Cost Cutting for Success: Factors Influencing Costs

Irrespective of whether an airline has high or low operating costs, a thorough knowledge and breakdown of them is vital in order for management to: • monitor performance (to check if targets / budgets are being met. If not, remedial action can be taken) • set appropriate fares and tariffs • evaluate new routes, aircraft acquisition and outsourcing opportunities

The challenge of the low-cost airlines

Outline • How Low cost airlines have changed the EU? • Maturity in Europe? • Market Substitution or generation? • Are LCCs culpable for increasing aviation's carbon footprint? • What makes a successful low cost airline? • LCCs and the long haul market

airline marketing: an overview

Outline • Definition of Marketing • Realities of the Market Place • Realities of Airline Market • Marketing Strategies • The Challenges

Cost comparison of network, low-cost and charter airlines

Estimates of the Cost difference “The evidence suggests that low-cost no-frills operations can achieve unit costs as low as half those of a major network carrier” CAP 685 Single European Aviation Market: The First Five Years (June 1998)

Air cargo economics

Air Cargo Economics - Outline - Air cargo participants - Air cargo pricing, rates & yields - Cargo related costs - Freighter aircraft operating costs - Methods of cost allocation - Pax/combi vs freighter services - Lufthansa’s cargo strategy - Quick change aircraft - Aircraft wet leasing - Conclusions

Airline distribution

Distribution - Factors affecting distribution strategy • Airlines drive to reduce costs - Distribution has been around 20% of operating costs • Airlines wishing to have more direct contact with their clients • Technology has provided the possibility of a direct channel between the airline and its customers • Disintermediation - as airlines doubt the ability of agents to influence customers’ choice • GDSs fees • Large corporates are more professional in the way they purchase travel products

Achieving open skies

Types of Air Transport Trading Agreements: - Bilateral - "Open Skies" - Plurilateral - Multilateral

Sources of airline and aircraft finance

Presentation Outline - Internal vs external sources of finance - Long versus short-term finance - Bonds, deentures and convertibles - The term loan - Manufacturers’ support - Export credits - Summary

Airport business issues

Contents • Overview of the airport business • Economic characteristics • Airport business segments • Airport revenues • Airport costs • Conclusions

Introduction to airline network planning

Contents 1.What kind of airlines? 2. Network Planning – Data – Generic / traditional – Low cost 1.What kind of airlines? 2. Network Planning – Data – Generic / traditional – Low cost

Impact of deregulation

Pre-Deregulation in the US - Carriers were not able to compete in terms of price - Service quality and frequency were the main means by which they competed - Load factors were low and unit costs high as a result - A study by Jordan (Airline Regulation in America, 1970) of inter-state trunk airline fares in 1965 showed that if there had been no regulation these would have been 32 –47% lower