1. Welcome to class of Airline Simulation Game by Dr. Satyendra Singh University of Winnipeg Canada

2. Learning Objectives To appreciate and understand Business and strategic plan The complexity of managing an airline Strategies within the concept of airline Staff organization and sizing Fleet planning Schedule planning Yield Management Marketing Management Objectives:

3. Financial Cash : $20m Current fuel price: $1.05/litre Loan –You can take loan up to $1.25m (50% of stocks’ value) –2% of loan is deducted each quarter and applied to the loan. If defaulted, 5% of the loan value is added to the loan amount. Bonds: Issue Stock market: 50m shares at $0.05  $2.5m, if sold –You can buy stocks of other airlines, if you wish –Dividends, stock value Income tax: 20% (fixed  i.e., no change in govt.policies) Interest rate: 10% (fixed  I.e., economy is stable) Interest earned: if you have $ in your bank Bankruptcy: 4 straight quarters of losses

4. Human Resources Pilot training Support staff needed per 100 seats in the fleet = 1 Support staff needed per 100 seats at airport = 1 Cargo staff needed per cargo handling centre = 100 For each leased airline, extra staff needed = 20 Managers –Scheduling  gives advice on checks –Purchasing  reduces maintenance cost by 10% –Training  increases effectiveness of staff by 20% –Reporting  provides maintenance reports

5. Airports About 20 National and International airports –Choose home office, size Given Beijing and Winnipeg –Airport departures (hourly movements) –Terminal capacity  option to buy own terminal –Airport parking/landing fee  based on aircraft size Cargo operations –Suggested cargo rate $1.47per km for every 1000kms –Cargo handling facility – must have –You may lease it out to up to 10 airlines –If you underpay your staff, they will go on strike –Contract cancellations carry penalties –You can sell the cargo handling centre

6. Fleet Aircraft: Boeing and Airbus –I have given you two. –If lease new aircraft, 10% deposit reqd. If cancelled, you lose the deposit –Configuration: passenger, cargo or both –Age of the aircraft, buy or lease, runway length –Lease out, sell it Maintenance: In-house or global outsource –A check (at any airport)  Every 60 flight hours –B check (Engine Overhaul Centers)  500 flight hours; needs 200 man- hours –C checks (airframe manufacturer)  7500 flight hours; needs 2000 man- hours; allow 6 weeks for this check. –D checks (Restore as new)  22000 flight hours; needs 25000 man- hours

7. Marketing Airfare –F = First, J = business, Y = economy class –Q = Discount economy class (80% of Y fare) –N = Discount economy class (60% of Y fare) –I = Discount economy class (50% of Y fare) Service Level –Meals, headphones, video, tel., drinks, alcohol Luggage –By default, one carry-on luggage is free –International first piece $25, second piece $35 –Domestic first piece $15, second piece $25 Advertising –TV, radio, print, sponsorship, billboard –Check effectiveness Commission to travel agents Rename airline –Bankruptcy, crash, accidents

8. Operations Forecasting for demands Arrivals and departures –Technical stop, if long haul. Load limit (5-20%) can increase range and decrease runway requirements –Schedule for checks –Try to arrive in the morning and depart in the evening Scheduling within a foreign country –You must have your own office in that country Code sharing –Offering seats on your flight for sale in bulk to other airlines to sell and market as their own –You can buy or sell seats through the code sharing

9. Performance Balance sheet Loss and profit account Passengers carried Cargo carried, if applicable Capitalization Fleet size RASK: Revenue per available seat CASK: Cost per available seat ASK: Available seat kilometers RPK: Revenue passenger kilometers

10. Some Points Be careful when leasing, you cannot undo it Age of aircraft will affect public perception To make $, your aircraft (passanger/cargo) must be configured  $0 To make $, you must set airfare on scheduled flights  Otherwise $0 Check airfare carefully  Expensive tickets may fly empty seats Usually, short haul flights are more expensive than long haul flights Aircraft < 1 year cannot be leased You cannot lease a leased aircraft If an aircraft is up for lease, it cannot be scheduled If you buy an aircraft before lease it expired  penalty You get discount for bulk order of aircrafts Check—not all used aircrafts are configured, in case you buy used one For every hour an aircraft is not flying, a parking fee is charged If outsourcing all maintenance, be careful, it will delete schedules Maintenance depends on different airframe/engines Reduction (e.g. 20%) in paylaod will reduce the runway requirements Through passengers vs. point-to-point passengers (e.g. 30% for through)