Question

What is the nature of costs in the airline industry and how can airlines manage or reduce their costs?

Answer 1

The nature of expenses that greatly affect the airline industries are variable cost expenses which includes the labour cost and fuel costs. Whereas in the airline industries two-third of the expenses are fixed, so changes in variable costs expenses like labour and fuel may lead the airline industries from profits to loss.
Also airline industry is very competitive and even a slight increase or decrease in fuel prices can greatly affect the industry.

Airlines can manage to reduce their coats by the following ways :-

• One of the wise move that company can make is to set benchmarks and track its expenses. This would help the company to draw comparison among expenses and reduce costs.
• Another way is that these companies can use to reduce it costs is to save money through fuel. Company can hedge contracts over a secured fixed price for fuel for a certain period of time.
• Another ways is to negotiate with the airport fees. Companies can negotiate with airport fees and can save huge amount of money.