Surviving the Perfect Storm with outsource travel services

Having met the challenges resulting from 9/11 and changing business models, airlines find themselves again under siege, primarily from rising fuel prices.

Spiraling costs and falling demand as the credit crunch bites, has pushed many carriers over the edge. Airlines need to be strategically proactive to weather the storm, including consideration of outsource travel services.

In June 2008, Giovani Bisignani, Director Generale of the International Air Transport Association (IATA) stated: "It's another perfect storm. The spreading impact of the US credit crunch is slowing traffic growth. After enormous efficiency gains since 2001 there is no fat left and skyrocketing oil prices are changing everything. For every dollar the price of oil goes up, costs go up by US$1.6 billion."

The fallout from the crisis is staggering. Already this year, over 25 airlines have gone out of business. IATA has revised its projection for the airline industry in 2008 from a US$4.5 billion profit to a loss of US$6.1 billion, if the price of oil remains unchanged.

The gauntlet has been thrown down by these converging economic forces, which has and will continue to alter the business environment for the airline industry. Industry executives must quickly explore and implement new strategies to ensure they remain competitive.

So what are the manouevres needed to pull out of a nosedive? In short, those airlines that focus on increasing operational efficiency, enhancing the customer experience and driving organizational agility will be the ones in the strongest position to survive.

Increasing operational efficiency

An airline should diligently examine operational areas to determine where improvements can be made. Experience shows us that shortcomings in process efficiency are often found in the following areas:

- Frequent flyer programmes

- Revenue accounting

- Customer relations n Baggage handling n Cargo operations

- Departure control

- Yield analysis

- MIS

- Stock control

- Crew scheduling

As a global outsourcing service provider to the airline industry, we at WNS have found that increasing efficiency in finance and accounting (F&A) is essential. It is the area of airline operations that is particularly susceptible to revenue leakage.

It is startling how much money can fall through the cracks. For example, we were able to find a €1.6 million recovery in revenue accounting from a single carrier on behalf of a major European airline. For another airline we recovered €416 thousand in revenues. Some airlines are literally putting money in their pocket when there is a hole in it.

Accuracy and timeliness are also important factors that impact efficiency. Time is a valuable commodity and increasing time in a process leads to increased expenditure. Doing it right the first time avoids having to do it over again thereby minimizing costs. For example, we have successfully helped one major European airline that was operating with a 92 percent in-standard account percentage to elevate that rate to 100 percent. In another instance, we reduced the payroll processing time per request by 30 percent. By increasing efficiency in areas such as these, airlines can naturally reduce costs by reducing labour hours.

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About the Author

WNS Global Services is a leading global business process outsourcing and outsource travel services company. Deep industry and business process knowledge, a partnership approach, comprehensive service offerings and a proven track record enables us to deliver business value to companies.

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