Operating cost control strategies for airlines

Abstract

The purpose of this study is to explore the ranking of international airlines operating cost control strategies based on empirical studies of an international full-service airlines operation in Taiwan. Cost control has become more and more important for airlines in recent years, especially after the dramatic increases in crude oil prices that began in 2008, as well as the on-going global financial crisis that started in the same year. In this study, the ranking policies and cost control strategies were extracted from questionnaires answered by airline industry experts and evaluated using the fuzzy Delphi method. The cost control strategies were then ranked using the analytic hierarchy process. The findings of this study can provide international full-service airlines with five key policies for operating cost control, including a fuel cost reduction policy, employee productivity improvement, flight operations, aircraft maintenance cost reduction, and operating procedure simplification. By ranking these potential cost reduction strategies, we identified the ten most significant ones out of twenty-one that branched out of the upper five criteria. These were as follows: (1) optimizing aircraft fleet dispatch, (2) conducting fuel hedging strategies, (3) improving aircraft fuel saving performance, (4) reducing the dead weight of an aircraft, (5) optimizing flight speeds using the efficient cost index, (6) scheduling reasonable flight hours for flight crew, (7) correcting en route flight plans and alternate airports, (8) increasing direct ticket sales, (9) encouraging employees to provide cost-control strategies, and (10) replacing old aircraft. The results of this study could be used to establish guidelines for international airlines with regard to the possibly best distribution of operational resources. We expect that the total operating costs of airlines can be reduced significantly through the use of these cost control strategies. Key words: Airline, operating cost control, fuzzy Delphi, analytical hierarchy process.