airline industry risk assessment report

Introduction

Infrastructure assets, although very beneficial to society are often marred with high profiled accidents and deaths. Industry segments such as trucking, rail transportation, and ocean shipping have all experienced very high profile and deadly accidents. Although the statistics indicate the many of these activities are safe, occasionally accidents occur that can adverse consequents for not only the company, but the industry overall. The airline industry is not except for this criticism either. The airline industry is particularly fraught with oversight primarily due its importance global economy. The airline not only transports goods around the world but also individuals. These individuals are often helpless in the event of a malfunction or a serios lapse in protocols. As the September 11th, terrorist attacks illustrated, airlines can also be the target of extremist’s groups looking to harm the United States. From a national security perspective, airline also ship mission critical information, goods and products around the world. The recent COVID-19 pandemic illustrates the importance of airline companies in transporting life saving vaccines and doing so in a temperature controls and secure fashion. As result of the overall importance of the airline industry to consumers, industries and society overall, it is often a prime candidate for risk assessment. The modified bow-tie model is particularly useful as it allows multiple sources of inputs and consequences for a single event. It also provides insights into preventative measures and how to properly mitigate the risks associated with the aviation industry. Although risk can not be fully eliminated, through the use of the modified bow-tie methods risks can be substantial diminished (Cederholm, 2008). 

The overall purpose of the risk assessment is the minimize risks associated with the airline industry. Due to its importance to society, individuals travel, and global commerce, periodic risk assessments must be conducted to maintain the overall safety of the industry. Likewise, risk assessments can ultimately increase consumers confidence in utilizing the industry for their commerce and transportations needs. As COVID-19 has illustrated, a severe lack of consumer confidence, especially related to health safety can have a serve impact on the industry overall. Likewise, a severe mistake resulting in the death of many paying customers can have a similar impact. For this reason the report will provide a risk assessment of the sources of late clearance changes from air traffic control operations. In this instance, a majority of the safety reports have shown a strong correlation to air traffic control and late clearance items (Cederholm, 2014). 

Methodology

Chart 1, within the appendix provides a list of 25 safety reports that were analyzed. The chart includes both the CAN and the synopsis but excludes the narrative. The primary risk associated with the reports is associated with air traffic control delays. These delays have resulted in track deviations, altitude deviations, FMC programming errors, and overall communication confusion. Below is the Chart 2 which identifies the contributing factors and the corresponding consequences.

Contributing Factors 

1. Communication disruptions and inability to properly hear

2. Weather disruptions 

3. Lack of appropriate Staffing 

4. Pilots physical and mental conditioning (Tired, pilot attitude, etc)

5. External pressure to complete the flight

6. Airport Lighting and conditions 

7. Pilot Experience 

8. Condition of takeoff and landing areas with surrounding obstacles 

Consequences

1. Flight Delays

2. Disgruntled customers 

3. Increase fuel costs

4. Loss of productivity 

5. Loss of profitability 

6. Higher Expenses 

Risk Assessment

The airline industry has a cost structure that is relatively straight forward and directly correlates with risk management activities overall. To begin, airlines have two primary costs. The first cost is labor with approximates roughly 30% of all costs for major airlines. The second is fuel which typically accounts for another 30% of sales. The remaining expenses are related to maintenance, capital expenditures, and other miscellaneous expenses. Overall, the industry operates with razer thin profit margins. For example, American Airlines over the past decades has earned margins of roughly 3% to 5% in any given year. The combination of razor thin margins, high fixed costs, and a fickle customer base has all created negative headwinds for the industry overall. These factors are the main catalyst for bankruptcy filings for the many of the industries operators over the years (Pearce, 2020). 

This brief financial profile above is directly correlated to the risks and hazards mentioned above. For one, a seemingly small business disruption or delay could have severe consequences for the firms financial performance. A delay with one flight, will also delay subsequent flights later in the day. This could potentially increase cost and lower already low profit margins. If the firm consistently has delays as indicated by the safety reports in the appendix, this could have negative consequences for profitability. Lower profitability could lead to bankruptcy and massive layoffs. As a result, it is important to take ATC delays very seriously. Especially as they are appearing on a recurring basis. 

Secondly, delays can put both customers and airline employees at risk. Although these ATC delays are often short and meaningless, an accident can still arise if they occur to often. As indicated by the safety reports, a majority of the cases were track deviations that occurred as a result of late clearance. Late clearance has the potential to cause unforeseen problems as it relates to delays and their corresponding side effects. The worst-case scenario would be a deadly crash as a result of the clearance delays. Although highly unlikely, the changes of occurrence are increased with clearance delays (Szyliowicz, 2004). 

As it relates to each element within the risk model, the primary catalyst are elements that are often beyond both the pilot and the air traffic controllers’ control. Although these elements are often uncontrollable, they can cause safety concerns due to track deviations and delays. The first and most potent element is weather conditions. Weather conditions can obstruct the view of pilots, the ATC, and other crew member. Extreme rain or hail can cause deviations simply due to the inability for the ATC and the flight crew to communicate properly. In addition to weather, the overall conditions of the airport also play a roll. Both elements are related as snow and rain could impact the ATC and their decision making. Although rare the temperament of the pilot can also be an element. An experience pilot may have an entirely different ATC experience than a newly minted pilot (Tamasi, 2008). 

Risk Index

1. 1A – Terrorist Attack 

2. 2A – Economic Recession

3. 3A – Global Pandemic or Health Outbreak 

4. 4A – Global Economic Depression

5. 5A – Labor Union Negotiations  

6. 1B – Nuclear Bomb Attack

7. 2B – Chemical Warfare 

8. 3B – Cyber Security Attack 

9. 4B – Government Regulation