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Airlines’ cost cuts not enough
WTM 2004 Special: Cost reductions are not enough to save airlines because many of them are still not making any money, a conference heard.
Richard Clarke, vice-president of IT advisory firm MetaGroup, said US airlines had saved 10 per cent of their $130 billion costs and yet were still not delivering money to their shareholders.
Speaking at the “Future of Airline Industry: Transformation” conference at World Travel Market, Clarke said: “We’ve made lots of changes, but we’re not making any money. And although airlines have cut distribution costs, other costs are rising.”
He said airlines were left with three choices – to change their structure, consolidate or invest in their product.
“You can switch to becoming a low-cost carrier like Aer Lingus, but it’s harder to do if you’re as big as American Airlines,” said Clarke.
“Another possibility is to consolidate, as Air France and KLM have done, but it is complex.
“The hardest thing to do in the current climate is invest, but you have to think about the way markets are moving before making a decision.”
Ginny McGrath
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