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SMART RESILIENT AIRPORT
BLAZING THE TRAILS
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Forty Seventh Issue, October- 2015
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Thirty Ninth ATC Day Issue, Oct 2013
THIRTY EIGHTH ISSUE, JUNE 2013
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Poll
Do you think Indian ATC is doing enough to reduce RT congestion in the skies ?
 
 
EFFECTS OF HIGH OIL - Forty Second Issue, May - June - 2014
THE GOOD EFFECTS OF HIGH OIL PRICE IN AIRLINE INDUSTRY

It’s very common to think that high ATF price is the root cause of trouble for airline industry to suffer with heavy loss and continually downgrading service. But high oil cost has a positive impact on airline industry which is generally being overlooked.

Fuel now accounts for more than a third of airlines expenses, overtaking salaries, wages and benefits as the single biggest line item. U.S. carriers burned through 16 billion gallons of jet fuel last year at cost of $48.4 billion. That's up nearly $23 billion from 10 years ago — when the airlines consumed 2 billion more gallons of fuel.

In the last six years,high oil prices forced airline’s business model to adjust the new reality.

Airlines now show more disciplines by offering fewer seats at low price which ensures airfares are high enough to cover costs, unprofitable routes have been eliminated, grounded older gas guzzling jets, charged extra for checking baggage and raised reservation changefees,packed more seats per plane by installing seats with thinner seatbacksallowing to squeeze at least one extra row, and airline merger and acquisitionpushed airfare higher by reducing competition among the operating airlines.

Traditionally, it was easy to start up an airline and too difficult to kill one off. These changes along with high ATF prices have created an insurmountable road block to start-up airlines that hope to undercut established carriers. The majors aren't facing the myriad fly-by-night start-ups that disrupted their business in the past. Earlier LCC carriers used to able to enter market, charge a lot less to fly and pushed established carriers out.It’sdoes not happen anymore. Without the competition, the legacy carries have avoided killing air fare wars and kept ticket price high.

No new legacy carrier has started in US during last few years. Virgin America was the last major new U.S. carrier. But since it started flying in August 2007, the San Francisco-based airline has lost hundreds of millions of dollars. It didn't post its first annual profit until last year and that was only after it stopped its rapid expansion.

High fuel costs have created a financial discipline among carriers that has made them look closely at every expense, in the air and on the ground. To save fuel, aircraft taxi with one engine operative and winglet introduced to reduce drag.Airlines also increased profits by filling more available seats on bigger, newer, more fuel-efficient planes.

In 2013, the number of flights from the top 26 airlines dropped to 9.1 million, down from 9.3 million in the previous year, according to the U.S. Department of Transportation.At the same time, the number of passengers grew from 734 million in 2012 to 741 million.

Inside the planes, the percentage of seats filled continued to grow to an average of 83% in 2013, up from 73% a decade earlier.

Airlines are making rational decisions based on profitability instead of fighting with each other to become the largest airline in a city and expanding only to cities where they can make money.

High oil price has forced efficiency throughout the entire organization.

In 2013, a net profit of $12.7 billion announced on last Monday, up from $98 million in 2012.The profits come on $199.7 billion in operating revenues for the nation's top 26 airlines, compared with $156 billion for 2012, according to the federal Bureau of Transportation Statistics.For 2013, the airlines collected $120.6 billion from fares, $3.3 billion in baggage fees and $2.8 billion from reservation change fees.
 
Contributed By : DEBASHISH BHOWMICK BE, MBA, Technical Director – Aviation, AECOM.
 

About the Author-

 
Over 28 years of experience in Aviation Industry as a techno-functional leader in Aircraft Manufacturing, Air Traffic Control, Airport Management, and Aviation Consultancy
EXECUTIVE PERFORMANCE BENCHMARKS
  • Project Manager of Kannur International Airport, the only Greenfield Airport under construction in India at present; Project Management, Bid Process Management, Selection of Contractor. The Project has started and is well within schedule.
  • Project Coordinator of Delhi Airport Master Plan Review, to conduct a detail technical and financial analysis of the Master Plan 2006 for 100 million passengers per annum
  • Saved $162K through contract negotiations
  • 20% lower Operating cost than other verticals of AECOM
 
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