Tough choices for airlines

The international Air Transport Association, or Iata, has forecast turbulent days ahead for the aviation sector in the wake of deepening European sovereign debt crisis which, the industry watchdog says, has led markets to expect a further deterioration and damage to economic growth.

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Published: Sun 24 Jun 2012, 10:20 PM

Last updated: Fri 3 Apr 2015, 12:47 AM

The Iata has downgraded the outlook for European, Asia-Pacific and Middle Eastern carriers, saying global industry profits are expected to drop to $3 billion in 2012, the second year of declining returns.

One can call it a chaotic situation where nobody has a clue to the real solution for the cash-strapped industry. The sovereign debt crisis aside, there are many reasons given during board meetings to keep the directors and stake holders quiet, at least momentarily.

A Texas-based executive jet pilot close to retirement and one who has wisely gone into the aviation consultation business in case of a sudden job loss, gives a capsulated review of the situation: “Outsourcing and selling advice to the aviation industry in general would be better for most pilots and firms in the sector. Flyers past their 50s, unless they are privileged, should take this industry advice. By privileged I mean those in government-run companies where protection norms and unions stand guard against mass retrenchments. The situation is dicey.”

There is no broad-based formula like the articulate management gurus tend to come out with to solve the crisis. Every industry has its share of peculiarities to be taken into account. Aviation is perhaps one of the most complex sectors though it is just another mode of transport.

Airlines from both the developing as well as Third World countries are overstaffed and their employee-aircraft ratio are unbelievably high. But Gulf carriers have some advantage, with lower fuel prices and stricter staff intake norms. Crew and ground staff discipline is also much higher — all of which make regional airlines sought-after brands even if fares are higher.

Industrial action is the last thing that should be on the minds of airline staff during crisis times. Like smoking, strike kills, albeit slowly. One right step for future airline entrepreneurs is to get their priorities right. If you start an airline just for the heck of it, like some Indian tycoons did, it’s going to be a losing battle. Maintaining optimum numbers of staff right from the beginning is key to staying afloat profitably and cruising to a sustainable future.

Low-cost carriers start on the brink most of the time when they go into turf wars over prices, but some innovative entrepreneurs have proved that the budget concept is here to stay along with legacy carriers.

There shouldn’t be any fuss over the type of aircraft, operating routes and in-flight service routines, immaterial of whether it is a budget airline or a regular 3/2-class configuration. Fancy overheads must be cut from the outset and all non-operating station work should be outsourced. Crew layovers with the right provider could prove to be vital in preventing colossal expenses.

Flight catering makes room for close to 350-500 per cent profits on each item for the provider, one of heftiest in the food industry. For turnaround flights, food loading for the two sectors at the home base itself can also be considered. Less fuss on the showmanship, including uniform styling, can cut costs appreciably. High living and management styles, including expensive hotel and skyscraper accommodations, should be done away with to save the industry. Remember Pan Am — a couple of years before closing down fully — first sold its prestigious New York headquarters building. This kept the carrier airborne at least for some more time.

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