Unrest in Libya and nearby countries has been at the top of the news lately; and news analysts are commenting on the effect of that political volatility on oil prices. According to CNN.com, early last week the price of a barrel of oil went over 100USD for the first time since 2008, before retreating to 97USD toward the end of the week. The rising price of oil impacts many aspects of the economy, but its impact is dramatic in the aviation sector. (Bear in mind, the price per barrel for jet fuel is even higher than crude oil, with prices between 115-120USD per barrel.)
One source, FlightGlobal.com, sounds the financial concern: “IATA is forecasting 2011 will see industry profits slump 40% to $9.1 billion, assuming Brent [Brent Crude is the European classification of crude oil] at $84 per barrel. However, director general Giovanni Bisignani warns: "For every dollar increase in the average price of a barrel of oil over the year, airlines face the difficult task of recovering an additional $1.6 billion in costs."
The same article quotes British Airways chief executive Willie Walsh as saying "There's only so much airlines can do to offset the increased cost. It will drive airlines that are unprofitable out of the industry because they just won't be able to survive but, ultimately, it's going to lead to higher prices."
On February 22 an AviationWeek.com MRO blog commented, “It may be obvious that rising oil prices are bad news for airlines, but it is also a major concern for MRO providers -- and not just because financially struggling airlines make lousy MRO customers.”
AviationWeek.com also touched on this subject in an article on its recent MRO Middle East conference, “Inventory destocking, outsourcing and cutting costs (including labor) take priority, even as airlines order new aircraft to stay fresh and competitive in their markets. For maintenance and engineering departments and MRO providers, this means supporting more component work, facing increased competition for contracts and developing new ways to package services. A surge in fuel costs gives these issues new urgency.”
As airlines and MRO shops consider various steps to cope with increased fuel costs, they should also look to IT solutions for ways to reduce costs and improve efficiencies. We’ve written on this topic before, but it is a message that bears repeating: automating and integrating maintenance content saves time and money.
A case in point is Air France Industries KLM Engineering and Maintenance (AFI KLM E&M), which documented a 10% reduction in aircraft maintenance IT costs with its initial implementation of Enigma 3C. With an upcoming rollout of Enigma InService MRO and Revision Manager, the company expects to gain additional savings (see press release here). “By significantly accelerating the implementation of tens of thousands of maintenance updates and revisions, Enigma’s InService MRO will provide another competitive advantage for our aircraft, components and engine services operations,” said Peter de Swert, Executive Vice President, AFI KLM E&M.
Other M&E organizations still rely on manual processes to 1) incorporate OEM revisions into current maintenance practices and 2) extract maintenance parts and procedures to update ERP, MRO, PLM and SCM systems. Automating those manual processes saves significant time; for example, by using InService Revision Manager, airlines can reconcile OEM revisions about 80% faster (days rather than months). Integrating the maintenance documentation into enterprise systems ensures that the latest technical information is available across the maintenance environment. This means maintenance engineers, planners and technicians work more quickly, improving aircraft uptime, and helping airlines remain compliant.
With the rise in oil prices, airlines and MRO shops need every competitive advantage they can get. IT solutions for maintenance documentation and execution should be a key element of their cost-saving strategy.