Friday, April 21, 2017

Budget Airlines - how they achieve cost advantage over other airlines ..

Last time I caught an early morning 5.30 am flight from Bangalore to Mumbai, I had to leave home by 3.30 AM to reach Devanahalli airport at 4.30 AM. Why so early in the morning ? Since Bangalore does not have a secondary airport, I had to board flights departing the airport at odd times to avail of low airline fares. It was okay considering that I was paying just a third of what I would have paid had I boarded an 8.00 AM flight to Mumbai.

What is this big noise about Budget Airlines and how are they able to offer low fares to the public ?

Airlines operation is an interesting and exciting area of study for an Operations Manager. The airlines recover the initial high capital by carrying out very smart focused manoeuvres. South West Airlines in US was the first airlines in the world to start the concept of Budget Airlines. They started the field of demand management or Yield Management as an area of study where the ticket prices on a route depend on the customer demand for flights in that route. The main objective of yield management is to boost demand by offering tickets at different rates (in different slabs) depending on the demand distribution to optimise the final returns or yields.

Airlines have also looked at other minor yet important and interesting cost cutting aspects. As Sarah Coles (3) says, it is about concentrating in 4 main areas of operations,
  • first using the same type of aircraft
  • secondly, a constant drive to push costs down
  • thirdly, ensuring a faster turnaround time at the airports and 
  • fourthly not selling anything other than seats ..
We shall present them in detail here (1,2) ..

Identifying the cost pain points and addressing them to reduce the costs is the first step. US and India based budget airlines offer tickets that are 20-30% less than traditional airlines, while Budget airlines in Europe offer tickets at 50% of traditional airlines. an 800 km journey could be completed by air in under 10 euro. It is interesting to find how European budget airlines succeed where US and Indian airlines have only partly succeeded.

This video is a great example of how budget airlines constantly innovate to keep their operating costs low. Click for the video ..

There are different aspects we need to look at and they are listed here.

Physical Infrastructure - The planes are mostly of one type. RyanAir has only Boeing 737 and EasyJet only Airbus A320 aircrafts. GoAir and Indigo in India work mostly with Airbus A320 in their fleet. This helps the airlines to reduce their maintenance expenses, keep low inventory stock of spare parts and less training for the staff.
Additionally, the fleet is relatively new, with an average age of less than 5 years. They are more efficient incurring less running expenses, partly offsetting their higher purchase costs. These young planes incur less maintenance costs and are up in the air almost 24x7, giving better returns to the airlines. Most of these planes do not have expensive and luxurious reclining seats reducing costs and maintenance expenses. No back pockets for these seats reduce the cleaning needed reducing the turnaround time after each flight.The gap between the seats is limited, enabling accomodation of more seats in the economy class. (click here for pictures of future seating configurations in budget airlines..)

Airports proximity to city centre and landing fees - Landing fees at airports are a major source of expense for airlines as they have to part with higher airport landing fees when they land at major city airports. To keep the costs low, budget airlines land in slightly distant secondary airports which charge low landing fees, away from the cities with good connectivity to the city centre. The budget airlines use major airports at odd times when landing fees are very low like early morning or late night flights.

Training for Employees - training is imparted to the employees on multiple tasks like ticket checking, cleaning, luggage checking etc. . Fewer employees carrying out multiple tasks eliminates need for excess staff, reducing costs. The duration of training is less with more emphasis on safety than on hospitality. Being a very young workforce, there is no unionisation resulting in employees ready to shift to distant airports at short notice.

Catering facility - the budget airlines do not offer any complementary food or drinks during the flight and these are chargeable. The main advantage of this is that it saves inflight time for attendants who can attend to more important tasks of the passengers. Wastage of food is avoided on the flight.

Passenger loading schedules - The turnaround time at the airports are generally less than 45 minutes as earlier routine tasks like loading food trays, cleaning of planes between stops etc are avoided. As passengers are given seating on First Come First Served basis, passengers generally tend to come early to get window seats, eliminating delay in flights. The self check-ins through automated machines or internet check-ins have accelerated the check-ins.

Flying route schedules - Most of the budget airlines take only direct booking, eliminating middle men and commissions.
In addition most of the conventional established airlines operate on a hub-spoke arrangement, where they tend to touch at their hub or base very often, increasing the flying times and expenses for the airlines. Budget airlines on the other hand, have a point-to-point model of operations wherein they do not return to their main hub on every leg of the flight and instead touch base at different cities as per schedule and demand before reaching base. They also do not book connection flights as this leads to unnecessary extra expenses to the airline if the flight is delayed or connecting flights are missed.

Profit margins - Budget airlines have been observed to have healthy profit margins often running to an average of about 14-15 % while traditional airlines have low profit margins of about 4 - 5 %, besides being burdened with aging planes and heavy maintenance expenses.

What is the future of budget airlines ?

As economies keep growing, there will be increased demand for airline traveling. Hence the demand for budget airlines is only going to increase in the coming days, along  with a healthy demand for conventional long distance airlines. Short haul flights can experience a pull towards lower costs. An innovative technology like Hyperloop can bring great disruption if proved to be succcessful. 

References :

1. Nils Pratley, Anatomy of a flight, www.Guardian.com, 2003. Accessed April 2017
2. Wendover Productions, How budget Airlines work, www.youtube.com, 2016, Last accessed April 2017.
3. Sarah Coles, Low cost Airlines - How they cut costs, www.aol.co.uk, 2015, Last accessed  April 2017.

Compiled and written by George Easaw for classwork.

Thursday, April 20, 2017

UN Sustainable Development Goals 2015 .. What, why and how ?

Climate change is the greatest threat faced by humanity due to environmental pollution.  Sustainability efforts have thus gained importance world over, with leadership actions initiated by United Nations. 
Sustainable development means "meeting the needs of the present without compromising the ability of future generations to meet their own needs" (Brundtland Commission).Apr 21, 2015
UN' 17 Sustainable Development Goals, 2015 - 2030.
The historic Paris Agreement of 22 April 2016,  provides an opportunity for countries to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius. It entered into force on 4 November 2016.

The UN continues to encourage all stakeholders to take action toward reducing the impacts of climate change.

Click here for the UN website of the 17 Sustainable Development Goals adopted by 187 countries in 2015 to help transform our world, to be achieved by 2030 AD. 

The Lazy person's guide to saving the world (click here) is an interesting UN document which explains how each individual on this planet can contribute to making the earth sustainable in the long run in our small small ways.

Organisations big or small or even individuals need to analyse each of these 17 goals and 
  • segregate goals which they can influence and which they cannot, 
  • identify and prioritize goals which they can influence, 
  • organisations and individuals can then work out smaller macro and micro goals and
  • set measurable targets to achieve them 
  • in a fixed time frame.
The UN stated goals have been arrived at through consensus by all the 189 countries to be achieved over 15 years from 1 st January 2016. It is not legally binding on the countries of the world, but in the interests of the future generations, we need to take these goals in full earnestness and seriousness and ensure its accomplishment.

Kochi International Airport at Kochi, Kerala, India's third largest in infrastructure (1.5 m sq.ft T3) and fourth largest in terms of passenger traffic at 9 million annually, has built the world's first and only solar energy powered International airport. It remains unchallenged as the first and only fully solar energy powered international airport of the world even after 20 months of its initial insolation in July 2015. With faster economic development happening around the world, more people move around for work and leisure purposes. Air travel will become more popular and common, even though cheaper Mass Rapid Transport Systems alternatives like Hyperloop, do offer great promise. Airports going truly green can help make future air travel more sustainable, though air travel per se still depends on non-renewable resources..

2.5 acres of solar panels at Kochi International Airport, India.
We find very less awareness of these  in the press and media on the time limit and the goals to be achieved by then ? Let us take it upon each one of us, reading this document and the links given above to act in whatever small way possible to achieving the grand goal for the sake of humanity on planet earth...

It is our world, it is our joint responsibility to protect his world not only for our generation, but for all future generations..

George.. (photo courtesy Kochi airport, taken by Daily Mail, UK.)

Ref :

1. Bhaskar Chakavarthi, How companies can champion sustainable development, Harvard Business Review, March 2017. 
2. www,un.org/sustainabledevelopment, Sustainable Development Goals - 17 Goals to transform our world,  Last accessed , 17 April 2017.
3. george-easaw,blogspot.in, Truly green airport at Kochi, Last accessed 17 April, 2017,



India's top 10 market cap companies ..

Market capitalization is a measure of the customer confidence in the companies measured as the value what customers perceive it to have for their stocks in the market.

Total market capitalization of the top 10 Indian corporates as of April 2017 stands at 25,68,310 crores (app US$ 395 billion).

The Market leaders ..
(Market cap in INR, crores) (exchange rate calculated at 1 US $ = INR 65)

#1 Reliance Industries Ltd, 4,57,000 ($70.3 billion)
#2 Tata Consultancy Services, 4,56,000, (70.1 billion)
#3 HDFC Bank, 3,70,480 ($57 billion)
#4 Indian Tobacco Company, 3,38,851 ($52.1 billion)
#5 State Bank of India, 2,35,308 ($36.2 billion)
#6 HDFC 2,35,123 ($36.2 billion)
#7 Oil and Natural Gas Commission, 2,32,346 ($35.7 billion)
#8 Infosys, 2,11,870 ($32.6 billion)
#9 Hindustan Unilever, 1,97,464 ($30.4 billion)
#10 Maruti Udyog Ltd, 1,85,236 ($28.5 billion)

Of the top 10 market cap companies, 2 are from IT, 2 are from energy and telecom area, 3 are from Finance area, 2 are from retail and 1 from automobile manufacturing area. Finance sector is in the top with 3 out of 10 companies in financial services area. 2 of the top 10 companies are in the IT area reinforcing India's dominance and dependence on IT related services as economy drivers.

36% of market cap of the top 10 companies are generated by the top two companies RIL and TCS, the two flagship companies from the private sector in the country, representing energy, telecom and IT sectors.

Services vs Manufacturing -
9 of the top 10 companies are from the service sector and only 1 from manufacturing. It shows the dominance of service sector over manufacturing in the Indian economy.

Public sector vs private sector - 
Only three of the top 10 are public sector enterprises, rest are from the private sector, it shows that India's privatisation push post 1991 has worked quite successfully.

Contribution of different sectors -
Finance related companies , 840,911 crores account for 32.7% of the market capitalisation the top 10 players. Energy and telecom companies account for 26.4 %, IT related companies account for 26%, retail companies account for 20.9 % and manufacturing accounts for 7.2% of the market cap of total top 10 market cap companies.

TCS was India's leading corporate but for the presence of Jio Telecom which has helped Reliance Industries to get a boost of INR 100,000 crore to their market cap over the past six months.

The import this has for the future development of the country is that IT, energy, Finance and Retail will be dominating the Indian economy in the future. 

George..

Source -  Live Mint, 19 April 2017
                wikipedia.com

Wednesday, April 19, 2017

Aadhar card, can it be a panacea for Indian low levels of development ?

When about two months back I wanted to take my second Jio mobile SIM card, I collected it from a roadside Jio booth selling SIM cards in Bangalore near Christ College on Hosur Road. The employee asked for my aadhar card number which he fed to the Aadhar database and checked my finger print scan with the records in the Aadhar database to confirm my identity. Within 2 minutes my new Jio SIM card was in my hand. This was the first application I experienced wherein my personal details recorded in the Aadhar database has been verified by a commercial operator to establish my identity. It was a big culture shock to me. My existence as an Indian citizen has for the first time been validated and cross checked with the Govt of India database to help me avail of a commercial facility.

The Govt of India's Unique Identification programme Aadhaar (www.uidai.gov.in) is a 12 digit unique-identity number issued to all Indian residents based on their biometric and demographic data. The programme was implemented by Dr Manmohan Singh under the able guidance of Nandan Nilekani, one of the founders of the IT firm Infosys from Bangalore, an alumnus from my alma mater Indian Institute of Technology, Bombay. Though the present PM Modi took scrapping up this project as one of his top election promises, initially out of ignorance of the benefits of such a massive programme, later he accepted the utility and benefits of this programme in eliminating corruption in public systems and has adopted the Aadhar system with great dedication and sincerity now.

Cost of implementing the brilliant unique identification programme, Aadhar card,  of the Govt of India, started by Dr. Manmohan Singh and Nandan Nilekani and presently being pursued with all sincerity of purpose and devotion by PM Modi has been $ 1 billion, app INR 6500 crores.

Nandan Nilekani
Already the GoI has by weeding out false claims been able to save $8.5 billion in subsidies in two and a half years, about one fifth of annual central govt subsidies ..

Once the fingerprints of all the ten fingers and the iris scans of both eyes have been taken, there is no way someone can impersonate a person to run away with his subsidies and rations. (though roughly about 30% of all aadhar authentications are turned negative.)

The Aadhar database is being tapped on an average about 20 million times a day presently and 30 % of authentications are turned negative. About 1200 million people have already availed of Aadhar card across the country as per data released by The Economist of London, covering 99% of the adult population in the country.

The Income Tax department (woefully only 2.5% of Indians pay Income Tax in the country today) has made it mandatory that all IT returns from this year onwards be compulsorily linked with the Aadhar card number of the IT assesee. It is a welcome move as the GoI can keep a track of all citizens and possibly reward them in future for their honesty shown to the nation. It will also identify the dishonest citizens and punish them as the law permits.

With each passing day we find more and more services being linked with the Aadhar card identity of citizens making sure that services reach the actual beneficiary and no impersonation or corruption occurs in the delivery of central govt welfare subsidies and services. No other country has been as successful as India in rolling out this massive database benefiting the 1.25 billion population of the country.

In this recent talk with Quartz, (click here for the link) Nandan tries to defend the security concerns raised against Aadhaar by the tech community and the public at large ..

George (the author wishes to thank The Economist of London, issue of April 12, 2017, and wikipedia for the Aadhar related information provided in this article)

Data Analytics Primer ..

Information is processed data.

How can you process this data if it is very large running to terabits and is being generated on a continuous basis ?  One can easily get lost in the vast ocean of data. It is here the fields of big data and data analytics have joined hands to arrive at a tractable solution.
Big data analytics is the process of examining large and varied data sets -- i.e., big data -- to uncover hidden patterns, unknown correlations, market trends, customer preferences and other useful information that can help organizations make more-informed business decisions. credit - whatis.com
Big Data refers to the extremely large data sets that may be analysed computationally to reveal patterns, trends, and associations, especially relating to human behaviour and interactions. (source : wikipedia)

Big data is a term for data sets that are so large or complex that traditional data processing application software is inadequate to deal with them. Challenges include capture, storage, analysis, data curation, search, sharing, transfer, visualization, querying, updating and information privacy. (wikipedia.com)

Big Data comes from many sources it could be internal or external from customers, suppliers, transporters etc.., from the Internet, social media, sensors, IoT devices etc..

The 4 Vs of Big Data is

1. Volume (size of data running to Terabits) ,
2. Velocity (generated on a daily basis non-stop from units across the world),
3. Variety (from a large variety of sources like social media, retail stores, transportation, healthcare and so on) and
4. Veracity (how accurate is the source of data, is it corrupted, what is the quality of the data etc,,).

Big data could be in structured form like from a provision or retail store or unstructured form as from social media or facebook. Structured data can be handled by means of Database Management Systems or more efficiently with Relational Database Management Systems (RDBMS like MySQL, PostgreSQL, Oracle etc..) can handle strauctured data. But how can unstructured data that comes from twitter or Facebook or Google search be handled ?

The different models of Data Analytics is

A. Descriptive Data Analytics tells us what has happened in the past

B. Predictive Data Analytics they use past data to model future outcomes

C. Prescriptive Data Analytics uses optimisation or other mathematical models to help take better, effective, optimised decisions.

Big Data and Effective Analytics is a great competitive advantage for firms across the world. One model which helps one to achieve this competitive advantage is the DELTA model.

The DELTA model of Data Analytics is a simple yet effective model used across applications

Data has to be CLEAN, ACCESSIBLE and UNIQUE

Enterprise wide focus for data ensures data has to reach and should be accessible across all corners of the enterprise

Leaders across all functions that promote a analytics driven culture in the organisation

Targets, financial and non-financial that can help key business areas or departments meet their targets

Analysts help to analyse the data effectively and come out with right information to help take quality decisions.

Bid Data and Data Analytics is a great tool for the organisation to take the right decision and overtake competitors in he highly competitive world.

Click here to Understand Data mining - the three steps to analysing unstructured data ..

An excellent video from HBR click here ..

Monday, April 17, 2017

Take off - an action packed malayalam movie with an international theme ..

Happened to watch the malayalam movie "Take Off" a couple of days back in Bangalore. Have to say that there has never been such an active Malayalam movie for a long time. The most attractive part of the movie is the fact that a real incident which happened about two years back and which required the intervention of the CM of Kerala Oommen Chandy and the Ministry of External Affairs in New Delhi including the Indian ambassador, is the theme behind the movie. The picturisation of the theme has been carried out well by the Director.

Good picturisation of an international theme ..
The movie depicts the pains of a bunch of malayali nurses in strife torn Iraq and their escape from the hands of terrorist outfit, the Islamic State. In my memory, it is the first time in Malayalam film industry that an international theme has been used to make a picture. It was also a good depiction of the pain and every day challenges faced by Indian migrant labourers in Persia and Arabia.

Under the direction of Mahesh Narayanan, as the story goes, actress Parvathy as Sameera, the only Muslim woman in a pack of 19 nurses stranded in a hospital in Tikrit, Iraq tries to find her second husband played by Kunchacko Boban along with the help by the Indian govt ambassador and his team in Iraq. Fahad Fazil has played the role of the assistant well. With the help of an Indian businessman in Gulf, the Saudi Arabian monarch influences IS to release Sameera's husband.

It gives us a real idea of how Islamic State is a challenge to civilization not only in Arabia but the whole world. It demonstrates to us how in the interests of humanity, IS needs to be contained as early as possible. It was because we never had any such film that youngsters, especially from Kerala have been attracted to the violent philosophy of IS and its leader Baghdadi. This movie will prevent more such misguided youth from being captivated by the violent tactics of IS. The film has a very pleasant ending with the crossing of the Iraqi border into Turkey, as the nurses team escapes from the hands of execution by IS by a whisker on to freedom.

After seeing the movie I was reminded of the movie "Escape to victory" (click here for youtube movie) from the early 80s, where football legend Pele plays in the 1981 film as the captain, along with Sylvester Stallone, of the Allied prisoners in a German prison during second world war and beats the German all star Nazi team and escapes from the prison camp to victory. Hitler was very miffed at the victory of the prisoners team against the world champion Nazi football team.
Pele in "Escape to victory"

Hope this film prevents more misguided youth from joining IS ranks from India and other parts of the world. Islamic State is the curse of the modern day Arabia and Persia

The dubious role being played by Saudi Arabia and Qatar in funding Islamic State with enough of materials and cash supporting their violent means of establishing a Caliphate once again in the Gulf is very shocking for the common man. The same Saudi Arabia and Qatar, playing double standards, go around talking about their intentions to establish peace in the region, while hundreds are being killed daily. The role of US in precipitating this crisis in the first place in Syria and Iraq, is by itself a deep lesson for the world on how influential and powerful countries like US can sway world opinion to their favour, resulting in violence in other parts of the world.

This film also brings to the fore how the nations of Saudi Arabia, Qatar and United States are acting against the interests of humanity across the world for their personal and selfish interests and growth. Such nations need to be isolated from the comity of nations and expelled from all international fora. It may not prick some conscience to milk these countries for the riches, money and wealth they offer, but it is against the interests of humanity to stand with them in such heinous acts as creating and supporting terrorist groups.

george..

How US-China-North Korea war will benefit India .. How ?

USS Carl Vinson, Nimitz class, moving to Korean peninsula
US and China with the Chinese ally North Korea in a face to face combat is a great news for India. Why ?

The world waited for eight long years after George Bush's exit to see a boisterous US flex its muscles. Former President Obama was too smart to be pushed into a war and attended to the growth of US economy than its decline. Its great now to see under the impetuous Republicans, US pumping its fists to the air, all for misplaced reasons.

Republican Trump came into power not as much to bolster US defence as to give jobs to US citizens and to get US to grow once again. As is characteristic with almost all Republican Presidents without fail, Trump too did not fail the US public this time.

First it was the Mother of all bombs (MOAB - Massive Ordnance Air Blast) in the Afghanistan Pakistan border. The world looks forward to watch how US will give a shock to North Korea in the coming days. If that brings US and China face-to-face, it will be a bad day for global peace.

george..

Budget Airlines - how they achieve cost advantage over other airlines ..

Last time I caught an early morning 5.30 am flight from Bangalore to Mumbai, I had to leave home by 3.30 AM to reach Devanahalli air...

My popular posts over the last month ..