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Efficiency

Benchmarking

A proven way to judge own efficiency is to benchmark towards competitors. Data is available from quarter and annual reports. The comparison shall be conducted in a systematic way with deeper analysis of how the competitors perform their business in the areas they are more efficient (bench learning). Own inefficiency is often excused by comparing apples with pears. It is important to understand that, despite comparing different fruits, the fruit basket is the business. If the business is unprofitable, some of the fruits have to be changed, smaller or even leave the basket.

Benchmarking with airlines

Actual data from some airlines are available from quarter and annual reports. Data on annual basis is available from AEA and IATA. The various conditions between the airlines, such as different aircraft types, stage lengths, local cost bases etc., can be handled by breaking down the comparisons on easy to understand terms, such as cost per passenger, seat, block hour or seat kilometer.
 
The comparison should cover the total business, e.g. both revenues and costs, in order to give an overall view of what parts of the own business that need to be improved.

Benchmarking data

Below is a summary from official data from a European low cost carrier competing on the Scandinavian market.
  • Revenue per seat is 825 SEK. The hybrid business model includes revenue from private, charter, sales on board, sales on ground and others.
  • Direct operating costs per seat is 732 SEK. Fuel is 200 SEK or 27%. The contribution to cover capital and depreciation is 93 SEK per seat.
  • Total operating costs is 854 SEK which give a loss of 29 SEK per produced seat.
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