At long last, there's something to be optimistic about. For many airlines, traffic has returned, costs have been cut, and the bottom line is looking, well, better than it has for a long while. With economists predicting broadly a favourable environment for the next two years at least, flustered airline managers might be forgiven for thinking that they can return to sitting back and watching the money roll in. Maybe they'll even see some more of their families this year.
Don't you believe it. Much remains to be done, and there will be little chance for relaxation. Carriers that slow down the effort to restructure could be making their biggest mistake yet.
There are several reasons for this. Competition is intensifying, both in the US with low-cost carriers, and elsewhere through liberalisation, relaxed bilaterals and codesharing agreements. The global economy remains subject to surprise events - Mexico's meltdown occurred almost overnight, and who knows how January's earthquake will affect the already fragile economy in Japan? Most carriers' balance sheets have been pulverised by the recession. And virtually no airline is making anywhere near enough of a margin to finance expansion and fleet replacement, or to get through the next downturn relatively unscathed.
In some respects, headlines proclaiming a return to profitability do airline managers no favours. Oh good, say the employees. That means we'll get a decent pay rise this year, and we won't have to worry about further redundancies. And better results mean managers are bound to relax their frenzied efforts to restructure, cut costs and find new sources of revenue.
Yet all these activities must continue if this business is to ensure its long-term prosperity. Here are some suggestions for managing the upturn:
1 Concentrate more effort on the revenue side. Improve your use of yield management techniques, targeted marketing and your frequent flyer programme, to make sure you maximise yields on the growing number of passengers.
2 Don't be tempted to add more staff and aircraft to deal with growth, unless absolutely necessary. Find ways of coping with a minimum of new investment.
3 Keep focused on the core business. Sell non-core assets and don't invest in new ones.
4 Don't buy other airlines. Make do with codesharing agreements instead - they are less risky and don't tie up capital.
5 Keep those cost-saving ideas rolling in. Establish an annual target and make sure it is achieved.
6 Reward employees through profit and performance related bonuses rather than flat rate increases.
7 Keep looking for new ways of organising your business, such as creating service subsidiaries or outsourcing work that can be done more cheaply by others.
8 Build an employee culture that encourages innovation.
9 Make sure your employees do more to keep your customers happy. In a business whose product is increasingly a commodity, the little things make the difference.
10 Watch your back. This recession has created some lean, mean, market-minded players. They are out to get you.
Source: Airline Business
