The huge scale and complexity of any airline’s network make planning and budgeting for ground operations difficult enough in “normal” times. But increasingly volatile input costs for commodities (such as aviation fuel and the strong appreciation of the US dollar) have made it doubly difficult over the last few years. When you are the size of United Airlines, which operates an average of 5,000 flights a day across six continents and directly employs 84,000 ground staff, it represents a mammoth challenge.
Perhaps that’s why Cato Hagen, Senior Finance Manager at United Airlines, and his colleague John Karantonis, Senior Analyst FP&A, attracted one of the largest audiences at their session at Hub16. Their division is responsible for check-in counters, ground handling, wheelchairs, snow removal, security, and communications—basically, everything but the planes, aircrew, fuel, and flight attendants—at over 370 airports around the globe. With a planning challenge of that magnitude, their audience knew there were lessons to be learned.
Complex planning, budgeting, and forecasting fails to fly on spreadsheets
Fluctuating exchange rates can also influence the consumer’s decision to travel—or not. This means United constantly has to juggle routes and flights to keep its network capacity in step with changing demand. So in addition to a drawn-out annual budgeting process, United runs rolling reforecasts with General Managers at each airport, reviewing their staffing and expenses every month. Hagen described managing these two processes, which involved emailing hundreds of separate spreadsheets around the globe, as “hellish” with the perennial problems of juggling updates, errors, and countless versions.
United’s FP&A takes off with Anaplan
Needless to say, such a situation could not continue and following a rigorous selection process, United chose Anaplan for all their FP&A requirements. “Now we have the best of both worlds.” Hagen told the audience, “We have centralized control, built by us in finance, and decentralized input from all the stations around the world.” In addition, General Managers now have access to the Anaplan system around the clock, so they can immediately update their inputs whenever new information about schedules or rates becomes available. This means the new system delivers more value for them, and they take greater ownership of their budgets.
Another big win for United is that the forecast and budget processes have been morphed into one. As future rates and flight schedules—up to 18 months ahead—are loaded into the model, General Managers can easily update their rolling reforecasts. And because the rolling reforecasts are now always up-to-date, Hagen now “looks forward to a budgeting season without doing a budget. And now we will be able to greatly shorten the annual cycle by up to two months.”
Greater accuracy and insight into variances too
Improved productivity and shortened cycle times free up the United finance team’s time to better understand the numbers and what they mean. But United enjoys other big wins too. One is the ability to deliver rules-based modeling based on drivers, such as the numbers of each day in every month, to more accurately forecast individual expense lines; the other is incorporating algorithms that automate variance analysis.
Having delivered benefits on so many fronts, it was inevitable that Hagen and Karantonis received a barrage of questions from audience members who wanted to dig into the details. Hear the entire session, plus the Q&A, by watching the video.