leader in computer computing with offices in China and the U.S. (Lenovo's ThinkPad computer division was taken over with the acquisition of IBM's PC business), is pursuing a policy focused on cross-fertilization of innovations between two completely different worlds. And the second are "transactional" clients (individuals and small businesses) who usually buy one or two machines at a stretch and are all looking for more or less the same few designs, but are vulnerable to costs and good usability.
Secondly, be guided by your company's strategic direction to add the right level of sophistication. Lenovo's case demonstrates how an air carrier can be innovative to reduce undesirable process (reduce costs) and streamline the services competency and agility required by travelers and travellers of the top tier of the industry. Its realization. Ten Timeless Truths' (Meany and Scott, Mc Kinsey 2017) explains the writers - (1) talents and team ( "teams"), (2) organizational development and governance, and ultimately (3) the management of cultural diversity and transformation, are the big three areas to focus on at every turn-around.
JAL's storyline and the recent storyline of Turkey Airline are classical instances of this reality.