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Operational Risk Management in Aviation: The implementation of a new baggage logistics technology at Heathrow Airport Terminal 5

Trabalho de conclusão do MBA pela University of Sunderland no Reino Unido, onde o tema abordado é a tecnologia da esteira de bagagens abordada no Terminal 5 do aeroporto de Heathrow, em Londres.

Sunderland University – Cavendish College

MBA Dissertation

Operational Risk Management in Aviation: The implementation of a new baggage logistics technology at Heathrow Airport Terminal 5

Danilo Gomes de Matos

Sunderland ID: 089068287

Date: 15/05/2009

STATEMENT OF AUTHENTICITY/DECLARATION

This research has been finished with the help of others who contributed with their opinions, views, corrections and criticisms. The work is original and I am responsible to the full extent.

Signed:

_________________________________ May 2009

Danilo Gomes de Matos
Sunderland University - Cavendish College

Danilo Gomes de Matos

The Dissertation Committee for the above candidate for the MBA Degree, recommend acceptance of this dissertation.

Supervisor______________________________________________

This dissertation is accepted by Cavendish College

DEDICATION

To my Parents: Jose Alberto de Matos and Tania Regina Gomes de Matos for all the support and care throughout my life.

To my girlfriend Elisa Brioschi for the love, understanding and encouragement she gave me to get this academic achievement.

To my sisters: Vanessa Matos Loge and Aline Gomes de Matos for always being on my side.

To my supervisor John Jones and my professors Bruce Sheppy and Pavlos Stavrakakis.

Table of Contents

Executive Summary. 10

Chapter 1 - Introduction. 11

1.1 - Introduction. 11

1.2 - Background Problem.. 12

1.3 - Objectives. 13

1.4 - Chapter Summary. 13

Chapter 2 - Literature Review.. 14

2.1 - Introduction. 14

2.2 - Risk Management 14

2.3 - Different Types of Risk. 16

2.4 - The common risks faced by companies. 17

2.5 - Operational Risk. 17

2.5.1 - Controlling the risks. 18

2.5.2 - Strategies for managing the risks. 19

2.5.3 - Actions required. 20

2.5.4 The Decision Process in Operations. 20

2.6 Baggage Handling. 21

2.7 - Operations Management 21

2.7.1 - The Activities of operations Management 22

2.7.2 - The direct responsibilities of operations management 22

2.7.3 - The indirect responsibilities of operations management 23

2.7.4 - The broad responsibilities of operations management 23

2.8 - The scope of project risk management 24

2.9 - The project life cycle. 24

2.10 - Chapter Summary. 26

Chapter 3 - Research Methodology. 27

3.1 - Introduction. 27

3.2 - Research Questions. 27

3.3 - Research Design. 27

3.4 - Type of Research. 28

3.5 - Research Instruments. 28

3.6 - Data Collection. 28

3.7 - Target Population. 29

3.8 - Sampling. 29

3.9 - Administration of Questionnaires and Interviews. 30

3.10 - Data Analysis. 31

3.11 - Elimination of Bias. 32

3.12 - Study Limitations. 33

3.13 - Chapter Summary. 33

Chapter 4 - Data Presentation. 34

4.1 - Introduction. 34

4.2 - Findings from the questionnaire. 34

4.3 - Finding from the interviews. 38

4.3.1 - Question 3. 39

4.3.2 - Question 4. 41

4.3.3 - Question 5. 42

4.3.4 - Question 6. 43

4.3.5 - Question 7. 43

4.3.6 - Question 8. 44

Chapter 5 - Analyses of findings. 46

5.1 - Questionnaire. 46

5.2 – Interview.. 48

Chapter 6 - Conclusions and Recommendations. 55

6.1 Conclusion. 55

6.2 Recommendations. 56

6.2.1 Heathrow Airport Terminal 5. 56

6.2.2 Aviation sector 57

Chapter 7 - Personal Development Plan (PDP) 58

7.1 - S.W.O.T. Analyses. 58

7.2 - Action Plan. 59

Bibliography. 61

Appendices. 65

Appendix 1 - Risk factors identified: premises, product, purchasing. 65

Appendix 2 - Risk factor identified: people, procedures, protection. 66

Appendix 3 - Risk factors identified: processes/performance. 67

Appendix 4 - Risk factors identified on planning and policy. 68

Appendix 5 - Questionnaire. 69

Appendix 6 - Questions interview.. 71

Appendix 7 - Letter of recommendation. 72

List of tables

Table 1 – Eight stages in the project life cycle...........................................................25

Table 2 - Interview Schedule......................................................................................31

Table 3 – Differences noticed by passengers.............................................................37

Table 4 – Activities most and least important (handling baggage)..........................37

Table 5 – Improvements at Terminal 5.......................................................................38

Table 6 - Future investments in terminal 1, 3 and 4 at Heathrow ..............................41

Table 7 - Observations during interview.....................................................................45

Table 8 - Action plan...................................................................................................60

List of Figures

Figure 1 – Gender.........................................................................................................34

Figure 2 - Group of age................................................................................................35

Figure 3 - Problems with baggage................................................................................35

Figure 4 - Common problems with baggage...............................................................36

Figure 5 - Customer perception....................................................................................36

Figure 6 - Customer perception - security....................................................................38

Executive Summary

The executive summary for the research done can be seen as follow.

The chapter one had showed the introduction of the study with the background problems that was happening. The aims of the research were indicated as well.

Chapter two showed the literature review that the study had researched. It included theories about risk management, operational management, and different types of risk, how to control those risks through strategies and actions required, and the new baggage system that is being used at Heathrow Airport Terminal 5.

Chapter three showed the research methodology. The research question and design were described in this chapter. The type of research, the data collection, the target population, the sampling, the data analysis and the elimination of bias were written in detail in this chapter.

Chapter four showed the data presentation from the questionnaire that was done with passengers at the arrival and departure point at Heathrow Airport Terminal 5 and also the data presentation from the interviews that were done with people who worked for the airport and the company (BA – British Airways and BAA – British Airports Authority).

Chapter five had analysed the findings from the questionnaires and the interviews. It was linked to the theory about the topic and changes that they had introduced.

Chapter six gave a conclusion about the research that had been undertaken and also recommendations for both, BA and BAA.

A personal development plan was conducted on chapter seven. It included an S.W.O.T analysis and also an action plan for the author of this study.
Chapter 1 - Introduction

1.1 - Introduction

The study investigated the activities that were initiated when Heathrow Airport Terminal 5 introduced a new baggage system, specifically the operation management which deal with both, human and system failures. The study was based on the background of the sector that showed different problems with the operations

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