The subject of hypercomplexity is very often underestimated. It can often be observed when facing a sector that presents room for improvement in order to reach a higher level of efficiency.
One of the traits of industries considered extremely complex are that they are often subject to unexpected events that cannot be forecasted due to the high amount of variables which cannot be easily understood at a cognitive level and the solutions required may appear counter-intuitive.
Aviation is considered one of those sectors. As testified by Alan Joyce, CEO and managing director of Qantas Airways Limited in an article published ‘[So] aviation is a complex industry. Imagine an empty aircraft waiting on the tarmac. There are the passengers who don’t show up. There are those who just turn up on the day. Then there is the opportunity cost of an empty seat. […] the opportunity cost of a denied boarding. […] we came up with a model that helped […] define optimal overbooking levels and develop processes to achieve them.’
The complexity of the aviation sector is further rendered uncertain and unpredictable due to factors impacting the market:
- Changing price of fuel, also linked to floating exchange rates
- Growth of China
- Changes in the sector in terms of new players entering
- New technologies that can be adopted to manage booking
According to the research paper “Managing airlines: the cost of complexity” by César Trapote-Barreira, Andreas Deutschmann, Francesc Robusté, the complexity of the airline sector is given by the level of interrelation between different elements, the strengths of these dependencies and the heterogeneity between the elements. The main threat in the sector are delays, which have a consistent impact in the profit and loss account. Delays propagation could be caused by a congestioned airport and flights scheduled with no intervals among them. Delays negatively impact the business, being also a cost for the customer. It represents a big loss for companies as this money could be used for renewing planes, installing new entertainment for passengers and for security.
One solution adopted by airlines in order to respect the schedule is ‘padding’, namely the increase in the time allocated to each flight to deal with the problem of congestion in airports. It has been observed in a study conducted by OAG Aviation Worldwide that, for example, the scheduled time for flights between Los Angeles and San Francisco increased by 8% from 1996 to 2015. Even if this has improved the service, there is a need to analyse also the cost of it. In fact, an alternative solution may be rescheduling, which is more suited for hub-and-spoke, again according to the paper, than point-to-point, as it can dispose of larger resources.
Another possible solution may be artificial intelligence. As far as the aviation sector is concerned, it has been estimated that machine learning will save 23 billion euros currently lost each year due to unforeseen events. This figure was included in a report by Sita, an expert of technology solutions for the aviation sector. The saving will be based on predictive analysis, that puts together historical data as well as data from social networks and meteorology to forecast delays, flows, passengers and breakdowns. (Source: /www.sita.aero/globalassets/docs/air-transport-it-review/air-transport-it-review-issue-1-2016.pdf)
Alan Joyce, CEO of Qantas said ‘For an aircraft to take off, nine operational supply chains have to come together within a 45-minute window — safely, efficiently and on time. Check-in, lounges and in-flight service have to be synthesised into a smooth, comfortable travel experience. And pricing and yield have to be managed in such a way that the airline can ultimately deliver a profit for its shareholders.’
Nine operational supply chains can be defined an already complex scenario without adding on the market variables such as the introduction of new technologies, new players, fluctuations in the price of fuel and Asia growth. Aviation can be defined a Hypercomplex sector.
The examples mentioned above show how complexity can impact a business and also the solutions to the problem. This is the reason why it is important to have a clear identification of the perimeter of the complexity so as to assure that the solutions found really do involve all areas involved.
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