Driving efficiency in a changing world of aviation

DRIVING EFFICIENCY IN A CHANGING WORLD OF AVIATION TABLE OF CONTENTS HOW CAN AIRLINES LEVERAGE DISRUPTIVE TECHNOLOGIES TO MAINTAIN AND IMPROVE PROFITS 3 AIRLINES CAN DOUBLE PROFITS WITH A 10% REDUCTION IN MAINTENANCE COSTS 4 LATEST INSIGHTS FROM IFS RESEARCH 5 RESPONDING TO THE CHALLENGE 6 LOOK FOR THE OBVIOUS – AND WORK WITH EXPERTS 7 SAFER, FASTER, BETTER: MODERN MRO AND PERFORMANCE EXCELLENCE AT CHINA AIRLINES 8 WHAT’S NEXT FOR YOUR BUSINESS? 10 HOW CAN IFS HELP 11 MEET OUR INDUSTRY EXPERTS 12 Global industry views on the importance and relevance of digitization vary between industry around the globe. It’s worth asking yourself what sort of impact you think it might have for your business. IFS DIGITAL TRANSFORMATION SURVEY 2016 THANK YOU TO ALL WHO PARTICIPATED! NEARLY 500 SENIOR BUSINESS DECISION MAKERS FROM 20+ COUNTRIES GIVE THEIR VIEWS ON DIGITAL TRANSFORMATION DIGITAL TRANSFORMATION REGIONAL SPLIT ON WHAT ROLES ARE CONSIDERED TO BE RESPONSIBLE FOR DIGITAL TRANSFORMATION IN VARIOUS COUNTRIES WHO IS RESPONSIBLE? The nearly 500 decision makers consider these roles to be responsible for digital transformation CEO 39% CIO 40% CTO 20% CFO 35% CMO 6% OTHER C-LEVEL OTHER NON C-LEVEL DON’T KNOW18% 9%24% DIGITAL TRANSFORMATION: WHO IS RESPONSIBLE? ME 56% CIO 22% CTO 22% CFO 56% CMO 0% THE CIO’S VIEW THE CFO’S VIEWTHE CEO’S VIEW ME 63% CEO 38% CTO 19% CFO 25% CMO 16% ME 69% CEO 44% CIO 38% CTO 3% CMO 9% DIGITAL TRANSFORMATION RATING OF HOW IMPORTANT THESE TECHNOLOGIES ARE IN DRIVING DIGITAL TRANSFORMATION 59 42 48 45 37 53 55 59 IoT 3D Printing Wearable tech AR/VR Drones Machine learning Cognitive computing Cloud DIGITAL TRANSFORMATION HOW IMPORTANT IS IT? Digital transformation is just a buzz word Digital transformation will play a key role in my market in the coming five years I need to know more about digital transformation My company has a clear strategy for digital transformation Strongly agree Somewhat agree Somewhat disagree Strongly disagree 30% 76% 59% 86% Agree GLOBAL ASEAN AUSTRALIA BENELUX BRAZIL CHINA FINLAND POLAND SCANDINAVIA USA CEO 39% 38% 31% 37% 51% 47% 37% 41% 38% 30% CIO 40% 21% 31% 22% 42% 53% 52% 57% 45% 29% CTO 20% 0% 9% 15% 57% 19% 19% 7% 13% 16% CFO 35% 17% 56% 56% 27% 38% 26% 36% 32% 42% CMO 6% 0% 0% 11% 4% 6% 15% 2% 7% 6% OTHER C-LEVEL 24% 13% 22% 11% 42% 16% 19% 34% 15% 27% OTHER NON-C-LEVEL 18% 8% 25% 41% 8% 6% 7% 20% 12% 39% DON’T KNOW 9% 29% 9% 7% 0% 6% 15% 2% 15% 8% Source: IFS Digital Transformation Survey 2016 DIGITAL TRANSFORMATION HOW IMPORTANT IS IT? 2 New levels of data input mean that all aspects of areas such as maintenance should now be clearly understood. With every long-haul flight capturing 500GB of black-box data, the fact is that commercial aviation has never had the opportunity to leverage so much data-driven insight. It is becoming increasingly challenging for commercial airlines to make a profit in a world of disruptive technologies. Globally, the aviation industry is happy to seek third-party best-practice advice to mitigate disruptive risks with 71% of companies considering that outsourced vendors are equipped to provide for future digital needs. However, against a landscape of ever-changing opinions, it is increasingly difficult to identify and isolate true and sustainable expertise that understands both the industry and individual challenges. HOW CAN AIRLINES LEVERAGE DISRUPTIVE TECHNOLOGIES TO MAINTAIN AND IMPROVE PROFITS? As commercial aviation fleets age, MRO has never been so mission-critical to profitability. *average fleet age 10 YEARS Global aviation fleets 15 YEARS European A319 fleet 20 YEARS Global Boeing 747 fleet * * * 3 AIRLINES CAN DOUBLE PROFITS WITH A 10% REDUCTION IN MAINTENANCE COSTS Faced with big data knowledge, one thing is obvious. Aircraft downtime can cost between $10,000 and $150,000 for just a couple of hours. With airlines fighting for every piece of revenue from every single flight, and with aging fleets, the ability to detect and react to faults instantly is an essential operational function. The numbers are straightforward. Average maintenance costs are 11% of overall operating costs and operating profit is typically 1%. If you can reduce maintenance costs by 10%, you can add 1.1% back to the bottom line. The streamlining of maintenance operations and the ability of Aircraft Health Management Systems (AHMS) to detect and react to faults instantly can drastically reduce an airline’s exposure to asset downtime. On a flight with 100 passengers, it takes fares and fees from 99 seats to cover all costs. Profit = 1 seat Source: US Airways Group Inc. The Wall Street Journal 29% FUEL COSTS 20% SALARIES 16% OWNERSHIP COSTS 14% GOV. FEES, TAXES 11% MAINTENANCE 9% OTHER 1% PROFIT REDUCING MAINTENANCE COSTS BY 10% COULD DOUBLE PROFIT 67% of airlines report that operational availability is a significant challenge for their business67% Airlines need every possible piece of revenue from every single flight just to break even, so advanced, e-enabled, streamed maintenance systems are game-changing. Graham Grose | Global Aviation Industry Director, IFS THE COMPELLING METRIC YOU CANNOT IGNORE 4 Headline insight from new research, commissioned by IFS from Raconteur Custom Publishing, into the aviation industry’s attitude towards digital transformation indicates: LATEST INSIGHTS FROM IFS RESEARCH More than 50% of commercial airlines consider their digital maturity to be at an enhanced or optimized stage, with most seeing clear commercial advantages 45% of those questioned considered internal process efficiencies to be the number one driver for transformation 41% of the airlines experiencing a talent deficit report that it’s restricting their ability to perform, saying they feel either slightly or totally unprepared to deal with the challenge Airlines are very aware of the impact made by digital disruption, particularly the shortage of required skills to manage transformation Full details of the Raconteur Custom Publishing commercial aviation research into digital transformation are available from ifs.world/dcs-ca 0% 10% 20% 30% 40% 50% 60% 70% Upskilling of existing talent Investing in digital resources, technologies Narrow and hone service / product offering External recruitment of digital talent Diversify service / product offering Response to the impact of digital disruption: >50% 41% 45% 5 Aside from optimizing maintenance repair and overhaul (MRO) costs, profitability depends on operational availability and minimizing aircraft on ground (AOG) downtime. Because more traditional finance and HR-focused products cannot meet the industry’s complex requirements, this requires an enterprise resource planning (ERP) system with dedicated aviation expertise and experience. RESPONDING TO THE CHALLENGE Alongside these challenges, it is important for planned investment in digital transformation to be born in mind when determining the most appropriate ERP system to accommodate costly flight disruption from incidents ranging from natural forces through to aviation fuel prices and long-term economic cycles. However, as a starting point, efficient MRO and supply chain ERP are key to operational availability. Top five capabilities identified for investment: BIG DATA AND ANALYTICS 39% INTERNET OF THINGS (IoT) 39% ENTERPRISE RESOURCE PLANNING (ERP) 33% ARTIFICIAL INTELLIGENCE 37% MOBILE COMPUTING / APPLICATIONS 31% 6 LOOK FOR THE OBVIOUS – AND WORK WITH EXPERTS Based on such a broad range of experience, IFS Applications provides a fleet and asset management (FAM) capability, which fully integrates with the MRO functions, allowing you to integrate the configuration, maintenance and maintenance program management of assets with your fleet and its planned and tasked operations. IFS software enables commercial operators to overcome maintenance challenges by providing the right combination of planning and execution support capabilities. Airlines are able to maximize the utilization of expensive assets with multi-horizon planning capabilities such as fleet maintenance scheduling, short term and line planning and tail/route assignment. Comprehensive work packaging allows you to track the execution of all activities and part availability, and real-time configuration validations ensure compliance with approved configurations before the aircraft is released back into service. Additionally, IFS Enterprise Operational Intelligence (EOI) makes it possible for airlines to keep their finger on the pulse of critical business processes that impact daily operations. IFS has a dedicated and proven aviation business unit, comprised of leading industry experts who can work with you to prepare you for what’s next. IFS was: First to be certified for paperless use in line maintenance First to support configuration management of complex, aircraft field-loadable software The first thin-client, web-architected solution First to build a mobile, handheld, disconnected maintenance execution application One of the first to tap into latest cloud-based technologies One of the first to support maintenance of unmanned aerial vehicles 2002 2004 2006 2008 2010 2011 7 CONT... SAFER, FASTER, BETTER: MODERN MRO AND PERFORMANCE EXCELLENCE AT CHINA AIRLINES Founded in 1959, China Airlines operates the largest and most modern aircraft body maintenance center in the region, with more than 1,200 professionals working out of five hangars to deliver a complete range of internationally-certified line, heavy and shop maintenance work on various types of aircraft and engines. In addition to its own passenger and cargo fleets, it carries out third-party maintenance for over 40 other domestic and international airlines. I F S C U S T O M E R S T O R Y There is no denying that modern information technology has the power to exercise significant influence over business performance. For airlines looking to differentiate from the competition, innovation should be a top strategic imperative. Mr. Houng Wang | Head of Engineering, China Airlines Safety and the role of maintenance China Airlines believes that the quality assurance of maintenance work is the foundation of flight safety and takes great pride in running an effective engineering & maintenance organization (EMO). However, the effectiveness of the maintenance operation had been constrained by a network of legacy mainframe systems that were siloed from each other, making it very difficult to access and share timely maintenance information throughout the organization. In a marketplace where success hinges on driving greater operational efficiencies, China Airlines committed to investing in modern IT systems to better support the business and maintenance operation. To integrate the entire EMO department using a single, seamless approach 1 To strengthen configuration control and record-keeping, for more agile compliance reporting 2 To minimize in-house system customizations3 IT investment was designed to meet three key objectives: 8 China Airlines adopted IFS Maintenix as their system of record for maintenance and engineering needs across their entire fleet of Boeing and Airbus airplanes as well aircraft from its burgeoning third- party maintenance services practice. Translating operational efficiency to bottom-line benefit A phased approach allowed the airline to wean off legacy systems gradually, integrate with an ERP system, evaluate progress and measure results at key intervals. Every month, it conducts a Time Quality Cost (TQC) assessment, measuring the impact of the new IFS Maintenix system against 18 operational metrics. Download full customer story PDF (0.4 MB) ERP has delivered tangible benefits: IFS AND THE END-TO-END SOLUTION FOR CHINA AIRLINES I F S C U S T O M E R S T O R Y IFS Maintenix, which offers an end-to-end suite, including functionality for maintenance program management, configuration management, engineering, planning, materials management and line, heavy and shop maintenance, was the chosen strategic solution. LINE MANAGEMENT PROCESS EFFICIENCIES Annual cost savings of $560,000 10% A CHECK DELIVERY EFFICIENCIES Annual cost savings of $213,000 3% LAYOVER IN SCHEDULED AIRCRAFT MAINTENANCE Savings of $1,352,000 (DVC) 30 DAYS LESS LAYOVER IN UNSCHEDULED AIRCRAFT MAINTENANCE Savings of $1,133,000 (DVC) 25 DAYS LESS 9 For example, the ability to leverage technology and insights from Internet of Things (IoT), using a product such as IFS Maintenix, gives aviation planners, line maintenance and maintenance operations the real-time connected insights and information-exchange they need to provide: • Collaborative deferral management for fast, effective and recorded decision making • Real-time maintenance status monitoring • Raise or close faults and release aircraft at the aircraft • Eliminate double entry of tasks and information • Fast and effective part searches that return only those parts relevant to the aircraft and the task at hand Staying competitive necessitates a modular approach that directly fits the specific commercial aviation requirement, supported with a breadth of solutions sufficient to manage highly complex aircraft maintenance rotations, HR, finance and everything in between. WHAT’S NEXT FOR YOUR BUSINESS? 77% of aviation companies believe that augmented reality (AR) could help teams react more effectively to unplanned maintenance events. 77% Those who succeed in the commercial aviation sector are most likely to be those who re-invent themselves and reposition their business model as a digitally-transformed, data-informed and asset-focused organization. Graham Grose | Global Aviation Industry Director, IFS 10 As true experts, IFS understands how to manage the more complex aspects of forward planning. We can help you identify what’s next, help prepare you for what’s to come and help you to leverage the benefits of future-facing technologies such as interpreting and managing big data and leveraging the opportunities of IoT. HOW CAN IFS HELP The long-term play will be to transform your organization, enabling you to develop EOI for a more robust and agile way of moving your business forward by: TRANSFORMATIONAL IMPROVEMENTS – TRANSFORMATIONAL REDUCTIONS = TRANSFORMATIONAL BENEFITS TRANSFORMATIONAL IMPROVEMENTS • To improve reliability and maintainability, it is important to optimize engineering and MRO processes, resource planning and maintenance visits • Improving configuration, maintenance and maintenance-program management requires fleet and asset management to be fully integrated with MRO • Increasing availability, minimizing turnaround times, driving enhanced operational efficiency, control and the control of accuracy of asset configuration is driven by the readiness and sustainability of operations planning TRANSFORMATIONAL REDUCTIONS • Reduced costs and increased efficiency can be derived from improved management of all enterprise assets • Reducing cost overheads while supporting owner-operator, performance-based logistics (PBL) results from improving MRO facility capabilities • To reduce the end-to-end supply chain logistics overhead, it is important to introduce best-practice technologies and KPIs • A reduction in procurement costs is leveraged by the consolidation and management of suppliers • The quickest way to reduce lead times is to improve back-to-back order management TRANSFORMATIONAL BENEFITS • The management of highly-trained scarce and expensive staff is made much more effective by job prioritization • Aligned reporting is derived from standardized maintenance processes 11 MEET OUR INDUSTRY EXPERTS Industry experts can play a significant role in helping senior management plot a business strategy for digital transformation, both operationally and culturally, throughout the entire organization. GRAHAM GROSE Global Aviation Industry Director Wherever your business is on its digital transformation journey, why not speak to our team? Leveraging the right industry experts to speed digital transformation and realize competitive benefits has never been so important. Software will only take you so far. That is why at IFS we focus on selected industries to become true experts in how they operate. Our current customers say that the single best thing about IFS is our dedicated employees. For example, our global team of aviation industry experts is led by Graham Grose who is responsible for all IFS business development within the aviation industry, together with associated industry marketing and overall product direction. He has been a specialist in the supply of logistics information system (IS) tools in a variety of senior appointments within Sema, BAeSEMA, BAe, BAE Systems and IFS since leaving the RAF in 1991 where he was a supply officer serving in a variety of operational and IS appointments. The team can help you get it right first time with less risk, quicker time to solution and lower cost by working with you on: IFS has a long heritage in the aviation industry, having worked with SAAB since 1994 and GE Aviation since 2002. Since the 2016 acquisition of Mxi, which resulted in over 300 new IFS employees that are focused exclusively on supporting customers in aviation, our capabilities are now even stronger. Envisioning what your organization’s digital future will look like Helping to determine how best to invest in digital initiatives and skillsets Ensuring top-down support to lead transformation 12 SCHEDULE A MEETING 13 IFS develops and delivers enterprise software for customers around the world who manufacture and distribute goods, maintain assets and manage service- focused operations. The industry expertise of our people and solutions, together with commitment to our customers, has made us a recognized leader and the most recommended supplier in our sector. Our team of 3,300 employees supports more than one million users worldwide from a network of local offices and through our growing ecosystem of partners. 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