Monday, 11 January 2016

How to Boost Airline Revenue, Reduce Costs, and Survive The Age of Disruptions

Being and staying profitable and competitive is going to be more and more difficult as we are approaching the age of growing disruptiveness and travel discomfort. According to EU officials, by 2035, twenty airports in Europe will face the congestion that Heathrow has today. This will cause a further ripple effect across the airport network and potential capacity crunch that will cost airports and airlines more than €40 billion in lost revenues and €5 billion in congestion costs, annually. Airport capacity crunch will have severe repercussions throughout Europe. In particular, delays and congestion will be intensifying and spreading throughout the airport network, with average delay per flight increasing fivefold. The fact that these airports currently handle over a half of the total number of passengers raises serious concerns about the future of the industry. 

In this situation doing short term profit fixes at the expense of quality will no longer be a workable option. Nor will the rise in auxiliary revenue ever be enough to compensate for disruption losses in quality and reputation. 

The key to success will more than ever be in airline ability to control disruptions and there lies a big opportunity for improvement. This will be the key in ensuring competitive advantage. Knowing how to reduce avoidable disruptions opens up an invaluable opportunity for reduction in cost and internal inefficiencies, while winning passenger loyalty and increasing revenue. 

The effect of even the smallest increase in passenger loyalty on the increase in revenue could be significant, as shown in the following example:

Let's say that reduction in number and length of disruptions on the route A-B carrying 1000 passengers resulted in 10% increase in number of passengers, 10% increase in number of return passengers, and allowed for the increase of revenue per passenger for 10%. This will result in 33% rise in revenue, following the rules of geometric progression.

Add to this the cost saving made by reduced disruptions and you will fully understand the benefits of improved quality of operational performance. The sooner you realise this and apply the right methods for disruption control , the better your chances to be more successful than your competitors will be. See for guidance.