1. Airline Network-Based Modeling Aspects
Sambulo Matema 1

2. Contents Airline Business Network Management Network planning
Fleet Management
Scheduling
Forecasting
QSI

3. Who am I ? Aerospace Engineer: graduated from TU Delft in 2013
Also studied at Cranfied University
Independent Aerospace Transport and Operations consultant
Part-time lecturer and research trainer
Airline Management Trainer, IATA
Founder of CASSA and CASSA Aviation Solutions 3

4. Airline Business Planning Processes
Network
Schedule
Fleet
Maintenance
Crew
Marketing
Sales
Handling / Ground OPS
Flight
Catering
Training
Product
Pricing & Rev Man
Financial
etc 4

5. Network Management Network strategy Fit in the airline’s strategy
Determine an attractive market
Market potential (incl. competition analysis)
Network type 5

6. Network plan Route Feasibility Check Route Demand Estimation
Operational aspects- permits, run way length, infrastructure
Availability of traffic rights and slots
Critical aspect investigation - Availability fleet-, crew- and ground handling
Route Demand Estimation
Competition Analysis
Market Share Simulation
Network Optimization
Non-stop- vs. multi-stop service
Connections at the hub
Frequency, passenger & cargo mix 6

7. Network Management
Sensitivity analysis
Timing of introduction 7

8. Fleet Management Initial aircraft design OEM Markerting
Exchange info Airline and OEM
Analyze concepts on payload, range & economics
OEM Markerting
Obtain latest cost and performance figures
Connections at the hub
Decision making
Compare cost info, performance
Ananlyze network scenario’s
Prepare decision making 8

9. Fleet Management Contracting Secure performance and retention Service
Make buy/lease decision
Negotiate contract
Secure performance and retention
Safeguard fleet flexibility
Service
Manage assets
Monitor fleet performance
Address contract issues 9

10. Scheduling Frequency planning or optimization
Determination of the routes to be served
Frequency of service
Departures times determination
Time-of-the day variability of demand
Possible connections of flights
Departure times checked for operational feasibility
Aircraft rotation planning (number of aircraft necessary) 10

11. Scheduling strategy Structural Characteristics Route structure
Market Structure (density, volume and elasticity of demand) 11

12. Schedule evaluation
Estimate costs and revenues incurred flying the proposed schedule
Identify costly features of the schedule
A more precise demand function
Punctuality inherent in the schedule
Cockpit and cabin crews
Ground crews and ground facilities
Aircraft maintenance requirements 12

13. Product, pricing & revenue management
Revenue Management is an approach taken by airlines that want to optimize their revenue stream. This is achieved through a thorough understanding of the marketplace that manipulates product demand, timing and targeting to maximize yield 13

14. Demand forecasting Forecast market share to make long term plans
Market share determines
Aircraft scheduling
Maintenance planning
Advertisement and sales campaigns
To determine the market share the Quality Service Index (QSI) can be used, which is a tool for analysing market share and traffic levels on individual routes. 14

15. Quality Service Index (QSI)
QSI is a tool for analyzing market share and traffic levels it indicates on individual routes and in aggregate
the change in total traffic
the change in quality of service
the level of traffic carried
QSI attempts to forecast consumer behavior by quantifying the relative attractiveness of different flight options 15

16. QSI Methodolgy
Determine which factors passengers consider when choosing a flight among several options
Apply coefficients to each factor, for each flight option
Multiply the coefficients and weightings to calculate a QSI score for each flight option
Compare the relative QSI scores to estimate the market share that each flight option will achieve 16

17. QSI Methodolgy
The QSI model assigns a score to each carrier based on a range of factors
Connectivity - non-stop, single-connect, double-connect, interline?
Aircraft type -turboprop, RJ, narrow body, mid body, wide body?
Frequency - weekly, day of week, daily, 3 x daily, shuttle?
Elapsed travel time
Time of day - pre-dawn, morning, noon, after meetings?
Day of the week - Sunday conference reception, Mon-Thu, weekend getaway
Carrier Preference
City presence 17

18. QSI Methodolgy 18

19. QSI Methodology

20. Review
Implicit assumption that all passengers along the Y-axis are of the same value
Model is predicated on desire to gain market share to
Capture best traffic
Frequency dominance will bring high yield business traffic
Deter entrants
Dominate distribution channels
FFP
Earn abnormal profits
But on long haul routes the various routings (e.g LON-SYD via DXB, BKK, HKG, SIN, etc.) mean that market share cannot be protected

21. So to review…
In growth phase of cycle, airlines tend to adopt a market share strategy
An indirect service at low seat cost can afford to carry lower value traffic and will capture market share (but at increasingly lower yields) perhaps enabling market dominance in some markets.
But a carrier that puts a direct service or restricts capacity is likely to capture yield although costs may be higher
In a downturn airlines tend to adopt a market share strategy
Again the carrier with the smaller aircraft and the more direct service is going to capture better yielding passengers
The carrier with the larger aircraft may lose passengers unless they drop fares further. Low seat costs are not very worthwhile if you have no one sitting in the seat.

22. Final review…

23. The end…
Questions?