Cost Index Savings

OLM FBW 2006 Toulouse 26-28 September 2006
Presented by:
Jean-Jacques SPEYER
Director Operational Evaluation
Human Factors and Communication
AirSavings
A perspective to get started with dignified Cost Index Values
Contents
AIRBUS 2006 S. A. S. All ri ghts reserv ed. Conf identi al and proprietary doc ument.
Introduction
Strategic Markers of Airline Economics
Practical ways & means toward Flight Economy
Practical Methods & Tools for Flight Economy
Conclusion and Discussion
AirSavings
OLM FBW 2006
History
1927: Fuel saving - to increase range (Lindberg)
1940s: Fuel saving - to increase payload
1960s: Fly faster than the competition (Concorde)
Cost of
Time = Money
Cost
Index
=
1970s: Oil crisis - save fuel to save money:
FuelCost
= Money
of
1990: FMCs introduce balancing concept: Cost Index
[kg/min]
Time
= Fuel
[lbs/0,01hr]
AirSavings
OLM FBW 2006
The Cost Index governs the optimisation of your flight plan

COST INDEX
is the driver of
the FMS flight plan
optimisation.
AirSavings
calculates it
AirSavings
OLM FBW 2006
An Airbus / fwz initiative to compute the cost index
AirSavings
Web-based Software
JV with fwz:
Sold by Airbus & f:wz
ROI within first month
Based on YOUR data!
AirSavings
OLM FBW 2006
Contents
Introduction
Tactical Levers for effective Flight Economy

AirSavings
OLM FBW 2006
Oil price will stay high in the short term but not forever
80
US$ per barrel (WTI)
History
75
Forecast
70
High-price scenario
65
60
55
Base case
50
45
Low-price scenario
40
35
30
25
20
Q1
Q2
2002
Q3
Q4
Q1
Q2
2003
Q3
Q4
Q1
Q2
Q3
Q4
2004
Q1
Q2
Q3
Q4
Q1
Q2
2005
Q3
Q4
2006
Energy demand remain robust in spite of record prices
Modest increased investment in exploration and drilling
Supply disruption (emerging economies, war threats, terrorism, rebellions)

AirSavings
Source : Airbus
OLM FBW 2006
Oil price anticipated to trend downward in the longer term

Restored production capacity, increased refining capacity, slower
demand in emerging economies, oil reserve back to adequate level
60
Brent $ / bbl
50
Nominal
40
30
Real $2005
20
History
Forecast
10
Below $30/bbl unlikely, above 80$/bbl not unlikely at all

0
2000 2002
AirSavings
2004 2006
2008 2010
2012 2014
Source : Airbus
2016 2018
2020 2022
2024
OLM FBW 2006
In the meantime Damocles sword is still over our heads

The advent of Low Cost Carriers (LCC) has initiated a need to engage
into creative cost management in the battle for economies of scale
There is ample room for Flight Operations to contribute with regard to this
Whether fuel costs increase or decrease, it is important to track their
changes to cipher out better cost indices for the FMS and for the CFP
FMS functionality
Very
still the same since advent of Glass Cockpits
few airlines utilize the Ci to its full extent which is perplexing
Widely
Many
varying ideas about what the cost index is and time-dependent cost
havent a clue on economics and on how to account for delay costs
AirSavings
OLM FBW 2006
Contents
Introduction

AirSavings
OLM FBW 2006
Airlines
nowtackling
theirBases
Cost Bases
Airlines areare
really
tackling their Cost
Predictions for 2006 call for steady traffic growth (4.5 to 6.5%)
with fragile profitability and lower yields as facts of life
striving
some
for structurally lower costs must hence persist all the time
of the most intense cost cutting ever happened in 2001-2004
distribution, airport fees being tackled, flight operational costs

have just as well to decrease to spread the overall collective effort
labour,
Fuel hedging was possible thanks to a carriers strong financial

condition
enabling it to dedicate resources towards insuring itself against fuel hikes
fuel hedging contracts beginning to expire, record prices now bite, taking a toll
AirSavings
OLM FBW 2006
Strong improvement of Efficiency Markers
AirSavings
Source : IATA
OLM FBW 2006
Lower Unit Costs all along Oil Shock
AirSavings
OLM FBW 2006
Source : IATA
Airlines
tackling
Cost
Bases
Airlines areare
really
tackling their
their Cost
Bases
Unit cost, capacity and expe nses change 2001-2004
-8.53%
All airlines in sample
-0.20%
9.11%
Unit cost
Operating Expenses
-7.02%
-4.98%
North American airlines
Capacity
2.20%
-11.63%
Rest of the w orld
16.24%
31.54%
Mainline
-6.00%
-4.20%
1.90%
-13.79%
Low -cos t
41.93%
64.64%
US Majors
AirSavings
-5.54%
-7.33%
-1.90%
OLM FBW 2006

Source : ATA
Contents
Introduction

AirSavings
OLM FBW 2006
Examples of New Practices / Innovative AirSavings ~ 1

Consider Direct Operating Cost more critically and more closely:
Critical
Work
review of its real ingredients and seasonality/periodicity
collegially with all involved around a key accountable manager
Flight Operations,
Ground Operations incl. Dispatch and Passenger/ Cargo Service,
Engineering/Maintenance,
Finance & Accounting
AirSavings software to determine the (Flight) Cost Index to be field

tested and improved through dedicated airline consulting :
Review
and refresh costs periodically (AirSavings)
Introduce
the cost of delays with Cost Benefit Analyses
spend as an insurance to avoid even more eventual spending

AirSavings
OLM FBW 2006
Data from SWA , LCC and legacy carriers out of / in Ch 11

Since it works for DOT Form 41 airlines could do better with their own
internal cost data and city pair by city pair if they decided to go for it :
GALLONS/TOTAL BLOCK HOUR

($OPERATING-FUEL EXPENSES)/ASM
SCHEDULED YIELD (CENTS/RPM)
FUEL COST ($ PER GALLON)
AVERAGE STAGE LENGTH (SM)
$COST PER HOUR (CREW+MAINT)
$FUEL COST in kg/min
OVERALL COST INDEX
Cost of Time
Cost of Fuel
AirSavings
2000
2001
2002
2003
2004
2005
785.73 757.51 796.59 800.53 847.15 804.49
13.03 13.89 14.23 14.37 13.97 13.08
17.37 15.52 14.15 14.34 13.38 13.28
0.94
0.81
0.73
0.86
1.07
1.61
594
610
614
667
679
680
1,013.4 893.1 982.3 693.4 684.6 653.6
12.34 10.17
9.7 11.43 15.13 11.43
82
88
86
46
45
57
Overal Cost Index
OLM FBW 2006
Examples of Optimized Flight Planning & Procedures ~ 2

Selection of Flight Plan providers (not all give the same result)
Dynamic
Fuel
Cost Index : include impact on flight planning for reasonableness
tankering : How to do it to optimize costs (included in Airsavings)
Inefficient
air traffic control (ATC) systems are the single largest cause of
fuel wastage for which creative solutions are now steadily underway :
FANS (CNS-ATM), RNP RNAV / RVSM (capacity increase)
Reduced Lateral Separations (overflight charges), Datalink ( ATC charges)
In Flight Procedures
Improve
the use of FMS (insertion of proper Cost Index i.e.Basic Default ,

Route Specific, Tactical Delay, performance / idle factor, step climbs,
tropopause altitude, temperatures/ wind profile...)
Wind-Altitude
Cost
Trade-Offs in flight for Off-Optimum Altitudes
of flex versus cost of fuel also in the climb phase
AirSavings
OLM FBW 2006
Examples of Flight Follow Up Analysis for Economics ~ 3

Specifying Flight Follow Up Analysis
Flight plan recomputation after flight to look for possible savings

No longer manual written flight logs but numeric ones, so lets do something
with it to improve our Flight Cost Economics and learn from experience
Similar to post flight FOQA report, why not define a Flight Efficiency Index?
Assessing the energetic/ economic performance of a flight (an Econometer!)
Per season to aggregate big numbers over extended time periods :

Explain gross differences to explain deltas due to gross stack ups :
Flight Techniques, ATC, Flight Planning, Weather Forecasting
Adjusted / Weighted for factors, geared for airline decision-making
AirSavings
OLM FBW 2006
Examples of New Practices / Flight Follow Up Analysis ~ 3
Source :
Airbus
AirSavings
OLM FBW 2006
Examples of New Practices / Flight Follow Up Analysis ~ 3
Source :
Airbus
AirSavings
OLM FBW 2006
Contents
Introduction
AirSavings
AirSavings
OLM FBW 2006
AirSavings is available, ready for use now

Comparing apples with apples when trading of Ct vs Cf
FMC doesnt
understand
Fuel costs money
money
PLEASE WAIT...
Solution:
express
time cost in
terms of fuel
Time costs money
time = fuel
Example:
Fuel cost = 0.5 USD / kg (1.5USD/USG), Time cost = 5 USD / minute (300USD/fh)
equivalent to a Time cost of 10 kg / minute !
AirSavings
(5 / 0.5) => Costindex equals 10

OLM FBW 2006
Source : Airbus/fwz:
Fuel as a currency
The Cost Index concept

treats fuel as a currency
with the
fuel price being the exchange rate

From now on, we can deal with
kg / min instead of USD / min
AirSavings
OLM FBW 2006
Fuel as a currency
Simply add up fuel and time to get total cost

expressed in fuel quantity:
Example:
Trip fuel = 40000kg
Flight time = 9:10 (550 minutes)
CI = 10 kg/min
Total cost = 45500kg (40000 + 550*10)
AirSavings
OLM FBW 2006
Example:
Solution 1 (low speed)
Trip fuel = 40000kg
CI = 10 kg/min
Total cost = 45500kg (40000 + 550*10)
Solution 2 (high speed)
Trip fuel = 40500kg
CI = 10 kg/min
Total cost = 45800kg (40500 + 530*10)
Fuel
40000
Total
45500
Fuel
40500
Total
45800
Time
5500
300 Saving
Comparing Solutions
Time
5300
In this example, the low speed solution is optimal for cost index 10 !
(with a fuel price of 0.5 USD / kg we can convert the 300kg saving to 150
USD)
AirSavings
OLM FBW 2006
Changing the Cost Index
Solution 2 (high speed)

Trip fuel = 40500kg
CI = 50 kg/min
Total cost = 67000kg (40500 + 530*50)
Fuel
40000
Time
27500
Total
67500
Fuel
40500
Total
67000
Time
26500
500 Saving
Example:
Solution 1 (low speed)
Trip fuel = 40000kg
CI = 50 kg/min
Total cost = 67500kg (40000 + 550*50)
In this example we assume a higher cost of time, increasing the Cost Index
to 50.
Now the high speed solution becomes more optimal.
(with a fuel price of 0.5 USD / kg we can convert the 500kg saving to 250
USD)
AirSavings
OLM FBW 2006
AirS@vings enables a Dynamic Cost Index

Tailored CI for every flight with Tankering recommendation
AirSavings is a first step
integrated
Flight Cost Management
for towards
MinimumCost
(typicalCI=82)
Total Spec. Cost
(USD/NM)
98,00%
93,00%
Cost of Time
(USD/FH)
SFC (kg/NM)
88,00%
Fuel Flow
(kg/FH)
83,00%
78,00%
0,720
0,740
0,760
0,780
0,800
0,820
0,840
0,860
Mach
AirSavings
Maximum
Range
Minimum
Cost
OLM FBW 2006
Data Flow to database and to Flight Planning Programme

Cost Index
Administra
AirSavings
tion
Automated
Interfaces
Manual InputsCost Index

per Flight
Automated
Interfaces
Flt Schedule
Flight
Flight
Planning
Planning
Crew Schedule
Fuel Prices
Database
Database
Cost
Cost Index
Index
per Flight
per
Flight
Currency Rates
A/C Rotation
AirSavings
FMCFBW 2006
OLM
Source : Airbus/fwz:
AirSavings Minimum Configuration

For small short haul carriers
Cost Index
Cost Index
Administra
tion
Administration
Browser Client, running on a PC
Manual
Interfaces
with Internet connection
Single Currency (no exchange
rate updates required)
No interfaces
No crew cost
Fuelprices by manual input
TDMC by manual input
Citypair Lists as Output
AirSavings
Manual Inputs
per CityPair
Cost Index
per City Pair
Internet
Internet
Flight
Flight
Planning
Planning
Database
FMC
OLM FBW 2006
AirSavings Fullsized Configuration

For large or long haul carriers
Cost Index
Cost Index
Administra
tion
Administration
Server components on dedicated

or shared server
All input data via interfaces

(Schedule, Aircraft Rotation,
Crew, Fuel prices, Currencies)
Manual Inputs
Cost Index
Automated
per Flight
Interfaces
Automated
Flt Schedule
Interfaces
Flight
Planning
Crew Schedule
Automatic TDMC updates /

requests
Fuel Prices
Database
Cost
Index
Cost Index
per
Flight
per Flight
Currency Rates
A/C Rotation
FMC
Interface to flight planning system

AirSavings
OLM FBW 2006
Cost Factors / TDMC

DMC
per Trip
Sector Length in Flight Hours
DMC per Trip = H * Sector Length + C
Cyclic Cost (C)
Hourly Cost (H)
In the diagrams above, only the blue section is determining the TDMC, which
is purely the portion of cost that is directly proportional to flight time.
Only include costs that will be affected by a change in flight time as
small as a single minute.
AirSavings
OLM FBW 2006
Added feature : Time Dependant Maintence Cost Wizard
AirSavings
Source :
OLM Airbus
FBW 2006
Delay Cost Management

Cost Input to AirS@vings and Flight planning System
Based on Historical Irregularity Cost to be consulted on CRS
AirSavings
Source :
Airbus
OLM FBW
2006
On the Ground: Flight Planning System Integration
s
Co
st
h
tC
h
lig
erf
e
ar g
De
l ay
t
os
Ov
Co
st I
nd
ex
MC
+F
ue
l
ta
To
TD
All cost factors of different solutions are visible for comparison in on single
display, with values relative to the best solution
AirSavings
Source :
OLM FBW 2006
fwz:
Getting a temporary password and testing it for free
username: GUESTij
password: airsave
domain: public
http://airsavings.fwz.aero
Support :airsavings@fwz.aero
Do ask for a password here!
AirSavings
Send your feedback to

Airbus and f:wz
OLM FBW 2006
Application Layout / City Pairs List
AirSavings
OLM FBW 2006
Savings per Flight Leg

Savings per Flightleg
Avg predicted savings with AirSavings in original units
Opt. Mode
Unit
SR
MR
FL / Mach
kg
13
90
Delay Cost Index *
kg
21
48
Tankering
$
10
30
Avg. Fuel Price
$/T
LR
483
261
40
600
for Flights on Schedule

Current Scenario Nr
Current Scenario
1
LRC
1
LRC
1
LRC
for Flights with Delay

Current Scenario Nr
Current Scenario
Percentage delayed
5
M75
30%
5
M80
30%
4
M82
30%
Current Tankering
Tankering Potential
%
%
20%
40%
10%
30%
0%
20%
AirSavings
Avg predicted Savings in $

SR
MR
8
54
13
29
10
30
SR = Short Range
MR = Medium Range
LR = Long Range
LRC = Long Range Cruise
M80 = Mach 0.80 Cruise
CI 40 = Cost Index 40 Cruise
OLM FBW 2006
LR
290
157
40
Check Your Solutions
typical result from a legacy flight-planning system with added functionality

claiming to optimize for cost index,
the green area shows the results from the system, while on the right side a
comparison is made for required cost indices. The red zone values should
actually be in the same line as the corresponding Cost Index! The values in
the orange cells are the fuel penalties for not optimizing correctly,
Results like these may actually be responsible for the limited acceptance of
the Cost Index concept,
AirSavings
OLM FBW 2006
Real Optimization
this is how a well optimized solution will look like note that the zero values
are exactly on the correct lines in the orange fields,
typical in-flight solutions like the Mmo speed profile on a fuel optimized FL
profile in the last line show a significant cost penalty (over 4T of virtual fuel),
AirSavings
OLM FBW 2006
Running Conservative Scenarios on representative aircraft

AirSavings Application Cost
One-time License Fee
38,413 USD
One Time Setup Cost (installation, interfacing,training, etc - estimate*)
5,000 USD
Hardware, Standard Software licenses (estimate*)
8,000 USD
Yearly recurringco st (license, support, releases)

Amortization period
5,762 USD/y
5 Years
Total yearly cost
15,044 USD/y
* both can be reduced significantlyif you choose the hosted variant,

which will make absolutelysense for yourfleet size of 7 aircraft.
AirSavings
OLM FBW 2006
Cost Saving Potential Overview

Cost Saving Potential Overview
(relative to current situation)
Numbero f A/C
Legs/Day
Legs/Year
Short Range Medium Range

9
10
6.0
4.0
19710
14600
Long Range
10
1.5
5475
39785
Opt. Module
FL/Mach
Delay Cost Index
Tankering
Short Range Medium Range

151,767
786,940
248,346
420,480
197,100
438,000
Long Range
1,586,655
857,385
219,000
Total
2,525,362
1,526,211
854,100
X
X
X
Total (USD/Year)
Total
29
4,905,673
This is an estimate how much saving could be achieved in total relative to the current situation.
While AirSavings will contribute significantly to achieve those savings, this potential also implies that flight planning and
FMS handling is done accordingly, as well as pilots and dispatchers are properly trained to understand the concepts and
act accordingly.
AirSavings
OLM FBW 2006
Contents
Introduction
AirSavings
AirSavings
OLM FBW 2006
Conclusion
Dont wait & dont drag your feet.
Consulting is available from us

Support is performed through f:wz
airsavings@fwz.aero
Applying this tool needs the inputs of all
A personalized airline website can be tailored!

Do you want to specify some kind of induction training?
AirSavings pays for itself within the first month!

Please try free of charge & feedback your ideas
AirSavings
OLM FBW 2006
Furtherquestions andanswers
canbe directedto:
jean-jacques.speyer@airbus.com
Thanks!

Cost Index Savings

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OLM FBW 2006 Toulouse 26-28 September 2006

Strategic Markers of Airline Economics

Practical ways & means toward Flight Economy

Practical Methods & Tools for Flight Economy

Conclusion and Discussion

OLM FBW 2006

OLM FBW 2006

The Cost Index governs the optimisation of your flight plan

OLM FBW 2006

An Airbus / fwz initiative to compute the cost index

OLM FBW 2006

Strategic Markers of Airline Economics

Practical ways & means toward Flight Economy

Tactical Levers for effective Flight Economy

OLM FBW 2006

US$ per barrel (WTI)

Energy demand remain robust in spite of record prices

Modest increased investment in exploration and drilling

Supply disruption (emerging economies, war threats, terrorism, rebellions)

OLM FBW 2006

Oil price anticipated to trend downward in the longer term

Below $30/bbl unlikely, above 80$/bbl not unlikely at all

OLM FBW 2006

In the meantime Damocles sword is still over our heads

still the same since advent of Glass Cockpits

few airlines utilize the Ci to its full extent which is perplexing

havent a clue on economics and on how to account for delay costs

OLM FBW 2006

Strategic Markers of Airline Economics

Practical ways & means toward Flight Economy

Tactical Levers for effective Flight Economy

OLM FBW 2006

of the most intense cost cutting ever happened in 2001-2004

distribution, airport fees being tackled, flight operational costs

Fuel hedging was possible thanks to a carriers strong financial

enabling it to dedicate resources towards insuring itself against fuel hikes

OLM FBW 2006

Strong improvement of Efficiency Markers

Lower Unit Costs all along Oil Shock

North American airlines

OLM FBW 2006

Strategic Markers of Airline Economics

Practical ways & means toward Flight Economy

Tactical Levers for effective Flight Economy

OLM FBW 2006

Examples of New Practices / Innovative AirSavings ~ 1

review of its real ingredients and seasonality/periodicity

collegially with all involved around a key accountable manager

AirSavings software to determine the (Flight) Cost Index to be field

and refresh costs periodically (AirSavings)

the cost of delays with Cost Benefit Analyses

spend as an insurance to avoid even more eventual spending

OLM FBW 2006

Data from SWA , LCC and legacy carriers out of / in Ch 11

GALLONS/TOTAL BLOCK HOUR

Overal Cost Index

OLM FBW 2006

Examples of Optimized Flight Planning & Procedures ~ 2

Cost Index : include impact on flight planning for reasonableness

tankering : How to do it to optimize costs (included in Airsavings)

the use of FMS (insertion of proper Cost Index i.e.Basic Default ,

Trade-Offs in flight for Off-Optimum Altitudes

of flex versus cost of fuel also in the climb phase

OLM FBW 2006