Airline cost cuts hit suppliers

Last time you flew, did you feel that the airline meal didn't quite fill your stomach like it used to? Did you notice a smaller piece of chicken and no yogurt? This isn't a coincidence. Catering is just one of the aviation-related industries feeling the heat from the tightening of purse strings by airlines looking to cut cost to stay in air.
Aviation being an industry with a plethora of vendors, any slowdown in the sector trickles down to the numerous allied sectors. Suppliers claim that airlines are pinching pennies and are renegotiating existing contracts, looking for discounts of up to 25%. This, in turn, is forcing vendors to cut costs and increase productivity.
Such cost-cutting, some warn, could ultimately affect quality.
Lease rentals, insurance premiums, maintenance contracts, ground handling, airport services, catering services and even fuel marketers have seen airlines queuing up for better deals. While most lease rentals are done for the long term, those up for renewal are being signed at significant discounts, as there is a softening of lease rentals across the globe. Sources say that these figures are 10-15% lower than earlier amounts.
Maintenance services form a major chunk of an airline's expenditure. Most Indian carriers use brand new planes, which mean that maintenance worries are not a major issue. But for routine work, contracts are being renegotiated. M F Daver, chairman and managing director of maintenance firm Livewel Group, said, "Almost every airline is asking for new terms. They are asking for 20-25% off on the current amount."
26/09/08 Nirmal John/DNA MONEY/Sify

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Categories: Indian Aviation- In General Sep 2008