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SHRED OR DREAD
01 April 2007
As the airline industry continues with lacklustre profits, cutting costs could make or break some carriers. Geoff Hearn reports.
The airline industry has been in crisis since 2001, says Giovanni Bisignani, director-general and chief executive officer of the International Air Transport Association (Iata). It has avoided financial disaster by restructuring its costs.
Bisignani adds that labour productivity has improved by 33% during the period, sales and distribution costs have been cut by 10% and total non-fuel costs have fallen 13%. All this has been achieved while absorbing an extra fuel cost of $72 billion.
But George Williams, a reader in Airline Economics at Cranfield University, is cautious about the scope for future cost cutting. "Most airlines have done the easy things and it will be extremely difficult for the industry to continue making the level of savings it has achieved in recent years," he says.
Much of the progress that has been made in recent years has been in the reduction of indirect costs. Iata is aiming to cut $6.5 billion from...
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