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This costs typically can be tied to a flight number.

Direct Operating Costs – Costs incurred as a direct result of the operation of a specific service or flight relating to an airplane or the comfort of passengers during flight, landing and takeoff.

In general, 60 percent of an airline’s cost base goes to suppliers ( Buying and Flying Next Generation Airline Procurement, McKinsey & Company 2017), while the remaining 40 percent comprises mainly of staff cost, aircraft acquisition/leasing and depreciation which is typically handled by finance without procurement involvement.Īirlines’ costs are generally divided into three categories: Direct Operating Costs, Semi-Direct Operating Costs and Indirect Operating Costs: Top five costs for an airline are Fuel, Labour, Lease and Depreciation, Aircraft Maintenance and Airport Handling Charges.

To achieve this, it is essential for procurement to be able to track and understand their cost categories in order to stay profitable in a highly competitive industry. It must ensure timely acquisition while being cost effective and minimizing risks. One of the main roles of a purchasing department is to manage an organization’s spending, deploying an effective annual buying plan, leveraging robust forecasting, market analysis, purchasing processes and cost reduction methodologies. SAP offers a complete portfolio to support this digital procurement transformation for airlines with SAP S/4HANA as a digital core, integrated with SAP Ariba, SAP Fieldglass, SAP Invoice Management by OpenText for SAP S/4HANA and SAP Analytics Cloud solutions to enable performance, speed, agility, visibility and control. Digital procurement automates repeatable tasks to boost efficiency and reduce costs it equips stakeholders with real-time insights and analytics through artificial intelligence (AI) and easy-to-use online tools. Innovative companies go further, holding e-auctions for commodity categories and building collaborative platforms suppliers on performance management. IntroductionĪll airlines should have a digitalised procurement system: a workflow for traceability for all purchases, a supplier portal, a procure-to-pay process for payments and tools for spend analysis. This blog post provides an overview of how SAP procurement solutions can be used to manage the Source to Pay process for an airline. The most asked question is often “what SAP solutions are right for the airline industry?”. Being an airline procurement consultant, I have conducted numerous customer workshops globally for the past 8 years. SAP procurement solutions includes SAP Ariba, SAP Fieldglass, and SAP S/4HANA based offerings for operational procurement, delivering a comprehensive suite for goods and services procurement and external workforce management.