Jet-A prices are down nearly 15% from this time last year, so the profit margin of every flight American is flying today is up.OEM parts (in this case, tail cones from Boeing) can be manufactured in-house or from competitive builders. Inventory, in the case of the airline magazine, has to justify it's weight by producing enough offsetting sales. The same holds true for consumables. Why stock more than you need for a typical flight?Labor costs are huge for airlines. Most jobs are highly technical, and many require certifications.The video discussed how management and unions have tried to compromise to cut costs to save the airline, but as it was pointed out, labor unions always want more of what's in the coffers and loath the the idea that anyone in management should get bonuses. Lastly, airlines partner with credit card companies to pre-sell frequent-flyer miles and bet that notall of them will be redeemed. They (most) charge baggage fees because they know almost everybody flys with bags.I can imagine a day when airlines will prohibit passengers from bringing outside food and beverages (just like theaters do), because 1) they can charge a preimum for their products, and too, by arguing the excess weight costs them money.
(Post is Read)Thread:Discussion 3.3Post:Discussion 3.3Author:Rory Baysinger Posted Date:November 5, 2014 11:52 PMStatus:PublishedThis was a fascinating case study. I was aware of the hedging of fuel prices but it was very interesting to see the numbers that actually drive that as a player in curbing costs. Also I have dealt with wait and balance issues in general aviation before but to see it on an extremely large scale in order to reduce costs over a multitude of flights in order to reduce costs in a very large way was a bit enlightening. The weight issue evidently will be carried a bit further when the rebranding occurs. With the old planes being stripped of old paint and the new aircraft being composite, both evidently will be a little lighter with new painting technologies even with the entire fuselage of the older planes being painted.With this type of detail I wondered if EOQ actually had a place in the airline industry. It seems that it is not entirely foreign to some of the software used to track parts both “consumables” and “rotables” according to an article by Henry Canaday in Aviation Week & Space Technology. The EOQ formula is a feature that can be toggled on or off in a MRO software called Trax.It was somewhat curious to see that American Airlines had a similar experience as Southwest in that the CEO was replaced after bad relations with the labor unions. It seems to be an enlightenment era for management as well labor to pull together in order to make a business work. Bean counting can be a function of labor and taking care of the company, by way of takingcare of the labor, can still be a function of management. Raymond Oliver mentioned this in his posting.