One of the largest commercial carriers of passengers and cargo in Africa experience the challenge of an immensely complex budgeting process with many variables and cost centres.
Flight operations form the main driver for the financial budget, with the operating schedule, expected passenger volumes and cargo revenue forming the framework for both direct operating costs and revenues as well as the various cost centre operating budgets.
Using a manual, spreadsheet-based approach for formulation and consolidation of the budget resulted in a budgeting process that was error-prone, subject to a number of other weaknesses, and took between five and six months to complete.
In an effort to improve on this time frame as well as address other budgeting process issues, in late 2009 Cortell Corporate Performance Management using TM1 software from IBM Cognos provided a solution to assist the airline.
Manual processes made the airline’s budget time consuming and prone to error, and conducting simulations was a laborious task. Poor communication was also experienced on budget changes, a lack of automated budget approval, and poor version control. There was no proper audit trail, information security was lacking, and the airline was unable to integrate the budgeting process with their business systems.
On top of this, conducting what-if scenario planning according to changes in flight schedules was difficult, as the entire process took too long for this to be a viable option. After much research, TM1 was selected as it accurately met the needs of the airline.
TM1 from IBM Cognos was selected based on its functionality to perform budgeting, planning and reporting, as well as the fact that this solution is used effectively by other major airlines in Africa. TM1 had already been partially implemented within the organisation as a business intelligence tool, and training on the solution had already been completed, so it was a logical selection.
After integrating the solution with financial systems with the help of Cortell, TM1 now delivers fast, automated budgeting, forecasting and reporting capabilities which enable the necessary scenario planning to be conducted, helping the airline to be more agile in their budget cycle.
“Cortell performed the full development of the solution and has provided continuing support since implementation in 2009. The implementation took a phased approach, dealing firstly with budgeting and forecasting and then with reporting.
“The full implementation was completed on schedule, and our Service Level Agreement (SLA) ensured that over peak periods, someone from Cortell was available at all times to assist where necessary,” explains Greg Bogiages, director at Cortell.
The TM1 solution has enabled the national carrier to reduce the budgeting process cycle time to three months, compared to six previously, and has delivered automated budget consolidation and approvals.
On-demand budget simulations and what-if analysis are now available for a more flexible decision-making ability, and comparative reporting between actual, forecasted and budgeted figures has been enhanced. TM1 also enables accurate version control, an improved audit trail and better information security, along with improved visibility in terms of business performance in relation to budgets.
The implementation schedule was tight as it needed to meet the next budgeting cycle, and the TM1 solution needed to seamlessly integrate with other business systems to enable data transfer to take place.
With support from the airlines top management, Cortell’s airline specific experience, effective user training and proper change management and communication, the challenges were overcome and the solution was implemented successfully.
The airline has not only cut their budgeting cycle in half and improved the entire process, they have seen an increase in productivity in budget preparation, as well as in long term planning and forecasting. The airline is now also able to be more proactive when it comes to the volatility of the airline industry, resulting in improved budgeting and ultimately enhanced profitability.
In 2013, thanks to skills transfer and training from Cortell consultants, the airline was able to complete their budget cycle unassisted, showing the strength of the solution in simplifying the process and delivering the benefits required.
