Airline Industry Overview
Recent US airline industry analysis shows that the industry has expanded significantly over the past five years. Rising levels of per capita disposable income and total corporate profits have bolstered demand from both business and leisure travelers. However, there are certain challenges facing companies in the airline industry. Over 50% of an airline’s cost base goes to suppliers. Also, many contracts are long term and have hidden penalty fees, depreciating the financial performance of companies.
Business Challenges Faced
The client is one of the fastest-growing companies in the US airline industry. They emphasize on providing luxurious and innovative services to their clients. However, providing such services required the client to source onboard products and identify major spend categories. After tough years of marginal profitability, colossal cost, and competition challenges, the client realized that they must engage with a global procurement intelligence advisory firm to identify critical spend areas with a high degree of risk and business impact. The client, therefore, collaborated with SpendEdge to be innovative in negotiating contracts to improve financial performance.
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Our Research Approach
With SpendEdge’s help, the client performed a detailed airline industry analysis to obtain granular insights into buying activities and other spending trends. This helped them to consolidate three categories – airport lounge, ground and cargo handling – at a station where the number of cargo handling suppliers were twice, and the competition was comparatively less. Also, the insights gained through analysis helped the client to identify cargo warehouse providers who were earning substantial storage revenue from airline cargo customers. The team negotiated better contracts with them and increased the total cost savings for airport handling spend.
Furthermore, to handle critical spend areas with a higher degree of risk, the experts analyzed high-profile elements that were critical to the performance of the airline and had an impact on cost and brand reputation. This empowered the client to transform the traditional cost contract into a revenue-generating deal and deliver savings of around $3 million to the benefit of all stakeholders.
SpendEdge’s customized airline industry analysis helped the client to increase the total cost savings for airport handling spend by 13% and meet the cost reduction objectives. Also, the airline procurement solution offered enhanced the operating model for procurement, improved the client’s strategic ability to increase revenue for the company, and better manage their cost base.
Efficiently managing the cost base and improving the airline industry value chain requires airline industry analysis. Subscribe now to enjoy free access to SpendEdge’s insights regarding the airline industry.