Oil has become a significant part in our lives since we use the oil for generating machine in plants, to move our vehicles, and to fly people across the continents. Although, since the past decades we face issues of global warming, fossil fuels are still humans greatest energy source.
For airline industry, fuel costs contribute significantly to the total operating costs of airlines. This situation encourages airlines to manage the guide line in controlling fuel operation cost for airlines since it heavily impacts the continuity of airlines operation in long term.
Figure 1 shows typical costs contribution of airlines where about 31 of the total airlines costs come from fuel costs. It means that any fluctuations of oil price would drive the airlines to increase their airfares with risks of declining number of passengers or else they can maintain their airfares to be affordable but it hurts the airlines profitability. This kind of trade-off is the most usual challenges that airlines face as the results of oil price fluctuations.
Figure 1 Operational costs
Source IATA, 2009
According to analysts, the most attractive solution to energy crisis is the use of bio fuel to run vehicles and machines at plants. To cope with the fluctuations of jet fuel in the future, airlines have set up several alternatives to reduce the operating costs without grounding their ground staffs or reducing the flight. As figure 2 displays, the alternative to reduce operational costs are from technical operations, operational planning, and ground operational, and flights operations.
Figure 2 Operational costs reduction by area
This diverse alternative solution has risen dramatically in use in major European countries like Germany and Netherlands (JeriCan, 2007) as the jet fuel is predicted to arise in the near future (See Figure 3).
However, the use of bio fuel in large number also presents another problem as it cause shortage of vegetable oil quickly. The situation leads to another major issue like global warming as many forests in tropical countries are cut down for land transform into palm oil plants. Figure 4 displays the figure of crude oil price that almost doubles in 2007-2008 and further reduce in 2009 but it occurs to be doubling during 2009-2010 period into 74.09 in Jan 24, 2010 from about 45 in Jan 2009.
Figure 4 five-year figure of Oil price 2005-2010
Source httpwww.oil-price.net
Effects on the Rising Oil Price
The undulating oil price presents a significant impact on airline industry, people, and companies working around this business. Below is the brief the impact of fuel increase or decrease on airline operator and people.
Objectives
Concerning the rising of oil price, this paper has three aims and objectives as following
This paper intends to set a guideline for airline operator on how to react when the face an increase in their Fuel operation cost due to increase in fuel price
Using the non-participant observation method, collecting data and analyzing qualitative information from journal, books, magazine and other online materials, this paper is to overcome any future increase such as (reduce fare, ground aircraft, more increase in ticket fare, layoff people, re-engineer their company structure etc)
This paper will help airlines finding sectors to reduce operational costs without carrying out employee lay off
To deliver a guideline for airline operators in preparing the costs reduction program for 2010-2011 period.
Outcomes
Despite the increasing use of oil that greatly influence the transportation sectors especially the airline industry, it also raises concerns over the impact on environment as the use of fossil fuel becomes the major driving factors that cause global warming. In addition, fuel costs that contribute about 31 to the total airlines are indispensable so the outcome will be a well established guideline to deliver a strategy with goals and objectives to be followed by the airline operators in order to reduce or maintain their operating cost. Several alternatives that could be added into this guideline are
Four major areas for costs reduction
IATA estimates that in 2009, the total costs that airlines spend reach over US464 billion (2009) in which 25 (US116 billion) is spent for fuel. Due to the significant costs coming from fuel costs, there are fuel potential savings that IATA Green Teams identify as following
Asset Management
Flight Operations
Technical Operations
Ground Operations
(IATA, 2010)
Using Alternative Fuel
In terms of oil consumption, customers tend to decrease the use of gasoline to bring down the costs associated with it. One of the solutions is by using more fuel-efficient cars or buy new hybrid cars. The need for hybrid card and other vehicle that use energy alternative is driven by the fact that in the U.S., vehicles use up the oil reserve.
Research methods
This paper will use the qualitative approaches, which are the research that is carried out through observations. Moreover, observation becomes an important technique for collecting data concerning what occurs in a real-life situation. This method also helps us to reach an understanding about the perceptions of those who are being studied, in that situation. To be specific, we employ non-participant observation method especially by analyzing qualitative information from journals, books, magazines and many more.
In addition, the data retrieval was performed through indirect approach, which means that the information obtained is secondary in nature. The most important of conducting observation is it provides researchers with an understanding about the perceptions about things or people we observe.
However, since observation deals with someones perception, we plan to avoid preconceptions since it would provide this research with some bias. In addition, to provide comprehension, I will do some researches in my company using the data and observation of the working environment. In this situation, I will employ various sources including electronics journals and surceases investigations and books that relate to the topics of discussion in oil and airlines industry.
Gantt chart
Table 1 Time Schedule of Finalization of my Research
No.ActionsTime ScheduleNote1Proposal FinalizationJan Feb 2010The proposal will have finalization on several aspects including the aims and objective, literature review, recommendation etc.2Composition of Literature ReviewMarch 2010 April 2010Once the proposal is accepted. I will start composing the literature review based on topics accepted in the proposal3Data CollectionMay 2010 August 2010Collecting data from various sources both primary and secondary data4Data AnalysisSeptember 2010 October 2010Composing data analysis from the findings I obtain in the data collection5Formulation of Recommendation to airlines industry to reduce operational costsNovember 2010Formulating recommendation based on the previous findings and drawbacks in the past policy6Conclusion December 2010
For airline industry, fuel costs contribute significantly to the total operating costs of airlines. This situation encourages airlines to manage the guide line in controlling fuel operation cost for airlines since it heavily impacts the continuity of airlines operation in long term.
Figure 1 shows typical costs contribution of airlines where about 31 of the total airlines costs come from fuel costs. It means that any fluctuations of oil price would drive the airlines to increase their airfares with risks of declining number of passengers or else they can maintain their airfares to be affordable but it hurts the airlines profitability. This kind of trade-off is the most usual challenges that airlines face as the results of oil price fluctuations.
Figure 1 Operational costs
Source IATA, 2009
According to analysts, the most attractive solution to energy crisis is the use of bio fuel to run vehicles and machines at plants. To cope with the fluctuations of jet fuel in the future, airlines have set up several alternatives to reduce the operating costs without grounding their ground staffs or reducing the flight. As figure 2 displays, the alternative to reduce operational costs are from technical operations, operational planning, and ground operational, and flights operations.
Figure 2 Operational costs reduction by area
This diverse alternative solution has risen dramatically in use in major European countries like Germany and Netherlands (JeriCan, 2007) as the jet fuel is predicted to arise in the near future (See Figure 3).
However, the use of bio fuel in large number also presents another problem as it cause shortage of vegetable oil quickly. The situation leads to another major issue like global warming as many forests in tropical countries are cut down for land transform into palm oil plants. Figure 4 displays the figure of crude oil price that almost doubles in 2007-2008 and further reduce in 2009 but it occurs to be doubling during 2009-2010 period into 74.09 in Jan 24, 2010 from about 45 in Jan 2009.
Figure 4 five-year figure of Oil price 2005-2010
Source httpwww.oil-price.net
Effects on the Rising Oil Price
The undulating oil price presents a significant impact on airline industry, people, and companies working around this business. Below is the brief the impact of fuel increase or decrease on airline operator and people.
Objectives
Concerning the rising of oil price, this paper has three aims and objectives as following
This paper intends to set a guideline for airline operator on how to react when the face an increase in their Fuel operation cost due to increase in fuel price
Using the non-participant observation method, collecting data and analyzing qualitative information from journal, books, magazine and other online materials, this paper is to overcome any future increase such as (reduce fare, ground aircraft, more increase in ticket fare, layoff people, re-engineer their company structure etc)
This paper will help airlines finding sectors to reduce operational costs without carrying out employee lay off
To deliver a guideline for airline operators in preparing the costs reduction program for 2010-2011 period.
Outcomes
Despite the increasing use of oil that greatly influence the transportation sectors especially the airline industry, it also raises concerns over the impact on environment as the use of fossil fuel becomes the major driving factors that cause global warming. In addition, fuel costs that contribute about 31 to the total airlines are indispensable so the outcome will be a well established guideline to deliver a strategy with goals and objectives to be followed by the airline operators in order to reduce or maintain their operating cost. Several alternatives that could be added into this guideline are
Four major areas for costs reduction
IATA estimates that in 2009, the total costs that airlines spend reach over US464 billion (2009) in which 25 (US116 billion) is spent for fuel. Due to the significant costs coming from fuel costs, there are fuel potential savings that IATA Green Teams identify as following
Asset Management
Flight Operations
Technical Operations
Ground Operations
(IATA, 2010)
Using Alternative Fuel
In terms of oil consumption, customers tend to decrease the use of gasoline to bring down the costs associated with it. One of the solutions is by using more fuel-efficient cars or buy new hybrid cars. The need for hybrid card and other vehicle that use energy alternative is driven by the fact that in the U.S., vehicles use up the oil reserve.
Research methods
This paper will use the qualitative approaches, which are the research that is carried out through observations. Moreover, observation becomes an important technique for collecting data concerning what occurs in a real-life situation. This method also helps us to reach an understanding about the perceptions of those who are being studied, in that situation. To be specific, we employ non-participant observation method especially by analyzing qualitative information from journals, books, magazines and many more.
In addition, the data retrieval was performed through indirect approach, which means that the information obtained is secondary in nature. The most important of conducting observation is it provides researchers with an understanding about the perceptions about things or people we observe.
However, since observation deals with someones perception, we plan to avoid preconceptions since it would provide this research with some bias. In addition, to provide comprehension, I will do some researches in my company using the data and observation of the working environment. In this situation, I will employ various sources including electronics journals and surceases investigations and books that relate to the topics of discussion in oil and airlines industry.
Gantt chart
Table 1 Time Schedule of Finalization of my Research
No.ActionsTime ScheduleNote1Proposal FinalizationJan Feb 2010The proposal will have finalization on several aspects including the aims and objective, literature review, recommendation etc.2Composition of Literature ReviewMarch 2010 April 2010Once the proposal is accepted. I will start composing the literature review based on topics accepted in the proposal3Data CollectionMay 2010 August 2010Collecting data from various sources both primary and secondary data4Data AnalysisSeptember 2010 October 2010Composing data analysis from the findings I obtain in the data collection5Formulation of Recommendation to airlines industry to reduce operational costsNovember 2010Formulating recommendation based on the previous findings and drawbacks in the past policy6Conclusion December 2010
No comments:
Post a Comment