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Op-Ed: Airlines Compete for Operational Excellency

Op-Ed: Airlines Compete for Operational Excellency

The airlines are flying higher operationally in 2015 than in 2014, posting better on-time numbers as superior operations becomes a competitive driver.

» Airlines - W | Wednesday, December 9, 2015 • Air News Times

As the holidays march forward and as 2015 draws to a close, the airline industry offers consumers a number of reasons to cheer. Most notably, a slip in airfares during the year translates into more money kept in the pockets of many fliers as they head off to visit family and friends.

But airlines – somewhat more under the radar – also usher in the holidays with better operational performance than a year ago, nearly across the board. Consumers currently enjoy both lower fares and more timely flights than in recent memory. Quietly, operational excellency has gained traction as a point of competition between the airlines.

A quick look at Department of Transportation (DOT) on-time statistics reveals operational strides. While data for the entirety of 2015 does not yet exist, the early returns are extremely promising. For each month with recorded data so far (up to September 2015), the industry-wide on-time percentage cleared that of the corresponding month in the previous year. While not necessarily signaling uniform improvements at all airlines, it speaks highly of broad trends within the industry. This did not happen by accident, as the airlines have made real investments in their operational processes during the year.

Delta Air Lines represents the most commonly agreed upon operational leader. The company boasts an official 85.2% on-time percentage so far in 2015, outperforming the results turned in by American Airlines and United Airlines.

Over the past several years, Delta significantly boosted its on-time percentages and virtually eliminated cancellations, now routinely besting the U.S. majors in both regards. It marks a prime example of the airlines taking advantage of big data to determine what's most important to their fliers, and then responding accordingly to minimize turbulence. Some distance from its merger with Northwest, which involved a challenging integration process, freed up some time for the airline to focus more sharply on bettering the experience for fliers operationally.

Delta maintains a high degree of confidence in its operational competitiveness, manifested by its bold promises to corporate clients. Earlier in the year, Delta guaranteed that it would retain its operational superiority over American and United, offering travel credits to corporate fliers should the airline lag behind. The credits would apply directly to the purchase of fares, illustrating resounding confidence on the part of Delta for its ability and drive to stay ahead.

According to Delta, many companies have looked very favorably upon this commitment, leading one of its unnamed business customers to authorize bookings with the airline, even if its fares price higher than its competitors by up to $50. Clearly, Delta is trying to capitalize on its well-run operation by deploying it as a competitive tool.

While still lagging behind Delta, American Airlines also shows some interest in posting operational gains and potentially narrowing the gap. The airline's chief operating officer Robert Isom recently said that from September 15 to November 15, 82-percent of American's flights arrived on-time, compared to 86-percent of flights at Delta. The strong on-time number came as unusually bad weather plagued the North Texas region, where the airline houses its headquarters and largest hub, throughout much of the year.

In 2015, American "re-banked" its hubs at Dallas/Fort Worth (DFW) and Chicago O'Hare (ORD), reflecting investments made with an eye at least partially toward bettering operations. The move accompanies a great deal of success so far, with its DFW hub experiencing a nine-point uptick in on-time arrivals, according to airline executives.

American also unveiled during the year a new integrated operations center, which should help the airline better manage operations across its combined network. And according to the Center for Aviation (CAPA), the airline expects to complete a $100 million investment in improving operations, particularly during irregular operations and maintenance, highlighting a serious commitment to flying more on-time, more often.

United Airlines has typically trailed both Delta and American, usually rounding out the bottom of the "Big Three." But United rolled out a hefty promise of its own on Tuesday, making an on-time guarantee to corporate clients similar to Delta's. The airline pledges to be as reliable as Delta and American next year, reports Bloomberg, demonstrating its own commitment to reinforcing its operations. The guarantee offers its corporate fliers credits applicable toward upgrades and other ancillary fees should the airline fall behind the pack.

United posted strong on-time performance over the last several months, which the airline believes it can maintain. "If it were a short-term blip, we wouldn't be making this commitment," claims Jim Compton, United's chief revenue officer. Investments in new software to quickly deploy crews combined with a fresh management team make it likely that United will continue its climb.

The airlines are raking in record profits, benefitting from a new era of financial stability within the industry. Much public discussion focuses on the use of profits to reward shareholders with dividends, slash fares, and invest in the passenger experience while at the airport. But in 2015 the airlines have made substantial, intentional improvements in operations, an area which we should not neglect. After all, the airlines are first and foremost in the business of transportation, and timely flights mark as important of a factor as any.

The financial commitments to operational excellency should give us confidence that bright skies lie ahead for the airlines. Look forward to more on-time flights decorating the holidays this year and into the foreseeable future.

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