TProphet

You're a retired pilot. Did you do weight and balance calculations prior to every flight, so you could decide how much fuel to take on board, how much cargo you could carry, what you should load where, and whether you were within your takeoff and landing weight limits? Did you carry fuel reserves? Were there formulas you used to make all these calculations? Did you use computers to do this, and sanity check the figures yourself to make sure everything looked right? I am guessing that the answer to all of the above is "yes" because you are a retired pilot and not a dead pilot. Somehow it all worked! These formulas tend to be extremely conservative because when you get them wrong, you kill everyone on the plane and it's not very good business to kill your customers. However, the formulas definitely exist, and they do work pretty damn reliably. The fact that you're still alive is proof of this.

Now look at other parts of the operation. Have you noticed how good airlines have gotten at filling up planes compared even to 10 years ago? That's not by accident. In fact, my management science professor earned his PhD working in the field of airline revenue management, using KLM's operations for the basis of his research. A lot of the same techniques I've been discussing apply, but they're a whole lot more complicated than cash management. It's not hard to sell all the seats on the plane, but it's a really hard problem to sell all the seats on the plane for the maximum price. This is why a lot of really smart MBAs work in revenue management departments of airlines.

I would guess that at airlines, cash management is something that MBAs aren't looking at; it's just something that ends up being buried under accounting somewhere with some accountants overseeing it. The operations procedures that you get as a result will be more about carefully tracking all the money and making sure you don't lose any versus having enough change to provide good customer service. All the same tools and techniques that you use to manage other operations involving 600 airplanes and every flight can apply to this problem as well.

Actually, the model you are asking for is--for the most part--already built. The caterers need to know which items and how many to load on the plane before each flight. Remember how catering used to be a serious disaster right after buy on board launched, with too few meals (and then too many) always being loaded? It took awhile, but having gathered enough data on customer habits and preferences based on time of day and distance of flight, caterers now use very reliable computer models to ensure there is (usually) adequate stock. MBAs build this kind of stuff.

If I were hired as a consultant to solve this problem, I would adjust the menu and pricing so that change would need to be made less frequently. However, I would also update the model used to forecast catering to also forecast needed petty cash, and integrate the petty cash operations procedures with the catering procedures (which probably hasn't been done). It would be a new and different way of doing things, but it's certainly not impossible. You're not going to get things right 100% of the time but you don't get catering right 100% of the time either. The objective is not perfection, it's just to do better (hopefully a lot better) than we do today. Ideally, if change is no longer a problem, you'll sell more on board.

To the guy talking about change banks and safes and all that stuff... that's just silly. You already have a point of sale system that can issue receipts in order to support buy on board, every airline selling things onboard has a way to issue a receipt. And you just keep the cash in a canvas zip bank deposit envelope. You can hold people accountable by number of items stocked + starting cash - number of items sold * sales = cash + credit card slips + inventory at the end of the flight. This is easy to count down after each flight if you're issuing receipts. Airports are secure facilities, you don't need to worry about any sort of violent robbery or security beyond "counting down" at the end of each flight. Audit is easy, the caterer audits the inventory and the FAs count down the money, at the end the records need to match (and the caterer doesn't have any incentive to help corrupt FAs or vice-versa). I am willing to bet that the change fund for each airplane would amount to a lot less than $1000 per flight, because most customers do not pay in cash and not all customers will need change. However, even going with your inflated figures, the interest that you'll get on $600,000 in bank deposits amounts to only $6,000 per year (at most). And you're not really losing even that much (probably less than half) because you deposit your cash at the end of each day and withdraw what you need at the beginning of the following day, meaning that your cash account will only "close" for the day (losing interest) on the cash you need for operations taking place outside of normal business hours. I'll bet lost sales from not having proper change is a lot more than the trivial amount of money you would lose on interest.