With fuel prices accounting for up to 30% of airlines’ operating costs, the carriers are still struggling to remain profitable. So far LCCs have been an exception to this rule, thanks to cheaper operating costs and quicker turnaround times. However, with even such players as Ryanair reporting reduced profits, the carriers are constantly in search for ways to reduce expenses. As a result, while the traditional low-cost model is still far from broken, many low-cost carriers have gone beyond its original remit. Responding to such changes, MRO-related HR strategies should evolve accordingly.
According to IATA, in 2014 airlines are expected to return a net profit of almost $20 billion due to the rising passenger traffic and higher efficiency. However, while there was a strong acceleration in air travel demand during the last quarter of 2013, in March 2014 air traffic has risen only 3.1% compared to a year ago. Moreover, the recent political tensions have sparked an upward trend in oil prices, and jet fuel is expected to cost $124.6/barrel or $1.7/barrel more than previously expected.
Therefore, European airlines are expected to generate $100 million less profit than previously forecasted. Even such a giant as Ryanair surprised the aviation industry in September 2013 by announcing a first profit decline in five years, blaming steep competition from such airlines as easyJet, Norwegian and Vueling. Ryanair's traffic grew 6% to 18 million passengers during the 3Q, yet revenue per passenger declined 6%.
Pursuing to fight the trend, the carrier is targeting to fly 110 million passengers by 2019, adding eight bases in fiscal year 2014, while also boosting its presence at primary airports in Athens, Rome and Lisbon and promising to max out ancillary revenues to offset further cuts in fares and lost capacity. However, it also accepted that yields would fall in the months ahead. This implies that the traditional low-cost model might no longer be enough.
“Facing the competition-related challenges, traditional LCCs are devoted to continue driving down their expenses, by lowering airport costs, raising engine and fuel efficiency and increasing the number of seats on their aircraft. However, the players have also been introducing new, innovative ways to boost business. Among others, there have even been announcements about certain LCCs wanting to launch transatlantic flights. Such decisions are naturally pressuring carriers to look for more economically convenient solutions when it comes to meeting the increased maintenance needs of their fleets,” shares Skaiste Knyzaite, the CEO of AviationCV.com.
Assuming the low-cost model can be adapted to 7-8-hour-long flights, performing long-haul flights is a logical step. However, in order to make these profitable, aircraft need to spend more time in the air. In turn, such an increase in operations will generate a completely different demand for routine maintenance works, spurring up the demand for both, in-house airline personnel as well as local MRO's technical staff.
According to the CEO of AviatioCV.com, in such an environment, lease of qualified personnel could result in significant savings while providing the ability to absorb the additional workload. “Low-cost carriers are usually much stricter about their requirements, since they can’t afford to lose time due to inspection-related downtime. Whether is an expansion or increase of operational activity, the qualification of the additional team members remains the key factor in the successful implementation of a new business strategy. However, due to the global shortage of qualified personnel, training of such team can become especially costly in terms of time and money. Thus, turning to an existing pool of qualified engineers through services of various recruiting providers can provide the carriers with much-needed flexibility, while maintaining high levels of air safety,” says Skaiste Knyzaite, the CEO of AviationCV.com.