Question

Question 1:

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(i) Cost structure of the airline industry in general

(ii) Cost structure of a low-cost carrier (Air Asia India)

Answer this question: Compare and contrast the cost structure of (i) the airline industry in general and (ii) the low-cost carrier, in terms of cost classifications.

Question 2: Discuss the impact of Covid-19 on the profitability of the airline industry – general and low-cost carriers alike, due to its cost structure – cost classification and cost behaviour.

Answer 1

1 an the on price Answer:- Summatiged information provided in the question, ② the major expenses that affect companies in the airline industry are labour and fuel costs. Two-thiods of costs of flying aroplane arbe fixed and the industry continus to be brutally competitive Airlines generally have to compete rather than quality. -> Labour accounts for approximately 35% of the total of airlines operating expenses : Operating expenses account for roughly 75% of all non-fixed a fuel costs account for 10% to 12% of operating expenses. Many companies have programs to hedge fuel costs. > when oil prices spiked up companies slowly charging more for tickets to overcome that. A low-cost Carrier or low cost aioline aioline that offers generally low faces in exchange for eliminating ' passenger services. - A low-cost cablier suppooled by electronic ticked less .cystems In-flight service, no class differentiation high costs. г is an many traditional

an are flight frequencies, minimum delays arsport, undeserved seating, employees working in multiple roles, competitive wager, profit sharing and high productivity. 2 the COVID-19 crisis will have impact for years, & the market will take years, to return to pre crisis levels Reviewing and re-evaluating Operations cost structures and business models key and essential to ensure lean, optimized & Sustainable operations. In these situations aiolines will look for ways to keep fixed costs down. → During downturong, management looks to cut labour costs by laying off workers of reducing their pay or benefits > firance teams will need to be closely involved to protect cash levels, capture Gevenues as possible, and delay cash outs as much as possible. * Companies that take a data doiven, action- oriented and digitally supported approach will have the best chance to emerge stronger from the cover-19 crisis. * soon
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