Reducing Costs of Airlines

The first wave of cost reduction began in the 1960s. At that time, the use of IT focused on improving business and individual productivity in their respective fields. The goal is to achieve administrative and administrative control through automated manual processes. For example, the first cost reduction wave using the SABER investment to reduce the cost of setting airline seat reservations and utilize airline reserved assets and the second wave of investment cuts. With this system, American Airlines became a computer-based airline rather than the original form of a manual base system.

Cost savings: American Airlines expects savings of $ 25 million per year by reducing the fares that it offers to reduce CRS from just 50,000 to just 70,000. Secondly, since all the flights are charged according to the distance of the route, the actual price is determined by the variable expenses, and in theory higher revenues can be obtained. Price elasticity: In review, airline trips are reported as reviewing that most estimates are between -8 and -2, business trips are usually less than 1 and pleasure trips are usually less than 1 It has quite high price elasticity. More than uniform. Therefore, due to price fluctuations, the demand for leisure travel changes with business trip change.

The aviation industry has responded to this difficult environment by taking measures to reduce costs. The airline immediately announced a layoff to reduce the cost of the airline. To further deteriorate the industry, passenger numbers are expected to gradually recover in the coming years. The airline industry in Europe experienced the process of deregulation in the second half of the 20th century. Approximately one third of passengers did not choose airline choice before deregulation

Since the late 1970s, the United States has introduced deregulation of the aviation industry by the aviation industry. The deregulation of American Airlines created the same strategy that has been adopted in other countries, including European countries. Deregulation strategies allow civilian airlines to determine the price of services and freely select routes and destinations. In addition, this bill can reduce unnecessary services such as passenger lounges and free meals on board, so airline companies offer lifetime opportunities to reduce costs. Therefore, the invention of a low-cost airline (cheap airline) for the demand of cheap air service