Ph.D. M. Tatalović M.Sc. I. Mišetić B.Sc. I. Malović Beganović PRODUCTIVITY OPTIMIZATION OF AN AIRLINE ICRAT November 22-24, Zilina, SLOVAKIA

1. INTRODUCTION 1.1. IMPORTANCE OF PRODUCTIVITY 1926 SCHEDULED PAX SCHEDULED PAX SCHEDULED PAX SCHEDULED PAX CONCLUSION – PRODUCTIVITY IS WORLDWIDE PHENOMENA WORLDWIDE PHENOMENA 2/15

2. DEFINITION AND PRODUCTIVITY FORMS 2.1. Q = QUANTITY OF PRODUCTS (SERVICES)-OUTPUT R = INVESTED INPUT (WORK; MEANS & SUBJECT OF WORK) 2.2. FORMS NATURAL (QUANTITATIVE) NATURAL (QUANTITATIVE) ECONOMICAL (FINANCIAL) ECONOMICAL (FINANCIAL) 2.3. AIR TRANSPORT FORMS 2.3. AIR TRANSPORT FORMS PRODUCTIVITY OF AIRCRAFT PRODUCTIVITY OF AIRCRAFT PRODUCTIVITY OF EMPLOYEES PRODUCTIVITY OF EMPLOYEES PRODUCTIVITY OF FUEL PRODUCTIVITY OF FUEL 3/15

3. AIR TRAFFIC PRODUCTIVITY 3.1. HISTORY DATA PHASES ACCELERATION 77% EXPANSION 100% PROGRESSION 30% DYNAMICS 15% MATURATION 6-7% SATURATIONS 4-5% 4/15

4. BASIC PRODUCTIVITY INDICATORS OF AN AIRLINE 4.1. AIRCRAFT PRODUCTIVITY 9 INDICATORS (PLF, WLF, UTILIZATION) 4.2. EMPLOYEE PRODUCTIVITY 11 INDICATORS ATKm/empl, RTKm/empl., RPKm/empl., ASKm/empl., Pax/empl PRODUCTIVITY OF FUEL 5 INDICATORS (RTKm/fuel consumption, cost index) 4.4. ECONOMIC PRODUCTIVITY INDICATOR (23+…) 5/15

5. TOTAL FACTOR PRODUCTIVITY (TFP) MODEL 5.1. TRADITIONAL INDICATORS (FLEET, EMPLOYEE, FUEL, ECONOMIC) 5.2. ADDITIONAL INDICATORS OVERBOOKING (USA) OVERBOOKING (USA) CAPITAL VALUE INDICATORS (GB Cranfield University) CAPITAL VALUE INDICATORS (GB Cranfield University) - CABIN CONFIGURATION - SISTER COMPANIES, CSA, IN HOUSE INVESTMENTS IN PROFIT CENTRES -DIFFERENT WEIGHT CRITERIA RESULTS: DOMINATION OF ASIAN AIRLINES (SINGAPORE, THAI, CATHAY, JAL VS EUROPEAN (LH, AF, BA, KLM) AND AMERICAN (UA, AA, DE, NW) QUALITY (PUNCTUALITY, LOSTBAGGAGE) QUALITY (PUNCTUALITY, LOST BAGGAGE) PASSENGER SATISFACTION (COMPLAINTS) PASSENGER SATISFACTION (COMPLAINTS) 6/15

6. FUTURE TREND OF AIRLINE PRODUCTIVITY 6.1. INFRASTRUCTURE LIMITATIONS OF AIRPORTS 6.2. AIRSPACE CONGESTIONS 6.3. INCREASING ENVIRONMENTAL DEMANDS 6.4. LIMITED INVESTMENT POSSIBILITIES 6.5. INCREASING SAFETY AND SECURITY DEMANDS FORECASTING MODEL (PAX, CARGO)…GDP &YIELD AVERAGE FLIGHT DISTANCE0,26% BLOCK SPEED0,07% AIRCRAFT UTILIZATION0,32% PLF0,22% 7/15

7. TFP MODEL FOR CROATIA AIRLINES ELEMENTS OF TFP (WLF, PLF, UTILIZATION (BH), TKm/e, ATKm/e, PKm/e, ASKm/e, TKm/fuel, GDP per capita, Yield, Punctuality, Lost Baggage) 7.2. Structure – 67% Natural productivity indicators 17% Economics productivity indicators 17% Economics productivity indicators 16% Indirect productivity indicators 16% Indirect productivity indicators With different specific value of the elements (4 categories) 7.3. Model divided in two phases: Starting position and trends 7.5. RESULTS AIRCRAFT PRODUCTIVITY -10/15% AIRCRAFT PRODUCTIVITY -10/15% EMPLOYEE PRODUCTIVITY -25/30% EMPLOYEE PRODUCTIVITY -25/30% FUEL PRODUCTIVITY - 7/10% FUEL PRODUCTIVITY - 7/10%8/15

9/15 Selected natural and financial results of Croatia Airlines

8. CONCLUSIONS 8.1. HYPOTHESIS:  PRODUCTIVITY  PROFITABILITY  PRODUCTIVITY  PROFITABILITY RESULT: NEGATIVE – PEARSON’S CORRELATION COEFFICIENT –0,03 - 0, HYPOTHESIS:  PRODUCTIVITY  REVENUE  PRODUCTIVITY  REVENUE RESULT: POSITIVEPCC = 0,81 – 0, HYPOTHESIS:  PRODUCTIVITY  OPERATING RESULT  PRODUCTIVITY  OPERATING RESULT RESULT: MODERATE POSITIVE PCC=0,67-0,74 10/15

BUT, THERE IS MORE…… 1. NUMBER OF EMPLOYEES 2003 (TRL) (TRL)1991 AF BA LH LH pax (incl. CITY LINE) LH cargo LH Technik = 0 ?! LH Sky Chefs = 0 ?! LH Systems 3 000= 0 ?! LH Commercial 7 000= 0 ?! THOMAS COOK = 0 ?! 11/15

2. DEFINITION OF PASSENGERS UP TO THE YEAR revenue passengers min 25% of “appropriate” coupon value min 25% of “appropriate” coupon value -INF - OUT -Code-sharing, FF ? AFTER pax with AD and ID discount up to 50% OUT -FF YES -Code-sharing ONLY OPERATING CARRIER CROATIA AIRLINES IN 2001 (10 CSA) OLD METHODOLOGY pax NEW METHODOLOGY pax DIFF. IN METHODOLOGY pax 12/15

3. WEIGHT OF PAX IN TKM IATA WATS STANDARD = 70 kg + 20 kg cargo density = 161 kg/m 3 cargo density = 161 kg/m 3 BUT……..17 carriers > 100 kg 32 carriers < 90 kg 32 carriers < 90 kg 1999/2000LTU = 128,2 kg/pax GBAIRWAY = 122,3 kg/pax BALKAN = 75,4 kg/pax 13/15

4. VALUE OF DISTANCE LONG RANGE CARRIERS > km SHORT RANGE CARRIERS OU = 610 km 14/15

THANK YOU! QUESTIONS & ANSWERS 15/15