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Abstract

In a severely competitive industry, the last straw can be a steady rise in operational costs. For Indian airline operators, who were already making losses, increased airline turbine fuel (ATF) costs meant more woes. ATF costs representing 50% of total costs in 2007 rose to 70% in 2008, triggering ticket price increases. With travellers consequently turning towards roads and railways, airline operators managed the cost revenue gap through: (1) removing travel agent commission; (2) the reduction of passenger amenities and short-haul flights; (3) job reductions; (4) deferred fleet expansion; and (5) operational collaborations between operators. Hedging options were also being examined. Industry experts opined that losses could double if prices remained at current levels. The pertinent question was how long could the Indian operators cope?
Location:
Industry:
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June 2008

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Abstract

In a severely competitive industry, the last straw can be a steady rise in operational costs. For Indian airline operators, who were already making losses, increased airline turbine fuel (ATF) costs meant more woes. ATF costs representing 50% of total costs in 2007 rose to 70% in 2008, triggering ticket price increases. With travellers consequently turning towards roads and railways, airline operators managed the cost revenue gap through: (1) removing travel agent commission; (2) the reduction of passenger amenities and short-haul flights; (3) job reductions; (4) deferred fleet expansion; and (5) operational collaborations between operators. Hedging options were also being examined. Industry experts opined that losses could double if prices remained at current levels. The pertinent question was how long could the Indian operators cope?

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Location:
Industry:
Other setting(s):
June 2008

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