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Challenges Of Operating An Airline Essay

939 words - 4 pages

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|Fleet, land, operational equipment, and administration are fixed costs that are generally incurred by airlines. Variable costs such as fuel, labor, |
|food (if provided), equipment maintenance, and advertising can be marginalized through operational effectiveness by an airline seeking to |
|differentiate its services and focus on key components to increase their market shares or create a new niche market. |
|The easiest way for an airline to start working towards operational effectiveness would be to look at its fleet; the capital expenditures associated |
|with the fleet, and maintenance costs required to keep the fleet in compliance with FAA standards. Streamlining the type of aircraft used by an |
|airline could reduce their costs because they would only be maintaining one specific model of aircraft thus only having to purchase parts for that |
|model possibly in bulk orders. This could lead to reduction in labor costs because the airline would only need maintenance personnel |
|with competencies for working with a specific model of aircraft. |
|Another way to reduce, is to lower the cost of fuel. A major expense for any airline is fuel, which takes up about 12% of the total expenses. These |
|costs can be marginalized by proper flight planning of the loading and balancing processes, traveling at optimal speed and direct routing to each |
|destination. Also, reducing the weight of the aircraft will lower the fuel usage during the flight. According to Lufthansa, reduction in weight of |
|900 kilos, can save 47 tons in fuels per aircraft per year. One way to reduce the weight of the aircraft is removing the passenger’s personal screen|
|installed at each seat, and connecting directly to the passenger’s personal screens (iPad, computer, and phone) via airline app. Since, most of the |
|airline already offer’s Wi-Fi, airlines will no longer need to install additional equipment or incur other expenses to accommodate such a service. In|
|addition, reducing the weight of the aircraft will lessen the labor needed to repair, install, and program the personal screens. That labor can be |
|better utilized toward regular checks and other critical maintenance needs. |
|An alternative way to lower fuel cost, is by securing fuel at low/reasonable cost this can be done through fuel edging. Edging is the process of |
|buying fuel at current costs and locking in that cost for a contracted period of time (e.g. one to three years normally). However, this process must |
|be thoroughly considered because if fuel costs start to trend down, the airline is still required to pay the negotiated rate unless there is a ...

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