Airline Industry Summer Strategy: Have lessons been learned?

“As an airline, if you’re not excited about summer, you’re in the wrong business,” said Mike Van de Ven, Southwest’s chief operating officer. In other words, if you cannot handle the heat get out of the kitchen. This summer, airport crowds are expected to be the largest in the U.S. since 2008. In 2012, all airline flights including regional had an average 76.1% on-time flight arrivals (flight stats analytics WSJ). That will not “fly” this summer.

image_security_linesWhat method of forcasting informed Airlines that airport crowds are expected to be higher than recent years?

United had a terrible summer last year—only 67.9% of flights arrived on-time in summer months. Customer complaints soared. The airline blamed computer system problems related to its merger with Continental Airlines and an attempt to schedule planes and crews more tightly. The plan backfired because it created longer delays and widespread disruption when tighter schedules couldn’t be met. The use of Gantt charts to schedule turnover time is a simple strategy Airlines use. They are constantly coming up with new ways of speeding up this complex process. Southwest does not have to purchase many Airlines because of how fast they can turnover planes. They plan to use spare airplanes this summer to accommodate stuck travelers more quickly. Southwest plans to routinely keep operating late into the night rather than cancel flights on stormy days. This is a contributor to why Southwest is a leader in customer satisfaction.

What is a disadvantage to scheduling each project to tight with each other?

United says they are better prepared for summer because it has more staff and better scheduling. In addition, the airline has rolled out new graphics screens for its computer system to make it easier and faster for airport agents to use. United also is introducing new boarding lanes at gate areas. Five different boarding groups will line up in different areas, similar to how Southwest lines up customers by groups, so that each group will have a designated place to wait. A brilliant new seating system is set to take off. The coach cabin will board window-seat passengers first, then middle seats, and aisle seats last. With the “Wilma” system, as United calls it, seats fill faster because people already seated don’t have to get up as much to let a row mate in.  Now there are more reasons than one to get an window seat.

The industry as a whole have made changes that fliers should be aware of before making travel plans. Budget cuts in Transportation Security Administration overtime will likely lead to longer security-screening lines. Make sure travel plans are set in stone because domestic ticket fees change  to $200 from $150, and international change fees went to $300 from $250. United Airlines, Delta, American, and US Airways collected a total of $2.3 billion in reservation cancellation and change fees last year, according to the Department of Transportation.

Will higher change and cancellation fees persuade fliers to book with other airlines?

What may be the reasons Airlines raise these fees? http://online.wsj.com/article/SB10001424127887324659404578499162528986162.html?mod=WSJ_hpp_LEFTTopStories

Is the Oil-Tanking Industry Sustainable?

Due to the poor economy, the oil industry is having a rough time enduring transportation costs from country to country.  For decades, oil tankers have been the main source of transportation, carrying up to two million barrels of oil between the Middle East, Asia, and the United States. Unfortunately for the oil tanking business, operation costs over the past few years have been much more expensive than they have been in the past.  This increase in price makes the shipping of the popular and much demanded natural resource nearly impossible and not worth it.  Unlike what is usually the case, globalization in this situation for example is more costly to this particular industry than it would be to drill into our own soil.  The only problem is that we find a larger supply of oil in foreign countries than we do our own.

To get an idea of how much this is costing the oil firms, analysts look at the forecasts from previous years.  This collection of data has shown that the industry has lost more than $26 billion dollars in the past four years, and operation costs are higher than ever.  To operate one of these extremely large vessels, it costs anywhere from ten to twelve thousand dollars per day.  In 2007, operation costs peaked at $309,601 per day.  That is unbelievable! Because these carriers are only making roughly $7,000 a day, there is a huge deficit.  While such oil companies continue to lose so much money daily, they cannot possibly stay in business.  The supply chain is not working in favor of firms; therefore, sustainability of the business comes into question.  So what should these oil tanking firms do?  How can they cut costs?  Is it possible to adjust the supply chain or is it a lost cause?

I think that at such a loss like this, the amount of ships in operation should decrease drastically, causing less expenses to be paid.  That is the only way they can keep their heads above water, although they are already sinking in debt.  New York’s Overseas Shipholding Group filed for bankruptcy last year, and I am sure they will not be the last to do so.  I feel for these dying companies because many of them entered into contracts before the economic crisis occurred, and now they are stuck in a failing industry, losing more than they gained from the contracts to begin with.

Other possible options for consumers that effect the oil firms is innovation.  It is not uncommon to see on TV or read in the newspaper alternatives to oil resources.  At the Chicago Auto Show every year, concept cars are on display that use battery powered systems to replace oil.  These are more cost efficient and do not require the use of oil tankers.  What do you think will be the result of the oil industry failing?  How do you think consumers should react to this? How do you think the government should react to this?

Sources:

http://online.wsj.com/article/SB10001424127887323741004578418652461117968.html

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