AVSC 3060
Utah Valley University
Cutting Costs
Table 1: Airbus 320 Flight Operating Costs Per Block Hour
Airline Crew Fuel Maintenance Ownership Total
Cloud Nine Airlines $864 $1447 $688 $706 $3705
Wolverine Airlines $477 $1335 $413 $560 $2785
1. The crew costs for both airlines differ dramatically. List at least two reasons why Cloud
Nine Airlines’ costs may be significantly higher than Wolverine Airlines’ costs.
The obvious reason is pay scale, Cloud Nine pays their crew at a higher rate per block
hour than Wolverine airlines. There could be multiple reasons for this pay difference.
One could be that Cloud Nine is a unionized pilot group. The union plays a big role in
pilot pay negotiations, to make sure pilots are compensated adequately based on the
company profits and industry standards with other unionized pilot groups on the same
aircraft. Wolverine Airlines could be non-union pilot group. Another reason is that Cloud
Nine is advertising higher pay to attract more qualified pilots. Also, if the crew is
compensated well, they are more satisfied with the job and les likely to leave.
2. Wolverine Airlines anticipates a dramatic increase in its fuel expenses over the next five
years. What practice may Wolverine Airlines be discontinuing that will contribute to the
increased cost?
The one thing that comes to mind is what most carriers are doing today, charge for
checked bags. Airlines today are showing record profits from checked baggage fees. With
these fees, passengers are less likely to checkin bags or are more conscious about packing
lighter. With less or lighter bags, the aircrafts cargo weight is reduced, which in turn
reduces the fuel consumption of the aircraft equaling larger profits by burning less fuel.
3. Cloud Nine Airlines wishes to lower its crew costs for the A320. What two actions can it
take to accomplish this?
This is a very touchy topic when it comes to pilot pay. If an airline is desperate and must
cut cost, they could ultimately reduce pilot pay if things are bad. Doing so will leave a
sour taste in the pilot groups mouth. They may become disgruntled and may even start to
look for opportunities elsewhere. Airlines have done this in the past with mixed results.
If things get very bad another way to lower crew cost, which has been done in this
industry before, is to furlough pilots and bring in contractors who are paid less. They are
known in the industry as “Scabs”. Obviously, this doesn’t go over well with the pilot
group.
4. Which airline would be considered a low cost carrier? What cost-saving strategies might
this airline be using?
Based on this chart the low cost carrier is Wolverine Airlines. One field that has a big
disparity is maintenance. Cloud Nine’s cost is $688, and Wolverine’s is $413. There are
two possibilities in this disparity. The first and obvious reason is that Wolverine is just
paying its maintenance personnel at a much lower rate. Or they may have newer planes
which require less maintenance. If this were my low cost airline, I would man our
maintenance departments with the lowest number MX crew to preform routine
maintenance, and if more MX personnel is needed for bigger jobs to higher contract
maintenance for additional resources. This would cut back on overhead cost and only
incur additional expense when needed.
