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Operations Research... and May the Past be Prologue
Annual AGIFORS Symposium – Dinner Speech
Montréal, September 26, 2008

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The variety … the volume … and urgency of issues that need to be addressed … by Executives … may often prevent the careful development of appropriate models to resolve any particular issue …

However … the mental discipline which has been acquired in the development of OR-type solutions … is undoubtedly … very useful in analyzing the issue confronted … and in making the right decision.

Indeed … I often found this type of disciplined approach to be useful during my days at Air Canada.

For example … as Head of Marketing … it proved a valuable tool in identifying …and evaluating … specific strategies … in the light of the competitive environment that we were facing at the time.

Later on … as CEO … a disciplined approach was absolutely essential in evaluating different strategic alternatives … in our efforts to privatize the corporation which … at the time … was State-owned.

Similar approaches have been useful … in my more recent role as Director General and CEO of IATA.

To give you an example of a typical strategic approach …the following anecdote could serve as an illustration.

Towards the end of the last decade …, traffic was growing rapidly between Europe on the one hand … and Japan … Hong Kong … and South Korea on the other.

Unfortunately North Korea … which controlled a rather large flight information region … would not permit any aircraft to cross its designated airspace … thus forcing all airlines to fly around at considerable cost.

This was an increasing source of frustration … and every effort by the international community to influence the situation had failed.

North Korea had a small national airline called “Air Koryo” … which was anxious to achieve some degree of international recognition … and Air Koryo approached IATA to join our Association.

Air Koryo being State-owned … this provided an opening for us to begin discussions with the North Korea government.

We now had a basis for negotiation.

There were two immediate hurdles in suggesting the opening of the North Korea airspace.

The first was that the Pyongyang air traffic control centre … was not adequately equipped … to provide the necessary oversight and control of flights going through its region.

Secondly … communication between North and South Korea was strictly prohibited.

This would become a major impediment … as it would be necessary for the air traffic control centre of Pyongyang … to pass on information to the Seoul Air Traffic Control … as any aircraft crossed its airspace.

An additional factor in our favor … was the fact that North Korea was rather short of foreign currency … particularly US dollars … and they had not been aware that air traffic control centers … guiding airplanes through their airspace … could charge an appropriate fee … and thus earn valuable foreign currency.

We were able to demonstrate to the North Korean authorities … that opening up their airspace to very specific corridors … jointly defined … could be carried out with virtually no security risk to them.

These corridors would enable the international airlines … to achieve considerable savings in time and cost … by crossing that airspace.

As the North Koreans were short of U.S. currency … we offered to advance the funds … to train their controllers … and to adequately equip their air traffic control centers.

We arranged for an appropriate charge formula … collected the fees from the airlines … supervised the upgrading of the North Korean control centers … and thus got the centre to be fully operational.

But there remained a major difficulty … which was the lack of communication between North and South Korea … and North Korea was absolutely rigid on that point. … Under no circumstances could there be any direct communication between North and South Korea.

To overcome this particular constraint … IATA offered … – and subsequently received authorization –… to set up and operate the telephone lines between Pyongyang and Seoul … so that North Korea could continue to feel that they had not established any link with South Korea.

With all this having been agreed … it was implemented. The result was a typical case of Minimax:

Minimum giving in on the part of North Korea in terms of their self-imposed constraints and restrictions … with the maximum amount of benefits derived in terms of improving the functioning of their ATC …generating foreign currency … and achieving international recognition for their airline.

For the international airline community … the ability to fly through the admittedly still restricted North Korea airspace … was providing them with savings in fuel and operating costs of around $150 million a year … well worth the relatively reasonable fee for air traffic control which North Korea charges … and which was based on IATA’s recommended formula.

This was clearly a win/win which … as you would certainly recognize … required the identification of the various factors involved … and the search for the optimum compromise … which finally led to a satisfactory solution.

Finally … I believe … that Operations Research has been … a great incubator for the development of executives … and that this is still largely the case.

In Air Canada … out of the twelve or so … members of the O.R. group at the end of the 60’s … six eventually progressed to the level of Vice President … or Senior Vice President … and your humble servant even made it to the level of President and CEO.

Air Canada is not a particularly unique case in this regard.

Lise Fournel is a good example that … starting as a fairly junior O.R. practitioner less than twenty years ago … one can still become a Senior V.P.

Ladies and gentlemen … the airline industry has always been under stress … and probably always will be … as the current crisis affecting our industry is a good example … of what aviation faces periodically.

There has never been a shortage of issues … and there have always been too few resources.

It is a natural field for O.R. applications.

Over the years … as an O.R. practitioner … I have learned that the KISS principle is useful to keep in mind … (Keep It Simple Stupid).

I have designed models that have virtually collapsed under their own complexity.

Mathematical elegance may be academically attractive … and indeed useful … in getting your papers published … but it may be useless to your airline … if the implementation is overly complicated … and does not yield real results.

I remember that when Yogi Bera was asked … if there was a difference between the theory and practice …. he said …

“Well … in theory there is no difference … but in practice there is!”

O.R. practitioners can be very useful internal consultants … but must remember … that not every problem requires a sophisticated solution.

All too often … executives do not have the luxury of time … They must act quickly … now.

A simple quick analysis … today … with its stated limitations … may still be of better help … than a more thorough analysis … produced too late to impact a decision.

Finally dear colleagues … I guess that it may be permitted to use that term … as a former O.R. practitioner … I feel that … by now …. I may have been sliding down your retention curve … way past the saddle point!

On the basis that no speech is entirely bad … if it is relatively short …I would like to thank you for the opportunity you have given me … to get back to my O.R. practitioner roots.

And to reminisce about AGIFORS … and O.R. in general.

I wish each and every one of you … much success in your respective careers … as O.R. practitioners of course … and also … undoubtedly for a number of you … as airline executives.

Thank you!

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