In this globalised world, an economic problem in one country will not get restricted to that country, but gets spread to other countries. The economies of most of the countries in the world are directly and indirectly dependent on the U.S.’s economy and with liberalization happening everywhere, the negative effects in USA will be felt everywhere and European countries are no exception to it. The worldwide recession in many economies is having a major negative impact in all sectors, and airline industry is no exception. Airline companies all over the world are fighting for their survival not even their success due to recession and the resultant effects like drop in passengers’ traffic, high operating costs, etc. International Air Transport Association (IATA) in February reported a 4.6 percent decline in world passenger traffic due to decreased customer demand, high cost of fuel, high cost of finance and low access to credit. (iata.org 2009). Different airlines including budget airlines as well have been counting their losses and responding to the prevailing economic condition. These losses are attributed to lower traffic volumes and higher than expected oil prices. Global economic crisis is battering even the biggest of airlines, with airlines like Air France, KLM, Delta Airlines, etc posting sizeable losses last year and has initiated plans to remove 40-50 mainline aircraft from its fleet to eliminate fixed costs. Like these airlines, British Airways also reported net loss in tunes of millions last year, blaming it on the weak pound and the global economic crisis. However, Ryanair has been able to salvage something, by beating recession somewhat and posting sizable profits. On the whole, recession and the resultant oil price are having a negative impact on the European airline industry.
Operation management techniques
To obtain significant operational economies, airlines must take a careful look at the value chain and identify intrinsic high cost components that could be eliminated or reduced by changing the way the business operates. Normally, organisations can achieve low cost advantage through assets and competencies in operation which can be based on access to raw materials, low cost distribution, cost of labour, government subsidy, location cost, automation, purchase of inexpensive capital equipment and reduction of overhead. To travel in this track, airlines should incorporate lean management as part of its change management model. As stated and wished by Paul Coby, chief information officer at British Airways, “We need smart innovation and smart change...