The human history is testimony to plenty of life-changing inventions that have changed the way we live life. However few come close to the aviation industry that has revolutionized the way in which is commute around the world. The airline industry has changed the significance of time and place with the world economy of all sphere almost getting accelerated by quadruple times than what it was prior to it.
With its beginnings going back as early as 1916, the real significant breakthrough in the aviation industry came in after the World War II when Europe became the first destination for the setup of first commercial airplane route. Lately, with the aviation news suggesting a wide shakedown, the effect has been seen globally. The industry is quite competitive with rules being a bit complicated as far as its control is concerned.
The global airline industry continues to grow rapidly, but consistent and robust profitability is vague. According to the International Air Transport Association (IATA), the airlines have doubled the revenue from USD 369 billion in 2004 to $750 billion in 2014 whereas the profit margins in the industry are too narrow, less than 2.5 per cent overall. On average, airlines make less than $6 per passenger.
To categorize on a general sense, the Airline industry can be segregated into four sections including International, National, Regional and Cargo.
- Major / International:
Major airlines generate operating revenues of more than $1 billion annually. 130+ seat planes that have the ability to take passengers just about anywhere in the world.
National carriers are scheduled airlines with annual operating revenues between $100 million and $1 billion. Many of the airlines in this category serve particular regions of the country, although some provide long-haul and even international service. nationals operate mostly medium- and large-sized jets; Usually, these airlines seat 100-150 people.
It is limited to a single region of the country, transporting travellers between the major cities of their region and smaller, surrounding communities. Regional carriers are divided into three sub-groups: large, medium and small. regionals are scheduled carriers with operating revenues of less than $100 million. Most of the regional airlines aircraft seat less than 61 passengers.
- Cargo / Freighters:
These are airlines generally transport goods/ freight. Although major, national and regional airlines do not only carry passengers but also cargo. But cargo carriers only carry cargo/freight.
MAJOR CHALLENGES FACED BY AIRLINES INDUSTRY
In the Airlines industry the first priorities are always towards safety. Although flying today is extremely safe. In 2013 there were some 36.4 million flights and 16 fatal accidents. If you were flying on a jet aircraft, your chances of being involved in a major accident were one in 2.4 million. And among the three billion passengers that flew (the equivalent of about 40% of the world’s population), there were 210 fatalities. There is no safer way to get from one place to another by plane. But What happened Malaysia Airlines flight MH 370 and then MH 17 is absolutely unprecedented in aviation history. And we will honor the memories of those involved by re-doubling our efforts on safety.
- Competitiveness & GDP Growth:
Any change in the GDP is often reflected in airline usage. Competitiveness is one of the most important problems being faced by the airline industry.
Overall Aviation industry stands at $750 billion in 2014 revenue but the profit margins in the industry are razor-thin, less than 2.5 per cent overall. on average, airlines make less than $6 per passenger. Of course, there can be nothing guaranteed about the future of aviation if the industry is not sustainable. But the sustainability is always depending upon profitability.
- Fuel Cost:
Fuel plays an enormous part in the success or failure of Airline companies. It is the largest cost for the airline industry that goes up and down based on the market scenario. Fuel prices have dropped from $140 (2009/10) to just over $40 per barrel. In Europe and the USA; Fuel is the second-largest cost after labor cost whereas In Asia it is other way round. Fuel accounts for 30–40% of the operating cost on the average. Drop-in fuel prices are one of the reasons the airline industry has been able to rebound, but there is no certainty that fuel prices would remain stable.
- Labor Cost:
The number 1 cost for the aviation industry is the labor cost which includes financial implications for pilots, dispatchers, flight attendants, baggage handlers etc. Managing employees along with the attrition rate is a key challenge for the airline industry.
Sustained development of engines and aircraft technology has progressively reduced fuel consumption to about 35 liters per 100 RTK—35 liters of fuel spent to carry 100 tons of revenue weight (pax +cargo) over one kilometer, in comparison to 110 liters about 16 years ago. New technology aircraft like B-787 and A350 consume 20–30% less fuel than the aircraft they would replace. However, not all airlines would be able to replace their fleet with modern technology aircraft for the want of capital. Old technology aircraft, which are quite heavy on fuel would remain in operations for decades to come.
Growth in airline capacity also means more environmental damage—carbon emission. Old technology aircraft do, relatively, more damage to the environment than new technology aircraft. Introduction of carbon tax in Europe is the first step towards pressurizing industry to do something about it—use of alternative fuels and new technology aircraft.
- Threat of new entrants:
Although from the outside airline industry seems quite difficult to enter into with so many costs to be taken into consideration, it generally comes down to how difficult or easy it is to borrow money from banks. If the loans are easy to access without substantial cost, then the rate of new entrants is likely to increase. Building Brand name is also an essential part of being successful in the aviation industry.
HOW ARRELIC WILL HELP AIRLINE INDUSTRY
- We will help to develop an effective and efficient maintenance program that will reduce your maintenance cost and improve aircraft availability.
- Improving Reliability by adopting best in class RCM approach for Airlines Industry.
- We will Identify bad actors and mitigate the risk by adopting the airlines industries best practice which will further drive improvement in the reliability and maintainability of your systems.
- Using FRACAS (Failure Reporting, Analysis and Corrective Action System) to capture real time field data, Identifying, selecting and prioritizing problems and implementing corrective actions.
- Reduce operation and maintenance cost by implementing analytics driven MRO - Maintenance, Repair, and Overhaul
- Better Management decision-making by measuring the availability of aircraft and understanding the contributing factors to maintenance costs
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to know more about how Arrelic will help airlines and aviation industry.