Airlines need to be obsessive about saving costs

Chennai: Can Indian airline players benefit from some of the successful best practices implemented in other geographies? To this question, a ready reference that Pankaj Narayan Pandit, Head-Airlines Practice, Sonata Software Ltd, makes is to the Southwest Airlines, US, which has pioneered a low-cost model.
Southwest has the distinction of being the only airline that is consistently profitable for the last 38 years, he mentions during the course of a recent telephonic conversation with Business Line. “Airlines such as Air Asia have successfully adopted Southwest model in Asia. By zealously reducing every cost item, low-cost carriers (LCCs) have emerged with operating costs that are 40-50 per cent lower than traditional airlines.”
Choice of business model for an airline has lot to do with ability to reduce such costs, opines Pandit. For example, one class configuration, one type of aircraft, can save huge costs. Reason: the first and business classes have low utilisation. “Apart from high opportunity costs, premium class cabin demands other investments such as extra crew complement, airport lounges, premium catering, and so on.”
As someone with over two decades of experience in the airline industry (both passenger and cargo), and IT practice, Pandit urges traditional airlines to question every cost item that may be considered not relevant to their passenger, while retaining those services that are perceived to be of value by their passengers. “Airlines need to be paranoid in saving costs as even during better times, airlines have typically thin operating margins of less than 4 per cent.”
09/12/09 D. Murali/The Hindu

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Categories: Foreign Dec 2009, Indian Aviation- In General Dec 2009