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The Zero Based mindset is appropriate given the current climate and it would be prudent for the Aviation community to consider such an approach.

Implementing zero based principals to assess current spending can bring much needed clarity determining what costs should be based on outcomes, realigning resources to invest in growth, profitability, sustainability and trust.

Scenario Planning & Goal Setting

The Airlines strategy, its footprint and operating model needs to be reviewed and a blue print developed to fit with the "new normal" and provide the right framework for short-term actions and long-term strategic moves. Determining future air travel demands is not only predicated on the duration of the travel ban restrictions but also elements such as airline failures, government intervention and consolidation.

When approaching scenario planning consideration should be given to:

  • Impact of potential common international standards.

  • Easing of governmental restrictions.

  • Passenger confidence and demand. 

  • Technical innovation.

  • Route profitability and resource levels.

  • Legal obligations.

  • Environmental implications. 

Fleet Optimisation

Airlines need to focus on determining which route sectors will recover quicker

and optimise their fleet accordingly. 

Operational downsizing is a new reality facing airlines and focus needs to be placed on key elements such as​

  • Aircraft size relevant to route sector and expected yield

  • Initial Aircraft types to recommission first

  • Fleet thinning (early termination of ageing fleet)

  • SLB Opportunities

  • Potential early termination of Lease Agreements.

  • Utilising Aircraft in Long Term Parking for spares​

Lease Re-evaluation and Renegotiation 

 

Whilst Lessors will initially support Airlines by way of "Rental Holidays" it must be noted that this support is a payment deferral not a forgiveness. The Lessee's obligations under the terms of the Lease remain unchanged.  

 

With future fleet size a byproduct of Covid-19 and airlines focused on liquidity issues, consideration should be given to re-evaluate leased fleet profiles as part of the ongoing cost/benefit ratio analysis.

 

Opportunities exist to explore elements such as:

  • Examine financials associated with each leased aircraft

  • Explore potential to renegotiate lease terms 

  • Assess early lease termination implications (penalties verses remaining lease term costs)

  • Identify candidate aircraft analysing current maintenance status and projected utilisation. 

  • Review redelivery program resource requirements

  • Discuss with lessor potential end of lease redelivery "by out" options for mid-end life aircraft

Maintenance Cost Analysis


Other than a small percentage of Aircraft being utilised to support humanitarian and cargo flights, airlines continue to incur costs related to storage and other associated engineering costs.

Key decisions need to be made as part of the fleet optimisation strategy to determine which aircraft will remain in short-term parking and which will be consigned to long-term storage. Priority needs to focus on proactively managing the aircraft fleet in order to accurately forecast and optimise the economic outcome of future major maintenance events once operations resume. 

  • Effective aircraft utilisation

  • Fleet scheduled maintenance events

  • Workscope management polices

  • Engine swap strategies

  • Utilising long-term stored aircraft for spare parts

  • MRO and 3rd party service providers GTA re-negotiation opportunities

Green-Time Strategies

 

Significant cost savings can be achieved through the implementation of time-continued or green-time engine strategies.

Given the current cash constraints, workshop optimisation through a policy of reduced engine shop build standards will translate into lower maintenance costs. Airlines with leased mid-end life aircraft should explore with Lessors engine replacements as alternatives to performing maintenance reserve based engine shop visits. 

  • Short build ESV's - PR based utilising remaining LLP life.

  • Engine module swap during engine ESV's.

  • Implementing asset management initiatives for mature fleets

  • Engine swap strategies

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