1. Biography for William Swan Currently the “Cheap” Economist for Boeing Commercial Aircraft. Previous to Boeing, worked at American Airlines in Operations Research and Strategic Planning and United Airlines in Research and Development. Areas of work included Yield Management, Fleet Planning, Aircraft Routing, and Crew Scheduling. Also worked for Hull Trading, a major market maker in stock index options, and on the staff at MIT’s Flight Transportation Lab. Apparently has a hard time holding a steady job. Education: Master’s, Engineer’s Degree, and Ph. D. at MIT. Bachelor of Science in Aeronautical Engineering at Princeton. Likes dogs and dark beer. © Scott Adams

2. New Perspective on Fleet Planning Prepared for AGIFORS 2002 Symposium October 2002 William M. Swan Chief Economist Boeing Commercial

3. Review of Fleet Plan Techniques Put and Take Push Down Vest Pocket Abandon all Hope

4. SEA DFW ORDDTW BOS 19:65 19:66 19:78 19:79 19:85 19:86 19:89 19:90 20:10 20:12 Put ‘n Take Fleet Plan Replaces Airplanes in a Schedule

5. 20 old N110s 17 old N110s 15 New N142s 25 Medium N240s 15 New N142s 10 NEW N220s 18 Medium N240s Push Down Fleet Plan Reassigns Schedule 3 7

9. Aside:

10. Further Aside:

11. Review of Fleet Plan Techniques Put and Take Push Down Vest Pocket Abandon all Hope

12. Big Markets Do Not Mean Big Airplanes

13. All Airport Pairs under 5000km and over 1000 seats/day

14. Big Markets do not Mean Big Airplanes

15. Big Aircraft Markets Do Not Stay Big

16. Size in 1990 Not a Forecast for Size in 2000

17. Size in 1991 not a Forecast for 2001

18. Small Airplanes not in New Markets

19. Big Markets Do Not Mean Big Airplanes

20. Small Airplanes Not in New Markets

21. Small Airplanes not in New Markets ?

22. Congestion is Not Driving 747 Shares UP

23. Why No Pattern in Size?

24. Cost per Seat Declines with Size

25. Revenues Track Costs [30 business + discount fill to 80% LF]

26. Revenues Track Costs II [30 business + 90 discount, with Spill]

27. Any Size Will Do [Averaged Demand Curve]

28. Any Airplane Size Works Cost and Revenue Lines are the same shape Profit nearly the same at any size Possibility of a minimum profitable size Upper limit at twice that size? –Limit not set by airplane technology –Limit possibly set by market entry, split in ½ –Or does cost curve rise due to ground costs?

29. This is Speculation, Not Proof Strong lack of pattern in airplane size as used Need for model to explain observed behavior Proposed model explains what we see Proof by “Occam’s Toothbrush” not convincing

30. Bonus: An example of business sleaze (Occam’s Toothbrush) Introducing a technique often used in business Proof by Assumptions “Test” What is the most reasonable set of assumptions That fits all known data points And allows our guess to be right?

31. Any Size Will Do [from minimum to 2x]

32. William Swan: Data Troll Story Teller Economist Chief Economist, Boeing Commercial Airplanes, Marketing

35. RJs – Smaller than You Think A Review of the Evidence: RJs are eroding 100-seat market Small plane market growing slowly

36. RJ Share is Exaggerated Share of added airplanes* = 38% Share of scheduled departures = 16% Share of scheduled airplanes = 14% Share of seat departures = 7% Share of seats = 5% Share of ASK = 3% *airplane count from scheduled departures and miles. Added 2003 to 2004.

37. Macro View: Below 120-seats is Small

38. ASKs Below 120 seats Growing Slowly (1.3% since 1991)

39. New RJs Retiring Props, Old RJs, & 100-seats

40. 6-8% of ASKs not Boeing or Airbus

41. Asia Not Featuring RJs: Too Poor & Too Far

42. Europe Favoring 100-seat Jets

43. N. America is King of the New RJ

44. Other Regionals are Similar to Asia

45. New RJs Since 1995 Market for <120-seats growing at 1.3%/year –Compared to 4.6% for total ASKs New RJs have grown to 28% of these ASKs Old RJs are still 9%, from 8% in 1995 Props are still 13%, from 18% in 1995 Jet-100s (90-120 seats) are still 51% –Down from 73% in 1995 Most of this is in North America –Where Union Pilot Contracts favor RJs Still room to grow within this market