Airlines are now facing the challenge of reducing staff to save money while ensuring sufficient flexibility for ramp-up, managing public opinion and minimizing long-term negative impact on corporate culture. Finding the right balance between cost savings to survive financially and necessary expenses to respond flexibly to a future return in demand will become a key factor in the battle for market share in the New Normal.
For the aviation industry, adaptation in the corona crisis means one thing above all: shrinking – the industry is forced to shrink to cope with the drop in the demand caused by the worldwide closure of borders and travel restrictions. Consequently, airlines are trying to save costs and to secure cash flow immediately.
While the variable costs of operating an aircraft can be significantly reduced by grounding the fleet, one of the biggest fixed cost drivers for airlines are personnel expenses – including both, flying and non-flying personnel. As environmental variables continue to change dynamically it is unclear if and when the aviation market will return to pre-crisis level. One of the biggest challenges for airline managers now is finding the right balance between the urgent call for savings and the need for expenses to later allow for a flexible ramp-up whenever the demand for travel returns.
This article is part of Lufthansa Consulting’s ongoing series ‘Shaping flexible organizations: how to deal with COVID-19-induced uncertainties.’
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