Airline 2.0
Reading a recent article by respected author Rigas Doganis, made me thinking.
Isn’t the airline industry suffering from a structural problem ?
Overcapacity is one of the issues often blamed. This leads to the mindset that regulations similar to Chapter 11 in the U.S.A, which enable bankrupt airlines to come out of death and fly again, have hurt the industry.
Isn’t the airline industry structure caught in a paradox of its own ?
Another factor blamed is the government involvement in aviation, often providing money injection. But then, do other industries not receive money injections ?
The time has come to re-innovate the whole airline business. Welcome Airline 2.0 .
Our industry is traditionally one of the least profitable. And this situation goes to the edge when there is a recession. Stringent measures are needed to turn the airline business, and its definition, around.
Airlines need to reduce their costs, yet it is not an easy task.
Aircraft manufacturers are doing their best with delivering the best efficient aircraft possible under current technology.
Many airlines are often quick to blame their losses on high fuel prices, falling demands and flu pandemics. Yet, most of the time, the issue is within our own business model.
How can we turn around the airline business model ? Your suggestions are welcome.
Aviation is one of the most regulated industries and requires the highest standards in safety, airworthiness and training. Also it is so prone to political interference, natural disasters and geopolitical events. However, having said all that, the industry suffers from low volume production. The price of aircraft and equipment is relatively so high that asset cost becomes prohibitive while passengers demand lower and lower fares. The level of fares set on some routes does not cover the asset value of the equipment let alone fuel and overheads (following are the list prices of Airbus and Boeing http://bit.ly/dABsj4 you do the maths), this shows why profit margins are relatively low. The aircraft manufacturers and equipment OEMs should find means to boost productivity and reduce prices.
I thought about the same. But even if the acquisition costs went down, it will not be much beneficial without a considerable operating cost reduction. In this case, I believe the manufacturers are utilizing the best possible technology.