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Untapped Potential: How the Airline Industry can Reduce Operating Costs by $100,000,000

During the pandemic, airlines have to utilize all possibilities to save money. Besides prominent measures, untapped potential holds an enormous savings potential for the industry. Continue reading to find out everything about a measure that can reduce the airline industry's operating costs by more than $100 mil.

With few flights and even fewer passengers, COVID-19 unleashed a wave of challenges for airlines. Some airlines —unfortunately— had to go out of business while many others struggle to survive. Passenger volumes around 50 percent of 2019 levels are forcing airlines to seek cost-cutting measures constantly. And we’ve all read the news about furloughed employees, termination of aircraft orders, expansion plan freezings, and an overall downsizing.

Airlines Need Additional Cost-Saving Measures!  

Besides the prominent measures media has been reporting about, airlines —of course— have been seeking and implementing an uncountable amount of additional cost savings measures. Nonetheless, it turned out that the airline industry will need other measures to cope with future challenges. With this blog post, I want to introduce one particular cost-savings measure: A measure that holds the potential to save the entire industry more than $100 million — annually.

Let’s Have a Look at the Costs First.

Before we dive into the details of how the airline industry can save this enormous amount of $100,000,000, we take a look at the costs we are going to save. Unsurprisingly, several factors influence airlines’ costs: Labor, fuel, equipment, and many others. With the measure I’m going to introduce to you, we have to focus on a particular cost factor: delay costs. As the term says, these are costs that occur whenever an airline runs into a flight delay. Delay costs directly result from additional labor and equipment costs, passenger rebookings, or compensation fees (plus many other factors).

Delay Costs Represent a Significant Cost Factor for Airlines.

More importantly, delay costs represent one of the significant cost positions on airlines’ balance sheets. The Federal Aviation Administration (FAA) estimated the industry’s annual costs of delays in 2018 at $28 billion. That’s a humongous amount of money. Indeed, due to the pandemic, delay costs in 2021 will be lower. Nevertheless, many forecasts estimate a return to 2018 traffic numbers in 2022.

Delays Caused by Fueling: A Small Percentage Representing an Enormous Savings Potential

As a final step before introducing the measure that can help the airline industry to save $100,000,000, we have to understand delays more in detail. This is a necessary prerequisite to understanding the cost-saving action. So here we go!

Different reasons cause airline delays: For example, weather, air traffic control, or technical problems. One reason that actually causes a small number of delays is the fueling process. Delays due to fueling can happen when the fueling process takes too long, the fuel provider arrives late, or other reasons that slow down the fueling process.

Based on internal studies of client data, 0.283% of all flights are delayed due to the fueling process. I know, that number sounds like nothing. However, as an additional input factor, we analyzed that fueling-related delays have an average duration of 17.7 minutes. So let’s do the math!

According to ICAO, the number of flights performed globally in 2018 was 38.3 million. Accordingly, more than 100,000 flights (~108.577) faced a delay due to the fueling process. With an average delay duration of 17.7 minutes, that sums up to more than 1.9 million delay minutes due to the fueling process. Finally, with an average cost of $74,24 per delay minute (according to Airlines for America), airline costs for fuel-related delays sum up to more than $142 million.

Lots of Numbers — What are we Going to do With That?

Ok, I know that wasn’t easy to follow. However, the important number you have to remember is one-four-two.

In a year like 2018, airlines face costs of $142 million due to fuel-related delays.

And as already mentioned: It is likely to see the airline industry recover to 2018 traffic figures by 2022 or the latest 2023. Subsequently, if we can find a measure to reduce fuel-related delays, we can directly save airlines an enormous cost position.

A Digital Fueling Process: The $100 Million Answer!

So let’s talk about how to eliminate —at least a considerable part— of fuel-related delay costs. The key to do so is in digitizing the fueling process. It may surprise you, but the fueling process still reflects a manual and verbal process at most airlines. Especially the communication between airlines and fuel providers happens verbally. 

With a digital process that eliminates manual steps and verbal communication, the entire fueling process is streamlined, accelerated, and enhanced. Or in other words: Digitizing the fueling process is about driving the process’s efficiency.

Digitizing the fueling process is about driving the process’s efficiency.

Although only a few airlines went down the road and digitized the fueling process across their airports, the results are remarkable: On average, airlines achieved a reduction of fuel-related delays of 75% — possible through improved communication and a streamlined process.

The Entire Airline Industry can Save $100 Million!

So let’s put the facts together. Evidentially, the digital fueling process eliminates 75% of fuel-related delays. Based on the overall fuel-related delay costs ($142 million in 2018), such a reduction leads to cost savings of more than $100 million (~106). Assuming that the airline industry will return to 2018’s traffic figures in 2022, the approach could save $100 million already next year — in case all airlines make the shift to a digital fuel approach!

Want to Know More About Digital Fueling?

Head over to the world’s biggest digital fuel network to find out more about how this approach can help your airline!

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Benjamin Walther

CEO, Frankfurt

Benjamin is Information Design's CEO and a proven content-maniac. Besides running a successful business and developing pioneering ideas, he's dedicated to writing blog posts and creating content.

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