01 September 2009

Opening Day of The Culling Season

Today in Idaho - many hundred of hunters headed into the hills to cull the Grey Wolf which after being removed from the endangered species list earlier this year by the US Government Department of Fish and Wildlife, became fair game for legal killing.

For the airline industry - it is still a matter of survival but there is no such Government protection. So the killing instinct is pretty darn strong.

Thus listen up - brace yourselves everyone - the shoots of the reviving economy notwithstanding, we are about to enter the airline employee reduction season. The bean counters have done their sums and the routes have already been paired. Now the only piece is to actually match the costs to the revenues. Yes it is time to cut the staff back again. First out of the gate? AMR with a 900 person cull of their flight attendant ranks.

Not withstanding one of the largest reductions (number wise for sure - and percentage-wise also) in the history of the business already since September of 2008, the airlines must cut again in order to reduce their costs. The pressure of the current elevated (I choose my words carefully) oil price and the continued low yields leave the airlines one possible choice - cut the headcount.

All the fudge factors have already been exhausted. Hiring Freezes (even Southwest), reduced wages, voluntary retirements and as a new wrinkle work for free or take enforced time off. So now the bare bones must be cut. But the other metrics are already in place - Planes parked, deliveries deferred, routes and schedules paired, I could go on.

The numbers coming out of IATA on the first half performance - while expected are still very ugly. Despite recent positive signs, in the main the prognosis is that it will only get a little worse and that we are "bumping along the bottom".

So brace yourself folks - there will be many more announcements over the coming few months on staff reductions.

One side note here - there are still several areas of cost that the bean counters may have missed. The attempt by United to address one of them (Credit Card Fees) has provoked a firestorm of protest including Senate investigation etc. So perhaps it is time again to re-open the cost of distribution and evaluate where further costs cutting can be made. If you don't think this is possible then give me a call - because I can show you multiple ways to reduce the cost of customer delivery and distribution costs. Perhaps the Airline Staff Associations and Unions should get more aggressive with the airlines to look elsewhere for cost savings.

You have been warned.

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