What cost reduction measures would you implement and why?

Southwest Airlines is a company that is known for its low ticket prices and profitability despite the highly risky industry in which it operates. This essay examines the cost behavior, cost volume profit (CVP), activity based costing (ABC), budgeting process, costing and decision making policies of the firm. The essay will discuss how the airline integrates these concepts in its daily operations.

Vega, D., Pamplona D., & Oliviera A. (n.d.). Assessing the influence of the scale of operations on maintenance costs in the airline industry. Retrieved last February 25, 2015 from http://sitraer2014.pcs.usp.br/wp-content/uploads/Apresentacoes/19-11- 2014/Session5/04-Daniel-Alberto-Pamplona.pdf

A unique cost cutting policy would be the main core competence of Ryanair. It refuses to provide any meal vouchers or hotel accommodation for flights which are delayed or cancelled for reasons beyong Ryanair’s control in order to reduce the operating cost. (Ryanair, 2011) Meanwhile, Ryanair is using LFA business model to design the size of its

Managers at Ryanair implemented a strategy to keep operation costs low by limiting its fleet primarily to three variants of a single type of aircraft from a single manufacturer most of which are Boeing 737, this reduces the cost of personal training, maintenance and the purchase and storage of spare parts. It also leads to greater flexibility among crews as pilots and engineers are familiar with the aircraft. (www.ryanair.com)

Jerome Simelane, the airline's Commercial GM, “By using what we have learned over the years about international airline best practice‚ we have also created a cost structure which allows us to offer competitive fares without cutting any corners on quality‚ safety and reliability."

The purpose of this memorandum is to address the profitability issues at Continental Airlines and to estimate the costs for 2009 to forecast the future outlook of the company. To address these issues, I used regression analysis to observe what effect the 11% reduction in flying capacity would have on the firm’s future operating costs. I also used the results from the regression analysis to verify the costs that, if reduced, would further comply with the implementation of cost-cutting initiatives and operational efficiencies that the company is striving for. Lastly, I consolidated the data to forecast Continental’s financial outlook for 2009, then provided insight

Another problem present in the team was also related to the most important element of Open Work, Communication. One of the three components of Open Work is availability of technology for consistent mobile information access. During the HS Holdings server failure Nick’s mobile phone was switched off and Robert didn’t check his email until Monday. Also on Monday when Elisabeth Fournier called there was no reply from either Nick or James. This shows that the team being led by Greg James was not competent enough for implementing the Open Work system. Open Work can only be successful when all the three pillars – technology, access and workspace – work in synergy. In this case Open Work resulted in escalation of the crisis at HS Holdings because the customer demands were not suited to the Open Work environment.

The next step would be for management to know precisely how their decision to downsize capacity would impact the firm’s future operating costs, and also identify specific areas in which the firm could achieve additional cost reductions. Additionally, the cost analysis would help forecast the firm’s operating costs and projected profits (or losses) for the upcoming fiscal year. However, before we can proceed with such analysis, an examination of how the various categories of Continental’s costs behave is in order.

However there are several cost drivers that could break the airline and cause a large loss of income. A few are; excess flight

Over the years, company sustained low operation costs and tickets prices following well-developed strategy. Among other measures, it was able to keep prices low by flying only one airplane type, minimizing service and maintenance expenses, and convincing employees to cut gate turn-around times and make the airline more efficient (Fitzpatrick, 2005).

The authors were successful on this step by creating a valuable and diverse team that complimented each other, which was a necessity to ensure they had mixed points of views and opinions. Next, the team must create the approach they are going to take, and to be sure each team member has a clear understanding of the benefits for the future of everyone involved. This step was evident by the group meetings. Fourth, it is imperative for the team to demonstrate impeccable communication skills and the ability to influence others to comprehend the significance of the change (Kotter and Rathgeber 2006).

Airlines must operate within a low-margin, high-fixed-cost environment, making profitability particularly sensitive to decreases in volume, either from environmental factors (e.g., the September 11,2001 attacks) or from competition. Moreover, the airline business is labor-intensive. Labor costs as a percentage of revenues ranges from a low of about 25 percent for the low-fare airlines to almost 50

The company's internal strategies stand in response to the conditions of the external environment. The airline industry in the United States is a difficult one in which to operate. Fixed costs associated with

The Airline industry has experienced continual problems with rising costs with both fuel and maintenance which has caused them to increase their fees to the consumers to pay for those rising costs. This paper will help explain what an airline such as Delta does to help alleviate such costs without forcing its consumers to flip the bill through high fees that consist of tickets, baggage fees and food. The costs of doing business in aviation today have spiraled out of control making it very expensive for both airlines and the

In a worse case that an intense competition among employees occurs, the company should reset its pays distribution and incentives before (or along with) follow the above recommendations. Moreover, in the worst case that many more low-cost and low-fare airlines enter the same route with Ryanair, it is highly suggested that