Airline Supply Chain Feasibility Study

AirAustralsia, a company aiming to establish a low-cost airline in the Australasian market, seeks a feasibility study on setting up a supply chain to support the business venture. The report should analyze the current local supply chain and logistics infrastructure, identify key factors affecting the project's success, and propose solutions to ensure efficient operations and minimize costs.

Project:- Airline Start up
Project Brief
AirAustralsia is a company looking to establish a low cost airline to cater for the
Australasian market and is seeking a feasibility study to determine the feasibility of a
supply chain being set up to support the business venture.
Background Context
“The global airline industry continues to grow rapidly, but consistent and robust
profitability is elusive. Measured by revenue, the industry has doubled over the past
decade, from US$369 billion in 2004 to a projected $746 billion in 2014, according to
the International Air Transport Association (IATA).
Much of that growth has been driven by low-cost carriers (LCCs), which now control
some 25 percent of the worldwide market and which have been expanding rapidly in
emerging markets; growth also came from continued gains by carriers in developed
markets, the IATA reported. Yet profit margins are razor thin, less than 3 percent
overall.
In the commercial aviation sector, just about every player in the value chain —
airports, airplane manufacturers, jet engine makers, travel agents, and service
companies, to name a few — turns a tidy profit. Yet it’s one of the enduring ironies of
the industry that the companies that actually move passengers from one place to
another, the most crucial link in the chain, struggle to break even.
Airlines need to make large and ongoing improvements to operate more efficiently.
With few exceptions, the most successful airlines are those with the strictest cost
controls. The biggest (albeit cash-intensive) lever to reduce costs lies in fuel
efficiency, as jet fuel typically accounts for 40 to 55 percent of operating expenses.
Cost reduction can also be achieved through enhancements in organizational
structure, operating model, and work practices. In particular, legacy airlines have
often built up complex processes over decades that cost far more than the streamlined
processes of the LCCs.” (Price Waterhouse Coopers, 2015)
“The aviation industry in Australia has a long history and currently it has a number of
airlines operating within the country and all over the world. The importance of
airlines in Australia has grown very rapidly because the country is an island and also
has a thriving economy. Defunct airlines and planned airlines are the two types of
airlines which are in operation in this country. The main sectors of the Australian civil
aviation industry are the international airlines sector, general aviation sector and its
safety and the domestic regional airlines sector. The aviation industry of
Australia also comprises of some small segments like hand gliding, gliding, autogyros
and ultra-light aircraft.
“The international airlines in Australia carry cargo and passengers to and from various
parts of the world. The total number of international airlines which provides services
to Australia is 49. As Australia is an island more than 90% of the visitors to this
country come by air. The total annual average of passengers who come to Australia
from around the world is about sixteen million. Though airlines are the main carrier of

passengers in Australia the freights are mostly carried by the ships to various
destinations”. (Australia Net, 2007)
The potential growth of the business and commercial markets within China suggest a
growth in demand for air travel around the region. As part of any business
development there are a number of areas that need to be explored in order to establish
the business case for the venture. An essential part of the business being considered is
the logistics and supply chain that is required to ensure the continuity of business.
This is even more the case as the model that the company is looking to adopts is one
of low cost and this inevitably puts greater pressure on the margins that the company
is looking to pay for goods and services. The company have a range of areas to
consider in relation to supply chain and are looking for a consultancy to provide an
independent feasibility study within this area. The two main aspects that have
emerged from initial investigation are a need to understand two factors:
 The current local supply chain to support the business and its capacity
 Current logistics infrastructure to support the airline growth
AirAustralasia understand the highly competitive nature of the modern airline
industry and so are keen to ensure that they have a clear examination of the issues that
will inform the supply chain requirements to run the business.
Client Requirement
The client is looking for consultants to provide a report bid critically discussing how
they would produce a study that achieves the following:
A feasibility study providing a clear analysis of the supply chain required to support
the setting up of a low cost airline within the Australasian market, meeting the aims
and objectives identified.
Project Timescale
The duration of the project is 6 Months.
Deliverable
Consultants need to produce a 6,000 word report outlining the main objectives of the
study and the methods that would be employed – following the structure provided. In
addition, an ‘A3 Report’ summarising the approach to this project needs to be
provided.
Project starts from
5th may till 30 September 2016