Monday, 14 November 2011

The Value of IT: A Real Life Example

How IT could have saved BAA £220 Million
I’ve been listening to The Bottom Line this week - one of BBC Radio 4’s flagship business programs presented by Evan Davis (better known for presenting The Dragon’s Den).  In the show, Alison Carnwath, Chairman of Land Securities, took the opportunity to pin down BAA Chief Executive Colin Matthews over how much time passengers spend circling London before landing at London Heathrow, one of 6 airports operated by BAA in the UK.

 "I think I'd like to get off the plane now"

The Business Challenge
Flights arriving in London Heathrow are circling the city waiting for a landing slot due to congestion at the airport.  The challenge is for Heathrow to land more planes more quickly and reduce time spent in the in the sky above London without cutting the number of flights using the airport.  The benefits of solving this problem are three-fold:
  • Improving the passenger experience by reducing delays in the air and queuing on the ground
  • Improving airline customer satisfaction by reducing fuel overheads incurred as a result of extra time spent circling the city.
  • Maintaining and indeed increasing the number of airlines and flights using Heathrow - a core source of BAA revenue.

The Business Problem
The problem is one of capacity.  They need to be able to land more planes more quickly.  Initially, the most obvious solution was to build additional runways and more terminal stances to meet rising demand.  However, on top of the huge cost of building and maintaining this infrastructure there are other factors, including huge public resistance, which made this a contentious solution. The plan for a third runway was subsequently scrapped by the UK Government in 2010.  However, there’s more than one way to skin a cat.  If extending infrastructure is not an option, then an organisation must improve the way demand is managed to fit around the existing infrastructure.

The Solution
Matthew’s suggested solution was to manage demand more effectively by better integration of what Air Traffic Control with the allocation of runway slots and terminal parking stances on the ground.  This might relieve congestion in a limited way but it only addresses half the problem.  The cause of congestion lies both downstream and upstream of air traffic control.  Poor management of the runways and terminal stances creates a bottleneck downstream.  Upstream variation in flying times means arrivals deviate from the schedule and flights miss their allocated landing slots – so they are left circling in the stack until a new slot is found.

 "Hi, is that the tower?  I hate to rush you but..."

The weak point is NATS lack of visibility outside of their own airspace monitoring systems.  Mark Elborne, CEO of GE (UK & Ireland) was quick to plug GE Aviation’s Performance Based Navigation (PBN) system which allows air traffic control to track incoming aircraft from takeoff at the departing airport to landing, giving better visibility of delays before they enter NATS airspace.  This allows them to plan further ahead, reorganise landing sequences in advance and work with the airport to manage landing slots, terminals and parking stances to fit changing demand.  According to Elborne, this is already happening in China, Brazil, Australia and Sweden - meaning this is becoming an emerging best practice for aligning air traffic and airport operations.

I have no idea whether BAA will end up implementing such a system.  The point I want to make is that this is a prime example of an opportunity for IT to solve a business problem more cheaply and effectively than the alternative.  As such, CEOs need to integrate CIOs and IT executives into the decision-making process to explore all of the possibilities before making a decision.  BAA spent £220m buying property in the village of Sipson – the site of the proposed third runway.  This money could have been saved and a lot of bad press avoided if IT had been involved at an earlier stage.

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