Background and Challenge
One of the world’s most iconic and financially successful airlines was looking to implement a more structured management system to balance the myriad of operational and strategic decisions the airline faces. The growth and complexity of the airline and increasing dynamic of the industry meant it was becoming increasingly difficult for senior management and the board to keep track of the planning process for the airline. So they turned to L.E.K. Consulting to implement a comprehensive management system, including planning and key business process review, management tools, and measurement systems.
Approach and Recommendations
The project initially focused on reviewing and improving key business processes. The project was divided into two phases: diagnostic phase and implementation-plan phase. The aim of the project was to develop a number of implementation plans that could be executed either by the client or in conjunction with L.E.K. The diagnostic phase included a number of key activities including an extensive management interview program and workshops with more than 100 senior airline managers, a review of financial and operational performance, key decision process analysis, current functional structure analysis, and customer utility and delivery costs. Following the diagnostic phase, a selection of four areas was made for which implementation plans were developed: organization structure, outsourcing opportunities, contribution analysis framework, and new product development process.
For each of the four focus areas, detailed implementation plans were developed, including a range of key recommendations for improvement. In addition to the detailed implementation plans, a number of quick wins were formulated to show the organization some immediate gains from the project.
L.E.K. subsequently got involved in supporting the piloting and implementation of the new management system and tools, including strategic projects such as assessing the optimal configuration of the new A380 aircraft that was entering the fleet, a redesigned operational and strategic planning process, and reviews of a number of key departments including flight operations, sales & marketing and engineering.
The new system was fully embraced by the senior management and board. The revised planning process has successfully been embedded into the company’s annual planning cycle. Most tangibly, the planning discipline that the L.E.K. Shareholder Value process brought to the airline allowed the combined airline/L.E.K. team to identify $150 million in annual improvements in the maintenance operations alone. Further, another $40 million in annual benefit was found by the joint team in non-fuel related flight-operations costs.