1. Good Things Take Time – Building up an O&D-Forecaster Stefan Poelt Presentation to the AGIFORS RES & YM Study Group Berlin, 16 - 19 April 2002

2. O&D Forecaster page 1 Agenda What’s the scope of our O&D project ? Some traps to watch O&D Forecaster system overview What’s the current status ? How does a perfect project look like ? Happy end !

3. O&D Forecaster page 2 How does a perfect project look like ? A perfect project Is in time Is in budget Covers the scope Delivers quality Our project Is not quite in time Is in budget Scope has been adjusted Delivers quality

4. O&D Forecaster page 3 What’s the scope of our O&D project ? O&D Forecasting Detailed level Individual pax / groups Gross bookings / cancellations Aggregation of ‘exotic’ O&Ds Implemented by Lufthansa Systems Berlin PNR-based No-show Forecasting PNR attributes Decision tree learning Mixed with traditional no- show forecasts No decision about vendor O&D Optimization Benchmark study Project stopped after 11 Sep 2001 Re-activation in 2003 Implemented by CRSs Married Segment Control Prevents cheating Implemented at Inventory Dept. Coordination task

5. O&D Forecaster page 4 Simple vs. complex forecast method Separation of individual and group bookings Separation of gross bookings and cancellations Flexible aggregation of low demand traffic flows Complex methods are more difficult to calibrate Complex methods can better model reality Trade-off between accuracy and stability Pilot‘s Weather Forecast Station Stone is wet Stone is dry Shadow at ground White on top Stone can’t be seen Stone swings Stone is hopping Stone disappeared Rain No rain Sunny Snow Fog Stormy Earthquake Blizzard

6. O&D Forecaster page 5 Better no-show forecasts allow better overbooking Traditional no-show forecasts are based on booking class and routing PNR is a richer data source (e.g. ticketing info, special service request etc.) ‘There’s gold in the PNR data mine’ (Louis Busuttil, PROS Conference 1997) ‘PNR-based no-show forecast’ (Klaus Weber, AGIFORS Conference 2000) PNR-based methods can be applied to booked passengers only - they must be mixed with traditional no-show forecasting PNR-based methods (e.g. decision trees) can also be applied to cancellation forecasting

7. O&D Forecaster page 6 O&D forecasting without O&D optimization Intermediate step: O&D forecasts aggregated to leg-level and used in leg-optimization Better quality of leg demand forecasts Better quality of (PNR-based) no-show forecasts  lower overbooking risk O&D information, better understanding of travel flows Better communication and co-operation with Pricing and Scheduling / Flight Planning

8. O&D Forecaster page 7 Reasons for delay Too optimistic project plan Internal staffing (6-7 project members, 4 users – part-time) Under-estimation of noise in PNR data Frequent change of project management Scientific driven project – late involvement of users Research and calibration effort for new topics (e.g. cancellations) Re-organizations 11. September 2001

9. O&D Forecaster page 8 Renaming the project does not help There were plans to rename the project to ‘O&D-Forecaster’ This might help to confuse controllers but does not help to solve the problems Project name: ‚Bid Price 2‘ Original scope was adjusted, O&D-optimization was stopped after 11. September 2001

10. O&D Forecaster page 9 Shit happens There are many situations where something can go wrong The business processes haven’t been addressed at the beginning Later on we realized that important functionalities are missing Noise and complexity of PNR data have been under-estimated Aggregation of no-show information from O&D to leg is problematic

11. O&D Forecaster page 10 A precise specification avoids complaints later-on Innovative IT-projects require a lot of research Alternation of research and prototyping / implementation We decided to refine the specification during the project Problems keeping specification and documentation up to date Testing with ‘fuzzy’ specification is challenging You‘ve built it up reversed !

12. O&D Forecaster page 11 A good documentation is important Documentation often is prioritized down Good documentation improves user’s confidence 3 documents: –system administration –user manual / online help –process / workflow PRESS ANY KEY

13. O&D Forecaster page 12 In a perfect project: Project managers have the right perspective Focusing on the most important topics Understanding the subject (RM and Forecasting) Good communication and motivation skills Currently 2 project managers, one focusing on management, the other focusing on methods - learning from each other

14. O&D Forecaster page 13 In a perfect project: Motivation of the project team is not an issue Working for years on the same thing is boring We are the 4. generation of project managers The project survived 2 re-organizations Increase motivation by changing responsibilities Success is the best motivator !

15. O&D Forecaster page 14 Our new toy

16. O&D Forecaster page 15 Aggregation solves the small numbers problem There are many low traffic O&Ds 20:90 rule - 20% of all O&Ds cover 90% of the traffic Flexible aggregation of low traffic O&Ds is a key factor

17. O&D Forecaster page 16 Effects of schedule changes are handled automatically A major schedule change can affect thousands of O&Ds Concept of Lufthansa Systems Berlin handles new, moved and cancelled flights Demand is automatically adjusted based on ‘neighbored’ flights/paths ‘Distance’ to neighbored flights mainly depends on departure and arrival times Approximation of market (passenger choice) model new flight neighbored flights flight Aflight B flight C dist(A,C)dist(B,C)

18. O&D Forecaster page 17 This year we will take the last hurdle Forecast quality (aggregated to leg-level) is better than for current system Data loading performance is o.k. Business processes have been re- designed and matched with the tool Flight by flight migration of new forecast system (Jun - Nov 2002) minimizes risk Business re-organization will go hand in hand with migration Parallel project of O&D-reporting is started Married Segments Control is implemented in Amadeus and Galileo

19. O&D Forecaster page 18 The forecast results are very promising Validation of O&D-forecaster at representative test flights Distinction of open and closed flights to separate unconstraining effects Open flights are less important but have reliable actual values Booking period departure

20. O&D Forecaster page 19 Happy end ! The O&D forecaster will be completely in operation this year Very good cooperation with Lufthansa Systems Berlin O&D not always means Odd & Delayed !