BACK TO BASICS: PRIORITIZING SAFETY IN A CHALLENGING ECONOMY

 “Back to Basics: Prioritizing Safety in a Challenging Economy.”

Operating Environment and Safety

Any nation’s economic success depends on having a vibrant airline industry and to support this effort, the airlines must remain committed to ensuring their operations are the safest, and most efficient.  The airline industry’s contribution to the nationalization of a country’s economy and the globalization of the world’s economy cannot be overemphasized. It connects buyers and sellers and transports goods within one nation and across other nations while breaking the barriers of distance and time. Like any other business, the airline industry is impacted by changes in the external environment, and observation shows that the global commercial aviation industry is not immune to a socio-economic crisis.  This is often referred to as the operational environment. The operational environment for the airline industry stands for political, social, legislative, economic, cultural, and natural environmental factors that significantly affect the airline business. It is a well-known fact that a healthy economy acts as a catalyst for the industrial growth of which the airline industry is a major partaker. Economist measures the economic health of a nation by various economic indicators and examples of such economic indicators include growth in the gross domestic product (GDP), per capita income, disposable income, industrial production, level of business, and consumer confidence. Apart from the fact that economic health directly influences growth in airline, passenger, and cargo traffic, the fluctuation in oil prices greatly impacts airlines’ profitability. Airline performance is related to economic growth which means as per capita income goes down, the revenue passenger kilometers will be impacted and it will also impact freight tonne-kilometers.  Thus, economic indicator trends can be matched with airline passenger and freight volumes. Revenue passenger kilometers (RPK) measures the volume of passengers carried by airlines and it is calculated by multiplying the number of revenue passengers by the distance traveled. Freight Tonne Kilometres (FTK) measures freight traffic and one FTK is one metric tonne of revenue load carried per kilometer. The FTK is closely related to business confidence that’s driven by a strong demand for goods. During periods of weak demand which happens in any challenging economy, most businesses choose cheaper means of transport and this helps businesses reduce costs and maintain profit margins, but this leads to reduced volumes of passenger and freight and as a result, brings down the FTKs and RPKs.

The potential impact of this reduction in cash flows is financial pressure on the airline. Financial pressure in a challenging economy has a great impact on the safety performance of airlines by forcing airlines to "cut corners" or reduce the amount spent or to be spent on safety. Even when the economy is not distressed, airlines are faced with a myriad of operational challenges ranging from schedule disruptions, limited resources such as aircraft, crew, and maintenance personnel, and increasing customer expectations. Each day presents a new set of challenges that airline personnel must counter when accomplishing the safe and efficient movement of passengers and cargoes. The success of daily airline operations is measured by the efficient and effective completion of flights as close to the published schedule as possible.  Furthermore, it has been observed that the economic crisis is not solely responsible for the poor performance of the airline industry. Besides economic recovery, a professional team and good governance are required to give a push to this sector so that it can contribute significantly to the world economy. Efficient airline operations don’t just happen, weeks, months, and even years go into the planning of a flight schedule during which an airline brings altogether an airworthy aircraft, qualified flight crews, and sufficient ground resources like maintenance, ticketing, ground operations amongst others.

Airline Financial Health and Safety

That the financial health of an airline will impact its ability or willingness to provide safety seems intuitive. Evidence to support this notion has shown that financially strong airlines are significantly less at risk than financially weak airlines. It is sufficing to say that if the financial condition of airlines is important in the pursuit of safety, the regulatory authority should consider allocating relatively more resources to the oversight of financially weak airlines than to financially strong ones. It is often said that if an airline compromises safety, it is most likely to compromise quality as well. Thus, the quality of service provided by an airline can be used as a means of determining the level of safety of the airline. The best ways to measure the quality of service of an airline are the number of consumer complaints and on-time performance. Nevertheless, these measures are unreliable. Consumer complaints vary significantly depending on the disposition of the consumers and publicity in the media. It is an established fact that safety comes at a price and all airlines have limited resources to devote to safety, and thus must deal continually with the conflicting goals of safety versus productivity, which ultimately determines profitability. Financial health in any airline will be influenced not only by good corporate governance structure and internal efficiency but by the external economic environment. A stated commitment by an airline to safety is necessary but not sufficient to guarantee the safety and continuous safety improvements if such commitment is not supported by appropriate resources such as technology and equipment, training and expertise, policies, and systems that promote operational safety. One of the indicators of a positive safety culture in an airline is the degree to which these resources for safety are immune to an airline’s financial situation per time. An airline’s commitment to safety should be consistent and visible regardless of any financial pressure facing the airline, whether internally, or externally generated and that is why management of change under the Safety Management System (SMS) is essential. The extent to which an airline’s financial health affects the airline’s commitment to safety in a challenging economy will be apparent from decisions and practices such as “what budgetary changes affecting safety are made when ‘times are tough’? For example, are some safety-related training seen as dispensable and consequently cut or postponed? To what extent are productivity or efficiency pressures increased at these times? For example, is ‘cutting corners’ encouraged or condoned more often? Do management’s priorities, messages, and most importantly their actions change from a focus on safety to other airlines' goals, such as the ‘bottom line’?

Management of Change

The airline industry during a challenging economy mostly experiences contraction changes that bring about changes to their existing systems, equipment, policies, programs, and services. Examples are reduction in operating aircraft, reduction in workforce, and amendments to the company’s various policies and programs. Hazards may inadvertently be introduced into the airline system whenever these changes occur, and the existing baseline safety risk mitigation processes may also be impacted. Prioritizing safety in a challenging economy thus requires the balancing of the two ‘Ps’, that is production and protection. The dwindling resources of the airline would impact both the production of services and protection or risk controls most especially in the allocation of the meager resources and this will bring to fore the need for management of change elements of a company Safety Management System (SMS). This brings us back to the basic principle of SMS of which management of change is an important element. Safety has been defined by International Civil Aviation Organisation (ICAO) in ICAO Annex 19 as “the state in which risks associated with aviation activities, related to, or indirect support of the operation of aircraft, are reduced and controlled to an acceptable level”. Managing safety in a delicate and global industry like aviation is a herculean task that requires the input of all stakeholders in the airline industry, including the regulators. Every enterprise is established to make a profit and profit is made through the production and sales of products. Any economic crises, most especially with the dwindling prices of commodities will impact the service industry like aviation and this usually results in a reduction in the fortunes of the airline industry.

Management of change is Element 3.2 of the ICAO SMS and requires the airline industry as service providers to establish a formal process for the management of change within their organization. Management of change is one of the elements under the Safety Assurance Component of ICAO SMS that requires the service provider to develop and maintain a formal process to identify changes that may affect the level of safety risk associated with its aviation products or services and to identify and manage the safety risks that may arise from those changes. SMS regulations require airlines to ensure that, the management of change process addresses the impact of any change on existing safety performance and risk mitigation records before implementing the new changes. The management of change process is required to include procedures to ensure that safety assessment of new aviation safety-related operations, processes, and equipment are conducted (or accounted for) as applicable before they are commissioned. The established management of change process must also consider the vulnerability of that systems and activities, the stability of systems and operational environments, past performance, and regulatory, industry, and technological changes. Under the management of change, safety management practices require that hazards resulting from these changes be systematically identified, and strategies to manage the consequential safety risks be developed, implemented, and subsequently evaluated. Since a challenging economy is an unforeseen change, the airline industry should evaluate the appropriateness and effectiveness of its already established safety risk mitigation strategies.

During a challenging economy, most airlines look for ways to cut costs to make the business profitable to the owner(s) or at least to continue running at a minima loss. In a survey conducted by Sabre Airline Solutions, it was concluded that fuel cost is the top challenge and the most critical impediment to profitability for nearly all the airlines around the globe and since airlines cannot really operate without fuel, there are high tendencies for airlines to look towards other areas where they can cut cost without obvious negative impact on their operations. In a situation like this, safety initiative is not a priority and probable areas to cut cost includes downsizing of both technical and non-technical personnel, non-payment of insurance premiums, operational procedures that will reduce fuel consumption, maximum aircraft utilization with a request for additional concession, amongst others. Once an airline initiates a cut costing policy in a distressed economy, it is important to note that such operational changes may affect the appropriateness or effectiveness of existing safety risk mitigation strategies. In addition, new hazards, and related safety risks may be inadvertently introduced into their operations whenever operational changes such as the foregoing occur. It is the responsibility of the Safety Manager or whatever nomenclature the company chooses to ensure the coordination of activities that will ensure such hazards are identified to enable the assessment and control of any related safety risks. Management of change can cover anything in airline operations such as regulatory changes; new routes, vehicles, or aircraft; organizational restructuring; aircraft flight operations; cockpit procedures; aircraft maintenance; turn-around; ticketing; scheduling; baggage handling; and changes in integral procedures or management personnel (such as a new Safety Manager) to mention a few. Every change can manifest hazards in ingenious ways and as such management of change, plans must be comprehensive and well defined to the extent that the safety manager needs to ask imaginative questions about the change. The safety manager will do well to organize a brainstorming session with the Safety Risk Management Team where imaginative questions are asked and risks that are not obvious are addressed through “what-if” questions. These questions should be aimed at possible risks and hazards within the operational environment, and in the physical/external environment. Multiple disciplines should be represented on the SRM teams, including those with expertise in operational, technical, engineering, and safety areas. Teams must include representatives from the various business units that could be affected by the decision for change, which often means that multiple Lines of Business must be represented.

Safety auditors and line supervisors should then carry out observation of the day to day, flight by flight, job by job performance of operational systems and their associated safety risk controls considering the changes that may have been initiated by the management due to the prevailing economic challenges. Since both expansion and contraction affects the system, the initial system description will require periodic amendment as the changes occur. Just like as a maintenance organization it is required to inform the civil aviation authority of changes that can affect its approval (for example name of the organization, location, housing, facilities, tools, equipment, materials, procedures, and certifying staff), the airline industry should make it a policy to always carry out the management of change process in order to prioritize safety in a distressed economy, and this should be irrespective of whether the changes are of temporary nature or permanent nature. If the management of change is not performed thoroughly, airlines bear themselves at the mercy of unanticipated events, as well as the overlooked deterioration of existing controls due to the change. Airlines should formulate a policy and define in their SMS manual, the types of changes that would necessitate formal management of change process. This should include who makes the decision to start the process and who has the final authority to sign it off by accepting the safety risks. The major objective of the management of change process is to ensure that safety risks resulting from any changes are reduced to as low as reasonably practicable. Once the management of change process has been implemented, the safety performance monitoring and review should be performed as documented to ensure that the risk controls are being practiced and continues to achieve their intended objectives while looking forward to continuous improvement. Finally, airline owners and managers should be mindful that the market will penalize airlines for unsafe operations to the extent that the management chooses to under-invest in safety. One thing is certain in the airline business, hazards and risks exist regardless of our perception, knowledge, or awareness of their presence. Hazards and risks do not care if we know about them or try to do anything about them.