Project:- Airline Start up

Project Brief

AirAustralsia is a company looking to establish a low cost airline to cater for the Australasian market and is seeking a feasibility study to determine the feasibility of a supply chain being set up to support the business venture. 

Background Context

“The global airline industry continues to grow rapidly, but consistent and robust profitability is elusive. Measured by revenue, the industry has doubled over the past decade, from US$369 billion in 2004 to a projected $746 billion in 2014, according to the International Air Transport Association (IATA).

Much of that growth has been driven by low-cost carriers (LCCs), which now control some 25 percent of the worldwide market and which have been expanding rapidly in emerging markets; growth also came from continued gains by carriers in developed markets, the IATA reported. Yet profit margins are razor thin, less than 3 percent overall.

In the commercial aviation sector, just about every player in the value chain — airports, airplane manufacturers, jet engine makers, travel agents, and service companies, to name a few — turns a tidy profit. Yet it’s one of the enduring ironies of the industry that the companies that actually move passengers from one place to another, the most crucial link in the chain, struggle to break even.

Airlines need to make large and ongoing improvements to operate more efficiently. With few exceptions, the most successful airlines are those with the strictest cost controls. The biggest (albeit cash-intensive) lever to reduce costs lies in fuel efficiency, as jet fuel typically accounts for 40 to 55 percent of operating expenses.

Cost reduction can also be achieved through enhancements in organizational structure, operating model, and work practices. In particular, legacy airlines have often built up complex processes over decades that cost far more than the streamlined processes of the LCCs.” (Price Waterhouse Coopers, 2015)

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