Practical use of six-sigma for the IATA Fuel Program Tom Fodor Assistant Director E&M

1. Practical use of six-sigma for the IATA Fuel Program Tom Fodor Assistant Director E&M

2. IATA is an association of: • 230 airlines • Representing 93% of scheduled international air transport 2 13-14 April 2010 Ops Conference

3. IATA’s Mission: • To represent, lead and serve the airline industry • Represent airlines’ interests to • governments & international organizations • Assist the airlines in • developing solutions • to the issues • affecting efficient • operations 3 13-14 April 2010 Ops Conference

4. Fuel Price Evolution $138.7 / b Platts, September 28, 2012 LFI Conference 2012

5. IATA’s Four-Pillar Strategy Invest in new technology Operate more efficiently Build & use efficient infrastructure Use effective economic measures Aviation & Climate ChangeAviation is facing the challenge LFI Conference 2012

6. IATA Green Team Achievements 2005-2012 Americas: 17 Europe: 40 Africa/MENA: 27 ASIA/ASPAC: 27 • 111 visits • 41.3 M tons of CO2 • US $9.8 B LFI Conference 2012

7. IATA Green Team Identified Savings Potential • Average identified saving is 5% of the airline fuel budget • Savings range from 2% to more than 14% (higher values for airlines that did not have a structured fuel efficiency program in place) • Based on the actual fuel efficiency assessments, the major savings come from Flight Dispatch and Flight Operations LFI Conference 2012

8. IATA Methodology for Fuel Program • Lean Six Sigma Methodology • Combines the Lean and Six Sigma methodologies • Lean: reduce waste and add value • Six Sigma: reduce variation in product output, data driven, uses statistical tools • IATA uses the DMAIC process for the fuel program DMAIC Process LFI Conference 2012 8

9. Phase 1 Phase 2 Phase 3 Phase 4 Implementation Plan Implementation Execution Define Baseline IATA Fuel Efficiency Program – Phase 1 Fuel Program Setup Define Baseline • Engage Executive Management Support • Define Corporate Fuel Process • Define Organization • Establish Fuel Team • Select Program Methodology LFI Conference 2012

10. The Fuel Implementation Organization Executive Sponsor, Fuel Manager, Fuel Team LFI Conference 2012 10

11. The Fuel Efficiency Implementation Team LFI Conference 2012 11

12. Responsibilities and Accountabilities LFI Conference 2012 12

13. Phase 1 Phase 2 Phase 3 Phase 4 Implementation Plan Implementation Execution IATA Fuel Efficiency Program – Phase 2 Define Baseline Fuel Program Setup LFI Conference 2012

14. IATA Fuel Efficiency Gap Analysis • Areas covered: • Flight Dispatch – 8 areas reviewed • Flight Operations – 14 areas reviewed • Engineering and Maintenance – 8 areas reviewed • Ground Operations – 3 areas reviewed • Cabin – 4 areas reviewed • Objectives: • Reduce weight • Reduce drag • Reduce engine specific fuel consumption LFI Conference 2012

15. Basic Data – Fuel Budget Calculated for the previous 12 month period LFI Conference 2012

16. B747-400 Fuel Penalty for Extra Weight B744 weight factors 4 Hours 3.9% 7 Hours 4.1% 8 Hours 4.1% 12 Hours 4.7% LFI Conference 2012 16

17. Basic Data – Fuel Penalty Fuel burn (penalty) in kilograms to carry 1 kg additional weight on the entire fleet for 1 year LFI Conference 2012 17

18. Initial Assessment of Potential Savings Example: Potable water quantity reduction Fuel savings calculated based on water consumption of 0.3 l / pax / hr using average flight length LFI Conference 2012

19. Phase 1 Phase 2 Phase 3 Phase 4 Implementation Execution IATA Fuel Efficiency Program – Phase 3 Define Baseline Implementation Plan Fuel Program Setup LFI Conference 2012

20. Implementation Management • “Formalize” in the Planning Process: • Documented and detailed implementation plans • Detailed timelines with well-defined milestones • Accurate measurements and tracking results to plan • Quantification of periodic and cumulative benefit to the airline LFI Conference 2012 20

21. Rating the Project Benefit Effort LFI Conference 2012 21

22. Setting Priorities Start Here LFI Conference 2012 22

23. Safety Risk Management Mitigate / Eliminate the Risk of Safety and Uncertainty LFI Conference 2012 23

24. Project Work Plan • Project timeline and the milestones depend on: • Required resources, carry out survey • Development of new servicing procedures based on the survey results LFI Conference 2012

25. Communication / Change Management • Internal communication to include: • Ground Operations management and personnel • Flight Attendants and Pilots • Supply Chain / Contract Management • Internal stakeholders • External communication: • Ground Service Providers LFI Conference 2012

26. Selecting KPIs • KPIs Should be SMART • Specific – Clearly defined performance requirement • Measurable – Defined in a quantifiable way • Achievable – Realistic, manageable • Relevant – Directly related to the desired goal • Time-constrained – Set to a defined time span LFI Conference 2012 26

27. Using Business Information (KPIs) Example of an Executive Level Dashboard KPIs are supported by trend graphs & performance measures to show progress against the specific targets in each initiative of the program LFI Conference 2012 27

28. Key Performance Indicator (KPI) & Operational Performance Measures (OPMs) • The company’s KPI and supporting OPMs for the project are: • Part of the overall weight reduction initiative (KPI) • Reduction of water servicing quantity in consideration of passenger load and flight length plus other considerations (OPM) • % of flights serviced to policy level (OPM) • Resultant fuel savings when comparing actual water weights carried to pre-initiative baseline levels (OPM) LFI Conference 2012

29. Data Requirements LFI Conference 2012 • Data elements for tracking actual results • Aircraft water tank capacity • Projected flight time and associated policy water volume • Actual water volume after servicing • Volume of water remaining on arrival • Number of passengers and crew • Flight time (block to block) • Planned consumption rate • Actual consumption rate • Identify source of data • Ensure data quality

30. Implementation Plan Project / Objective Benefit / Effort, Priority Target Savings Issues / Tasks Duration / ROI LFI Conference 2012 30

31. Phase 1 Phase 2 Phase 3 Phase 4 IATA Fuel Efficiency Program – Phase 4 Implementation Execution Implementation Plan Define Baseline Fuel Program Setup • Tracking Results • Analyze Results • Adjust Policies and Procedures • Sustain & Control LFI Conference 2012

32. Build Statistics • Track actual savings against plan and identify under-performing areas • Savings can be calculated from weight reduction and fuel penalty value LFI Conference 2012

33. Monitor Performance LFI Conference 2012

34. Monitor Performance • Look for significant variance from plan • Implement corrective action accordingly LFI Conference 2012

35. Adjust Policies and Procedures • Continuous progress check • Identify any implementation issues • Improve procedures as necessary • Institutionalize changes for sustained results • Modify organization structure if required LFI Conference 2012

36. Institutionalize the Improvements To sustain and control results: LFI Conference 2012

37. Fuel Book 5th Edition & Implementation Guidance Material Fuel Efficiency Program Implementation Guidance Material 5th edition Fuel Book 5th edition highlights: • Time dependent maintenance costs • Aircraft performance monitoring (APM) • Released: October 2011 Implementation Guidance Material: • Setting priorities • Risk assessment • Building a strong business case • Program management • Metrics for tracking implementation • Key Performance Indicators • Released: June 2011 LFI Conference 2012

38. Thank you! IATA Fuel Efficiency Regional Workshop - Amman IATA Fuel Efficiency Regional Workshop - Geneva 38 38 Oct 6-7, 2009 June 9-10, 2009 Singapore Airlines 38 23 Jan 2009