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Edit Story

CIO Network


HERE’S WHY BOARDS NEED TO KNOW ABOUT AMERICAN AIRLINES’ TECH ‘GLITCH’—AND IT’S
NOT ABOUT TRAVEL.

Noah Barsky
Contributor
Opinions expressed by Forbes Contributors are their own.
I write about essential business insight in a tech-driven world.
New! Follow this author to improve your content experience. Got it!
Jul 11, 2022,08:30am EDT|

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Recent cybersecurity scares and emerging regulation motivated boards to re-think
digital risk. While downside fears monopolize attention, strong IT controls
serve a second valuable and underappreciated purpose - to help businesses run
smoothly.




Beyond loss prevention, CFOs and CIOs must also ensure that system designs do
not impede “what must go right” for key stakeholders. Such unforced errors can
be equally or more damaging to company strategies, reputations and finances.



For the second time in five years, American Airlines (AA) reported that a
scheduling platform “glitch” left thousands of flights without pilots. While the
airline characterized the resulting operational disruption as minimal, the
long-term effects could prove far more costly and problematic. That’s hardly
unique to American’s business.





UPPER HAND

Holiday crew scheduling is not a new challenge to airlines. Pilots and cabin
staff are assigned to flights weeks in advance. Trading systems allow for time
off without jeopardizing published flight schedules.



On July 2nd, a system control lapse left over 12,000 upcoming AA flight cockpits
understaffed. The turmoil and confusion quickly drew the pilot union’s ire, as
American is contractually prohibited from re-assigning pilots in such
circumstances.

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“[American Airlines] failed to keep the IT system running properly and now
thousands of flights do not have pilots assigned,” said Dennis Tajer, Allied
Pilots Association (APA) spokesperson.



APA union president Ed Sicher soon added, “Management’s trip trade system
allowed many July trips to turn ‘green’ last night, resulting in more than 2,000
sequences and 37,000 flying hours to be dropped into open time. Once again, AA’s
operational mismanagement is at the heart of an issue that will soon go public.”

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With long-term contract negotiations underway, the timing could not be worse. To
swiftly resolve the immediate matter, American Airlines made some significant
concessions — including agreeing to pay pilots triple their normal rate for all
re-assigned July flights. Additionally, all future holiday flights will pay
pilots double.

That’s an example of how a “tech glitch” can be costly, even without
malfeasance.


HISTORY REPEATS

In November 2017, American encountered a similar issue, which then left
approximately 15,000 flights understaffed. According to CNBC, “pilots loaded up
their schedules with flights in early December but many opted to take days off
around the holidays, after the system allowed it.” At that time, American agreed
to pay pilots a 50% premium (time and a half) to cover reassignments.

The American Airlines crises shows that effective data controls must do far more
than preventing inevitable bad actor mischief. They’re essential to well-run
enterprises.

Then and now, both instances gathered much media attention. Such negative press
further challenges an industry facing skyrocketing fuel prices, intense
competitive pressures, record delays and tenuous customer service reputations.
Increased labor costs and overtime rates only raise profitability hurdles and
stress cash flow.

The real underlying problem is that many C-suites tolerate the term “glitch” as
a comfortable excuse for inadequate management oversight. Too often, system
designers and software engineers lack fundamental business process insights –
and, in turn, their operations peers conveniently blame “system flaws” for
workplace mistakes.


JUST ASK

As companies move to digitize workflows, tech leaders must thoroughly understand
routine business activities, critical resource paths and risk points. Otherwise,
avoidable crises can quickly derail strategy, devour leadership time and
disillusion employees.

To start, frequent walkthroughs of routine transactions, resource allocations
and scheduling needs can help close troublesome gaps. Here are three questions
that directors and senior leaders must regularly ask and address:



 * Do system designers understand how automated and digitized business processes
   should speed throughput and improve revenue generation? Technology is
   increasingly important to customer experience, supply chain management,
   employee staffing and financial management. Tech challenges can, do and will
   impair value chain effectiveness and efficiency.
 * Do decision tools connect operating decision quality to financial
   consequences? Misestimation jeopardizes sales, erodes margins and drains
   cash. For instance, well-known retailers, including Target and Bed Bath &
   Beyond, recently announced significant markdowns of excessive inventory.
   Similarly, Cerner and now-bankrupt Astria Health just settled a longstanding
   dispute over medical billings and accounts receivable collection timeliness.
 * Do credible plans exist to deploy and utilize artificial intelligence-driven
   analytics to proactively identify, diagnose and curb transaction variances?
   Emerging data tools allow for real-time assessment and corrective action of
   deviations that could signal or devolve into more significant challenges.
   Such “smart” technologies provide sharper and more timely oversight, but also
   require heavy utilization to justify investment.



Management responses likely reveal much about digital era readiness - or lack
thereof.


FULL SPEED

Just as race cars use precision steering and brakes to navigate turns at high
speeds, companies need data controls that both prevent losses and accelerate
strategy. Who’s roaring ahead or off course scrambling for excuses?


Follow me on Twitter or LinkedIn. Check out my website. 
Noah Barsky



I am a professor in executive and graduate business programs at the Villanova
University School of Business. My teaching, writing, and consulting focus on
contemporary

... Read More



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