Cost, safety and efficiency: Are LCCs facing a serious PR issue?

Wednesday, 06 December 2017

I started my day with a smile after seeing this headline on my news app: Are budget airlines actually safe?

Back in University, my Statistics professor once gave us an interesting journalistic analogy – as the probability of an event occurring in the real world decreases and approaches zero, simultaneously its news value (measured by its probability of appearing on the front page of the newspaper) increases and approaches 100%.

Having to explain to readers in a news article that "budget airlines don't compromise on safety to cut costs" tells me there is a lot of misunderstanding about this sector in general.

So how does a Low Cost Carrier (LCC) cut its costs? Very broadly, we can chalk up the cost savings to a number of heads. But what's important to note is that none of these points involve putting passenger safety at risk. Consider these:

Astute management of infrastructure

The first rule in infrastructure for LCCs is to keep things simple. Managing maintenance, training manpower and handling spare parts are easier and less expensive if all your aircraft are of the same model, especially one designed for fuel efficiency. Keeping body weight low, through using less dense materials, hollow design of structurally insignificant utilitarian elements (cutlery, containers, etc.) and eliminating unnecessary accessories, helps reduce the load on engines and hence minimizes fuel burn.

Air Mediterranée, which ceased operations last year, successfully reduced the weight of each seat by 66% by switching to lighter materials. Also, you would surely have heard of the airline which supposedly hires only female flight attendants because they are 10-15 kg lighter than men on average. Everything helps – it's pure physics, after all – to reduce the fuel bill, which is about 1/3 of a typical airline's expenses. And lighter certainly doesn't mean unsafe!

Operational ingenuity and caution

Automobiles respond to whoever is at the wheel; everything from instantaneous fuel efficiency to long term health and longevity of the vehicle depends on the driving habits of that individual. The same rule applies to cars as well as aircraft, which means there are ways for pilots to improve fuel efficiency of the planes through careful operation. Manipulating take-off and landing speeds, as well as controlling altitude according to drag will help them in this effort without compromising on safety – after all, that's what they are trained to do!

On the other hand, some airlines are known to fly faster (at the expense of more fuel) to reduce flight duration and then squeeze in additional flights into the schedule to increase revenue. Also, different airports (even in the same region) may charge different orders of usage fees; in fact some models allow airlines to collect fees from airports that hope to gain economic advantage from passengers landing there. Both of those depend on operational analytics equations and may not work on all routes and schedules. Time for distributed scalable airports infrastructure?

Optimized staff allocation patterns

Planning routes efficiently not only means more demand for your flights, but also eliminating the need for overnight hotel accommodation for your crew members. Cabin crew members are in fact highly trained not just in hospitality, but also in safety and disaster management. Expanding the scope of responsibilities assigned to the crew to include such things as cleaning the cabins between flights mean that engaging additional ground staff can be kept to a bare minimum. It is also conceivable that eventually, AI may take over some of the functions.

Streamlined customer service

Clearly, it is of utmost importance for LCCs to make use of economies of scale in everything they do. This means customization of offerings is of least priority, which is why they typically have all-economy class cabins. There is an ever shifting line separating what service comes as part of the fare and what is available as an ancillary upon further payment. How is this important? Consider the demand curve below; in the absence of a charge for ancillaries, the airline would have to be prepared to deliver any such service far in excess of what it would have if it was chargeable. This means that packaging them as ancillaries not only drive down demand for non-essential services, but it also reduces the cost of providing the service.

So what's the final verdict?

There is no compelling evidence to show that LCCs get into more safety incidents than full service carriers. At the end of the day it is simple economics. If customers are paying less than in a full service career, then the revenue difference has to be offset somewhere on the chain. This could be a direct reduction in tangibles like infrastructure cost, staff salaries, services offered, etc. or indirect savings enabled through more efficient strategy and operations planning.

Either way, if customers decide to stay away from LCCs because they fear for safety, that is certainly a marketing/public relations issue that needs to be solved a.s.a.p!

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