Cutting Costs

[mweiss]

Many people talk about the need for US to cut costs. Some profess that the only way to accomplish this is through lower wages. However, that is clearly an oversimplification of the situation.

A company's value chain involves several factors, but they can be boiled down to two in the simplest form:
1) Dollars going in
2) Dollars of value coming out

When looking at moving an airplane from Point A to Point B, the dollars going in come from a variety of sources:
- Reservations agents
- Amortized cost of reservations systems/web site/etc.
- Ticketing/baggage agents
- Amortized cost of electronic checkin kiosks
- Gate agents
- Amortized cost of gate lease/gate equipment (includes ground equipment)
- Fuel
- Rampers
- Pilots
- Flight Attendants
- Cleaning Crew
- Catering
- Amortized cost of mechanics/maintenance
- Amortized cost of schedulers/yield management/station managers/etc./etc.
- Landing and other miscellaneous fees

Dollars of value coming out can be boiled down to revenue generated for the flight.

But when looking at dollars going in, there are typically two different fundamental levers that can be moved. One is the obvious...pay the people less and negotiate lower costs for non-labor costs. The other is more subtle and often overlooked.

Every single minute that a person is being paid and not adding dollars of value is an opportunity to maintain wages and still cut costs. Every single minute that a piece of equipment is sitting around and not adding dollars of value is an opportunity to maintain wages and still cut costs.

All of those wasted minutes should be examined, and turned into value-add minutes.

 

[diogenes]

Exactly so.

 

[tadjr]

Every single minute that a person is being paid and not adding dollars of value is an opportunity to maintain wages and still cut costs. Every single minute that a piece of equipment is sitting around and not adding dollars of value is an opportunity to maintain wages and still cut costs.

This is extremely true in some cities where flights have been cut, however the scheduling requires people none the less. We have lost over 30 flights since 9/11 and are currently down to 21. Yet, we still require staffing for multiple flights at 225/250/315 and 640/655/715 as just two examples. Our hours have been cut to partially take the gaps in scheduling into consideration (and there are other flights in between these times as well), but there are opportunities to ADD flights into the existing gate and work schedule to make employees more productive instead of sitting around until the next barrage of flights arrives. Hopefully this will finally be addressed in Sept when the point to point flying is added. Also we continue to have flights (in some cities) terminating as early as 730-8pm and not leaving in the morning until 930 or later. This is valuable flight time wasted with the plane just sitting on the gate. Again, hopefully the Sept schedule will take this into consideration.

 

[funguy2]

This is extremely true in some cities where flights have been cut, however the scheduling requires people none the less. We have lost over 30 flights since 9/11 and are currently down to 21. Yet, we still require staffing for multiple flights at 225/250/315 and 640/655/715 as just two examples. Our hours have been cut to partially take the gaps in scheduling into consideration (and there are other flights in between these times as well), but there are opportunities to ADD flights into the existing gate and work schedule to make employees more productive instead of sitting around until the next barrage of flights arrives. Hopefully this will finally be addressed in Sept when the point to point flying is added. Also we continue to have flights (in some cities) terminating as early as 730-8pm and not leaving in the morning until 930 or later. This is valuable flight time wasted with the plane just sitting on the gate. Again, hopefully the Sept schedule will take this into consideration.

The problem here is that with three primarily N-S hubs, the whole bank structure for each hub will be based on having 7am (roughly) flights out of BOS and out of MIA/FLL. The timing of those banks will then be roughly determined by the location of the hub because it takes 1:30 BOS-PHL and 2:15 BOS-CLT.

The elimination of PIT as a hub should help, as PIT's flights will no longer be based (I assume) on a bank structure (for those stations that will have PIT flights). Furthermore, rolling the PHL hub should also help reduce multiple out-stations operations. Naturally, not all out-station multiple ops will be able to be eliminated, but I will bet that you'll see a marked reduction across the system with the transformation plan.

 

[tadjr]

Those are good points and I agree with the hub bank problems, but hopefully just having CLT as the only true bank hub will help eliminate some of the problems. With the additional point to point flights being planned, hopefully planes wont sit idle until 930 or 10 in the morning either. I know DCA and LGA will be constrained by their slot allocations, but none of the other cities on the East coast should have this problem. If a plane is sitting in MCO or TPA until 930 and another plane is sitting in BDL until 930 or 10, maybe each plane could fly an extra flight to the other city to make up the current originator. This will be a better use of employees and equipment since the originators would be off and running earlier in the day and would be providing earlier arrivals downline that require working instead of just loading originators until 10 in the morning. If they are going to a true point to point plan on many routes, then there are endless possibilities to get better utilization out of the planes. Not all city pairs would have to have multiple nonstops if one or a couple well timed flights were offered. A couple of tag on flights would also return US to many city pairs that have lost service, but may still be able to attract some local traffic in addition to providing one plane through service to many markets if the yield is there with a revamped fare structure.

 

[Smartest Loser]

I start seeing aircraft parking on the ramp for the night at 6pm....!!

They have to be in the air to make money, not sitting on a ramp somewhere.

SL

 

[MarkMyWords]

This is one area of the airline that has always puzzeled me....Scheduling.

I remember working the 5:45pm flights from PIT-BOS and EWR. Both flights, the airplane flew PIT-BOS or EWR and then returned from each station at around 7:30-7:45. The outbound PIT flights were always full, regardless of what airplanes were on the routes. I remember them being anything from a 727 or MD80 to a 734 or a 733. The return flights were always marginal at best. Generally around 50 customers.

When marketing/schedule planning looked at the routes, then never looked at them as seperate entities. It was always looked at as a round trip. So, since the outbound always had a load factor of near 100%, but the return was only 40%, the market was considered a money loser. Eventually these flights were handed over to express RJ's and now MidAtlantic. Why would they not see the value in each individual segment, versus the round trip? If the one segment lost money, then why not find a better way to utilize the airplane, versus scrapping the round trip all together.

Hopefully a new point to point flying system will help to benefit each market and flight segment individually, versus looking at things as round trips.