The
airline industry is a service industry with a low level of profitability
because it is labor, capital, and technology expenses. It is also affected by
external environmental changes as well as internal operations. Among other
things, jet fuel is a major component of commercial airlines’ operational
costs. Therefore, airline companies must always exercise cost control,
especially after having experienced the extreme crude oil price increases.
According to International Air Transport Association (IATA) statistics, in 2008
the global airline industry’s fuel bill in 2008 grew somewhere between $31 and
165 billion USD, and lost about $16.8 billion USD, which accounted for 31% of
operating expenses at $99USD/barrel Brent of oil. Thus, improving
fuel-efficiency continues to top the agenda of the airline industry. Under this
challenging economic environment, operation cost control is of the utmost
importance to the airline industry.
When
we discuss about Operational costs, it includes a plethora of expenses that
needs to be cut short. During a flight operation, there are multiple costs that
needs to be pulled down in order to assure maximum profitability. These costs
includes Fuel, Parking charges, covering air space charges, maintenance cost
particularly. This not only helps an airline to reduce their operational costs
but also helps them to attain a competitive edge in the domestic as well as
International Market. This in turn plays a major role in the Revenue Management
also since it helps the airlines to provide a competitive pricing to the Travel
Agents through different GDS. Lets discuss few points that could help airlines
reduce their cost of Operations and Manage their expenses in an organized
manner:-
1) Manage the cost of Project:-
Managing the cost of Project is one of the most important project management
activities that would help us to complete the task within the estimated cost
that suits the airlines. A proper guidance along with effective management
objective is required by the Project Manager and the team who plays a major
role in effective planning.
2) Deciding on the Budget:-
Budget planning is one of the most crucial and difficult activity to be
executed. This requires a lot of Strategic planning and research. Now planning
and research doesn’t necessarily mean only data available to determine the
expenses as per the revenue and capital but also going back to previous
expenses and experiences in terms of cost reduction and profitability. We need
to keep a close eye at the competitors and understand their strategy, make
comparisons and gain something out of it.
3) Tracking the Expenses:-
There should be an effective IT tool with effective resources to keep a track
of the costs that is being incurred at every phase. This would help in tracking
the actual cost against the estimated cost and with tracking the cost at every
phase, it will help to stimulate the upcoming costs and help to manage them
accordingly. This would infact allow us to take a decision if a new work can be
adjusted within the objected cost.
4) Time Management:-
Although most airlines take this quite casually but it’s a fact that managing
time effectively is equivalent to reducing cost. There are different phases of
a Project/Operation. If there is a delay in any of the phase, it will highly
affect the cost of the entire project since we need to meet the deadlines. In
that case, we might need deploy more resources and make more expenses in the
tools to meet the deadlines. Again this will definitely increase the cost.
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