COMM 3020: Cost Reduction in Commercial Airlines Strategies

This presentation analyzes cost reduction strategies within the commercial airline industry, focusing on the challenges of low profitability due to high operational costs. The presentation identifies jet fuel and maintenance costs as significant expenses, emphasizing the need for effective cost-saving measures. Secondary research is utilized to explore the effectiveness of various strategies, including hedging fuel contracts, detailed expenditure analysis, optimizing flight speeds, and strategic market scoping. The presentation recommends signing hedge contracts when fuel prices are low, recording and analyzing expenditure data, optimizing flight speeds, and exploring comprehensive service providers. The conclusion highlights the importance of minimizing fuel and maintenance costs, with flight speed optimization and timely contract signings as key strategies. The presentation provides a comprehensive overview of cost-reduction strategies in the airline industry, supported by research and practical recommendations for improved profitability.

Course code
COST REDUCTION
IN AIRLINES
INDUSTRY
ENTER YOUR NAME HERE
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The Problem
• Bankruptcy is a common occurrence in the
airlines industry.
• Increased expenses involves high costs of jet
fuels (Chen, 2016)
• Many airlines have been unprofitable in the
recent times.
• Closing them down would lead to further
losses- employment, creditors, inconvenience
of travelers.
• The nature of the service itself makes the
industry prone to bankruptcy(Francis,

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Research
• Secondary research can be applied to the
topic to come up with some of the effective
cost reduction strategies.
• Maintenance costs are the main costs that
increase operational costs in the sector, as
per previous studies.
• Minimizing fuel and maintenance costs
have benefited 80% of airlines (Holloway,
2017).
• Secondary research to be applied to
determine the effectiveness of the
methods in practice.
• Research shows that maximizing flight
speeds are the main ways of cost reduction
for flights.

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RECOMMENDATIONS
• The hedger contracts should be signed when fuel prices are
low.
• Data pertaining to the various of expenditure should be
recorded, so that they can be compared and analyzed for
strategizing reduction tactics for the future.
• Optimizing flight speeds using the right costs index.
• Scoping out the market to avail a holistic range of services
from a single provider.
• Encouraging employees to take up cost reduction
strategies at work, and also educating them on the
importance of the same.

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CONCLUSION
• PROFITABILITY HAS BEEN LOW IN THE INDUSTRY DUE TO
HIGH MAINTENANCE COSTS.
• FUEL COSTS HAVE BEEN THE MAIN REASON FOR HIGH
MAINTENANCE COSTS, AND MUST BE MINIMIZED.
• FLIGHT SPEED OPTIMIZATION AND TIMELY CONTRACT
SIGNINGS ARE THE MAIN STRATEGIES FOR THE PURPOSE
OF COST REDUCTION.
• THESE STRATEGIES HAVE ALREADY PROVEN TO BE
EFFECTIVE.
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REFERENCES
• Chen, H. (2016). Service Improvement and Cost
Reduction for Airlines: Optimal Policies for Managing
Arrival and Departure Operations under Uncertainty.
• Francis, G., Humphreys, I., & Ison, S. (2004). Airports’
perspectives on the growth of low-cost airlines and
the remodeling of the airport–airline
relationship. Tourism Management, 25(4), 507-514.
• Holloway, S. (2017). Airlines: Managing to make
money. Routledge.
• Mallikarjun, S. (2015). Efficiency of US airlines: a
strategic operating model. Journal of Air Transport
Management, 43, 46-56.

THANK YOU
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