Evolution of Low Cost Airlines
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Transcript of Evolution of Low Cost Airlines
Evolution ofEvolution of Low Cost AirlinesM k Di d P i i l ICF SH&EMark Diamond, Principal, ICF SH&EMPP 1986
Prepared for:
21 September 2011
0icfi.com/aviation |
Agenda
1. ICF SH&E summary
2. What defines a Low Cost Carrier (LCC)?
3. Evolution of LCC’s
4. Added bonus: the airline network planning process
5. Q&A
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SECTION 1
ICF SH&E summary
SECTION 1
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ICF SH&E is a consulting firm exclusively dedicated to the global air transport industryg p y
Specialty consulting firm with over 70 staff
Founded in 1963
Performed over 8,000 individual engagements worldwidePerformed over 8,000 individual engagements worldwide
Full-service offices in Boston, New York and London, with specialists worldwide
Staff recruited from airlines airports academia finance Staff recruited from airlines, airports, academia, finance, government agencies, manufacturers and IT
Joined publicly-held ICF International in December 2007
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Our client base spans the aviation industry and its participants
Passenger airlines
Air cargo express & integrated logistics operators Air cargo, express & integrated logistics operators
Major & regional airports
National, regional & local governments
International development agencies
Maintenance, repair, & overhaul (MRO) providers
Airframe, engine & avionics suppliersAirframe, engine & avionics suppliers
Leasing companies, IT, equipment & service providers
Investors & financial institutions
Booking, distribution & travel services
Corporate & business aviation
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Selected airlines we’ve worked withSpain Ireland France UK Netherlands FinlandGermany RomaniaScandinavia Poland RussiaHungaryLuxembourg Czech.Bulgaria
ChinaChina EasternChina NorthernChina SouthernFormosa
So th Korea
pIberia Aer Lingus Air France
Air LittoralBABr. MidlandEasyJetVirgin Atlantic
KLM Finnairy
LufthansaCondor &Neckermann
Tarom
ItalyAlitalia
TurkeyPegasusTHY
AmericanAlaska/Horizon
MaxjetMesa Air
United States
CanadaAir CanadaWestJet
SAS Central WingsLOT
AeroflotS7UTair
g yMalev
gLuxair CSA
gBalkan
GreeceOlympic
CyprusAegeanCyprusHelios
Switz.flybaboo
South KoreaAsianaKorean Air
JapanANAJapan Airlines
Hong KongAir Hong Kong
Alaska/HorizonAlohaAm. WestAtlantic CoastAtlas AirBus. ExpressContinentalCommutairDelta
Mesa AirMidwestNetjetsNorthwest Pan AmPolarSkyLinkSouthwestSpirit Air Hong Kong
Cathay PacificDragon
TaiwanFormosa
ThailandThaiAirways
Delta DHLEmeryFalcon AirFedExGreat PlainsHarmonyHawaiian
SpiritTWAUnitedUPSUS AirwaysWestern Pac.Virgin America
MexicoAeromarAeromexicoALMAMexicana TAESA
Cayman IslandsCayman Airways
Airways
PhilippinesPhilippine
IndonesiaGaruda
MicronesiaAir Micronesia
VenezuelaAeropostalVIASA
EcuadorEcuatorianaTAME
Antilles
ChileLanChile
PeruAeroperu
ArgentinaAerolineasArgentinasCayman Airways
Central AmericaCopa AirlinesGrupo TACA
JamaicaAir JamaicaWest IndiesALM
MalaysiaAirAsiaMAS
New ZealandAir New Zealand
AustraliaQantasUganda Mauritius
OmanOman
KuwaitJazeeraKuwait
MadagascarEgypt
LebanonMEA
S AfricaIvory Coast
ALM
ColombiaAvianca
BrazilBRAGOLTransbrasil
Saudi ArabiaNASSaudiaNetjets
BahrainBex AirGulf Air
Austral
Sri LankaAir Lanka
U.A.E.Royal JetEtihad
EthiopiaMorocco
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ALMBWIA
QantasAustralian
UgandaUganda Airlines
MauritiusAir Mauritius
MadagascarAir Madagascar
EgyptEgyptair
S. AfricaSAASA ExpressMango
Ivory CoastAir AfriqueTAM
VARIGVASP
EthiopiaEthiopian
MoroccoRoyal AirMaroc
Management consulting services
Strategic and business planning
Alliances
Privatization advisory
Process improvement
P bli li / i h Public policy / economic research
Litigation support
Business and industry analysisy y
Financial services support (investment analysis, due diligence & advisory)
Bankruptcy merger & financial restructuring Bankruptcy, merger & financial restructuring
Financial management audits
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Financial and technical services
Asset management
Appraisals
Aircraft and engine repair oversightAircraft and engine repair oversight
Financial modeling
Interiors management
Reliability analysis
Inspection services
Litigation supportg pp
Future value forecasts
Maintenance reserve requirements
D dili Due diligence
Aircraft procurements
Aircraft & other asset remarketing
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Airport services
Demand forecasting
Air service marketing and route development
Cargo marketing
Cargo facility & business planningroute development
Strategic & master planning
Airport system planning –commercial and GA
planning
Safety & security evaluations
Air traffic controlcommercial and GA
Capacity & delay analysis
Environment / noise analyses
Air traffic control infrastructure planning
Airport concession & lease structure
Economic impact studies
Airport privatization
Operational restructuring
Bilateral & regulatory advisory
Airport finance, rates & charges
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Aviation safety & security services
Aviation safety and security audits of commercial i li i t d i ti th itiairlines, airports, and aviation authorities
Program design
Professional trainingProfessional training
Safety-related technical analysis
Security, quality and loss control
Legal and regulatory support
Aviation claims services
9icfi.com/aviation |
SECTION 2
What defines a Low Cost Carrier (LCC)?
SECTION 2
Low Cost Carrier (LCC)?
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First of all – why is this important?
Whether you’re in industry or government, it’s critically important to understand how the industry works
LCC’s are a fundamental driver of airline industry evolution worldwide
• There are 9 LCC’s in the U.S. and 100+ worldwide, accounting for about 21% of U.S. airline industry revenue and about 25% of scheduled seats globally
Plus – it’s interesting
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What defines a Low Cost Carrier (LCC)?
Simplicity, consistency, repeatability
Maximize asset utilization – to spread fixed costsM i i ft ti h d i k t• Maximum aircraft operating hours per day, quick turns
Minimize number of aircraft types• Enable economies of scale in crews, training, maintenance, procurement, spares g p p
inventory
Outsource non-core functions• E g reservations & distribution handling maintenance etcE.g., reservations & distribution, handling, maintenance, etc.
Drive costs out of the system & eliminate overhead wherever possible• Direct online booking vs. agency & Global Distribution System (“GDS”)
commissions automated check in etccommissions, automated check-in, etc.
Simplified pricing structure
Low unit costs > enable low fares > stimulate market
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Low unit costs -> enable low fares -> stimulate market
How does the LCC model differ from the traditional “legacy” airline model?
Legacies have evolved, but were traditionally characterized by:
Complexity
Focus on revenue generation via hubbing• Susceptible to peaking of activity, poor resource utilization
More services performed in-house• Reservations, passenger handling, aircraft handling, maintenance, etc.
High overheadHigh overhead
Distribution via intermediaries• Travel agencies & GDS’s
Multiple aircraft types tailored to mission
Complex pricing structures
C ll ti b i i t
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Collective bargaining agreements
Comparative domestic unit operating costs –U.S. LCC’s vs. Majors
$0.16
Domestic U.S. Cost per Available Seat Kilometer (CASK) – USD, CY 2010
Legacy
$0.12
$0.14
D
g yLCC
ContinentalUnited
$0 06
$0.08
$0.10
ASK
-U
SD
Vi i A iJetBlueAirTranSouthwest Hawaiian
FrontierUSA 3000Alaska
American
US Airways Delta
$0.02
$0.04
$0.06CA
SpiritAllegiant Sun Country Virgin AmericaJetBlueAirTran
$0.00
$
0 500 1,000 1,500 2,000 2,500 3,000 3,500Average Sector Length, Km
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Source: US DOT Form 41, domestic entity
Cost & productivity metrics, U.S. LCC’s vs. Majors –domestic market: aircraft utilization, unit labor cost
13.9 13.0 11.6 11.2 11.2 10.4 10.210.6 10.3 9 9 9 8 9 3 9 1121416 LCC Legacy
Average Daily Narrowbody Aircraft Utilization, CY 2010Hours
10.2 8.86.0
10.3 9.9 9.8 9.3 9.1 8.6
02468
1012
Labor Costs Per ASK CY 20105.9¢
4.3¢ 3.8¢ 3.7¢ 3.3¢ 3.0¢ 3.0¢ 2.8¢ 2.6¢
6.0¢ 5.8¢ 5.7¢ 5.7¢ 5.5¢ 5.1¢4.5¢
3¢4¢5¢6¢7¢ LCC Legacy
Labor Costs Per ASK, CY 2010Cents
¢
0¢1¢2¢3¢
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Source: US DOT Form 41, domestic entity
Revenue & traffic generation metrics, U.S. LCC’s vs. Majors – domestic market: yield vs. load factor
$0 16
Domestic Avg. Yield (Rev. per Passenger-Km, USD) vs. Load Factor, CY 2010
y
$0.12
$0.14
$0.16
DeltaUS Airways United
Continental
LegacyLCC
$0.08
$0.10
$0.12
d -U
SD
ContinentalAlaska
AmericanSouthwest HawaiianFrontierAirTran
JetBlueAllegiantS i itVi i A i
$0.04
$0.06Yiel
d AllegiantSpiritVirgin America
$0.00
$0.02
75% 80% 85% 90% 95%
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Load Factor
Source: US DOT Form 41, domestic entity
LCC’s offer the potential for tremendous fare-driven market stimulation When Southwest launched service at T.F. Green Airport (PVD) in
Providence, R.I., in 1996, passenger traffic grew 85% in one year
T t l E l d P & A Yi ld (C t t 2010 $) t PVD CY 1991 CY 2007
14
16¢3,000,000
Total Enplaned Passengers & Avg. Yield (Constant 2010 $) at PVD, CY 1991 – CY 2007Enplanements Yield ($ / RPK)
10¢
12¢
14¢
2,000,000
2,500,000
4¢
6¢
8¢
1,000,000
1,500,000
Enplaned Passengers
0¢
2¢
4¢
0
500,000Enplaned PassengersYield (¢/RPK)
Southwest starts service Nov. 1996
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Source: US DOT O&D Survey
History of Low Cost Carriers‘71 ‘72 ‘73 ‘74 ‘75 ‘76 ‘77 ‘78 ‘79 ‘80 ‘81 ‘82 ‘83 ‘84 ‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11
Midway (1979-1991)Midway (1979-1991)
Ryanair (1985 – Present)Ryanair (1985 – Present)People Express (1981 – 87)People Express (1981 – 87)
Southwest (1971 – Present)Southwest (1971 – Present)
Kiwi International (1992 1999)Kiwi International (1992 1999)
Shuttle by United (‘94 – ‘01)Shuttle by United (‘94 – ‘01)Easyjet (1995 – Present)Easyjet (1995 – Present)
Valujet / AirTran (1992 – Present)Valujet / AirTran (1992 – Present)Kiwi International (1992-1999)Kiwi International (1992-1999)
CAL Lite(‘93 – ‘95)CAL Lite(‘93 – ‘95)
1978U.S. Airline
Deregulation Act
1978U.S. Airline
Deregulation Act
Allegiant (1998 – Present)Allegiant (1998 – Present)
Gol (2001 – Present)Gol (2001 – Present)
1983U.S. Industry
Fully Deregulated
1983U.S. Industry
Fully Deregulated
WestJet (1996 – Present)WestJet (1996 – Present)yj ( )yj ( )
JetBlue (1999 – Present)JetBlue (1999 – Present)
Metrojet (USAirways) (‘98-’01)Metrojet (USAirways) (‘98-’01)
Gol (2001 Present)Gol (2001 Present)
Air Arabia (2003 – Present)Air Arabia (2003 – Present)
1997Completion of
EU Liberalization
1997Completion of
EU Liberalization
Song (Delta)(2003 – 2006)Song (Delta)(2003 – 2006)
Jetstar (Qantas) (2003 – Present)Jetstar (Qantas) (2003 – Present)Wizz Air (2003 – Present)Wizz Air (2003 – Present)
Ted (United)(2004 – 2009)Ted (United)(2004 – 2009)
Virgin America (2007 – Present)Virgin America (2007 – Present)
Air Asia XAir Asia X
Spicejet (2005 – Present)Spicejet (2005 – Present)
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(2007 – Present)(2007 – Present)
LCC’s are operating today in every region of the globeEurope
A i
North America
AirTran Airways
Ryanair Bmibaby easyJet eastJet Switzerland Belle Air InterSky
Air One Smart Carrier Blu-express Meridiana Windjet airBaltic ArkeFly
Spring Airlines Air India Express Goair IndiGo JetLite
Jeju Air Jin Air T’way Airlines Air Asia AirAsia X
Asia
Allegiant Air CanJet Frontier Airlines JetBlue Airways Southwest Airlines Spirit Airlines
y Niki Jetairfly Wizz Air Wizz Air Bulgaria Wizz Air Ukraine Smart Wings
y Norwegian Air Shuttle Jet Air Blue Air Avianova Sky Express Vueling Airlines
JetLite Jet Konnect Kingfisher Red Spicejet Batavia Air Citilink Indonesia AirAsia
AirAsia X Firefly Air Blue Shaheen Air Airphil Express Cebu Pacific Spirit of Manila Airlines
Sun Country Airlines USA3000 Airlines Virgin America WestJet
/ C
g Climber Sterling Transavia Transavia.com France XL Airways France Germanwings TUIfly
g Anadolujet Corendon Airlines Onur Air Pegasus Airlines SunExpress Flybe
Indonesia AirAsia Lion Air Air Next Hokkaido Intl. Airlines JAL Express Skymark Airlines Skynet Asia Airways
Spirit of Manila Airlines Zest Airways Mihin Lanka Jetstar Asia Airways Tiger Airways Valuair Nok AirLatin America / Carib.
REDjet Azul Brazilian Airlines Gol Airlines WebJet Linhas Aereas EasyFly
Middle East/ N. Africa
Jazeera Nas Air
Sub Saharan Africa Fly540
y Iceland Express
y Jet2
Skynet Asia Airways StarFlyer Air Busan Eastar Jet
Nok Air Orient Thai Airlines Thai AirAsia Jetstar Pacific
EasyFly Viva Colombia Aires Interjet VivaAerobus Volaris LC Busre
Air Arabia Air Arabia Egypt Air Arabia Maroc Jet4You Flydubai RAK Airways
Aero Contractors Kulula.com 1Time Mango Velvet Sky
Australia/Pacific
Jetstar Tiger Airways Australia
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LC Busre Peruvian Airlines Star Peru
Felix Airways Karthago Airlines
Some key prerequisites for a successful Low Cost Carrier operation:
Deregulated market• Little or no controls on fares, capacity, schedule, p y,
Ability to turn aircraft quickly• Premium on passenger & aircraft handling
Ability to drive costs out of the system• Work rules• Outsourcing• Strategic procurement
Financing
Understanding the market and the competition• Legacies will not sit still and let their market disappear
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SECTION 3
Evolution of LCC’s
SECTION 3
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Over the years the original LCC model pioneered by Southwest has evolved to include numerous variations
Point-to-point flying
Short-haul
Connectivity & hubbing
Long-haul
Single aircraft type
Domestic only
g
Multiple aircraft types
International
Operate in contested markets
“No frills”
Operate in unserved or underserved markets
Quality product, in-flight entertainmentvs.
Single class
Secondary airports
Go-it-alone distribution
Economy + business
Primary airports
Code-sharing & alliances Go-it-alone distribution
Direct booking
Standard, simple product
Code-sharing & alliances
Use of intermediaries for booking
Unbundling of services + ancillary
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revenue sources
Many LCC’s now carry a considerable amount of flow traffic
U.S. LCC’s: Transfer Revenue (Multi-Coupon) as Percent of Total RevenueCY 2009
43%
31%
40%
50%
31%
21%20%
30%
8% 7%3%
0%
10%
Frontier AirTran Southwest JetBlue Spirit Virgin America
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Source: US DOT Origin-Destination Survey
The lines between LCC’s and legacies have been blurring
L i h d t d t ffi i ti f hi hLegacies have adopted many cost efficiency practices, many of which were pioneered by LCC’s:
Outsourcing non-core functions
Direct on-line booking and automated check-in
Unbundling of services and ancillary revenue offerings
Focus on aircraft utilization “continuous hubbing” Focus on aircraft utilization, continuous hubbing
At the same time, LCC’s have moved closer to some legacy practices:
Greater focus on connectivity, hub-and-spoke
Code-sharing & alliances
Multiple aircraft types
L h l Long-haul
Quality on-board amenities, multi-cabin product
Primary airports
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Distribution via GDS’s
Recent developments
JetBlue code-share with Lufthansa (2008)
Southwest code-share with Volaris (2010)
JetBlue & Westjet code-shares with American Airlines (2011)
Southwest launches service at New York LaGuardia & Boston Logan (2009)
Air Asia X – establishment of long-haul low cost service (2010)
Growth of international LCC joint venture carriers• Air Asia • Air ArabiaAir Asia
– Japan
– Philippines
I d i
Air Arabia– Morocco
– Egypt
Jordan– Indonesia
– Thailand
– Vietnam
– Jordan
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Legacy “airline-within-an-airline” LCC’s have largely disappeared in North America & Europepp p
In an effort to hold back the growth of independent LCC’s, a number of legacy carriers launched their own LCC’s:• CAL Lite (Continental): 1993-1995
• United Shuttle (United): 1994-2001
• Delta Express (Delta): 1996-2003
• Bmibaby (British Midland): 2002-present
• Song (Delta): 2003-2006
• Ted (United): 2004-2009• Delta Express (Delta): 1996-2003
• Metrojet (US Airways): 1998-2001
• Go (British Airways): 1998-2003
Ted (United): 2004 2009
• Jetstar (Qantas): 2004 - present
• Mango (South African Airways): 2006-present
• JAL Express (Japan Airlines): 1998-present
• Tango (Air Canada): 2001-2003
Many have now disappeared
• FlyDubai (Emirates): 2009-present
Many have now disappeared
• Difficult-to-resolve issues: Cannibalizing the parent airline’s business, and achieving enough independence from the parent carrier to achieve true low costs
Th d f LCC b idi i h d d l t i h
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• The need for LCC subsidiaries has decreased as legacy parent carriers have reduced costs and become more efficient
Legacy airlines have reduced their costs in recent years, but there is still an important cost gap relative to LCC’s
The wide wave of Chapter 11 filings in 2002 – 2007 helped the Majors considerably in restructuring their costs
F l t i diffi lt t t l t d i f b th l i & LCC’ Fuel costs remain a difficult-to-control cost driver for both legacies & LCC’s
LCC and Legacy Carrier Average CASK (Constant 2010 $)CY 2005 - CY 2010
2010 US$
10¢
12¢2010 US$
4¢
6¢
8¢
0¢
2¢
4¢LCC Legacy
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¢2005 2006 2007 2008 2009 2010
Source: US DOT Form 41
Public policy implications of LCC’s
Stress on airport and airway infrastructure, potential for congestion• From fare driven market stimulation• From fare-driven market stimulation• LCC’s now account for 29% of scheduled operations and 33% of scheduled seats at
Boston Logan
O t it t d l i i d l l i t Opportunity to develop air service – and local economies – at underserved airports and markets
Outside the U.S.: • Whether / how to protect a nation’s flag carrier from encroaching LCC competition? • Whether / how to ease the market into liberalization?
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Added bonus: the airline t k l i
SECTION 4
network planning process
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Network management is one of the core planning activities of any airline
Route selection, capacity & frequency planning, scheduling, code-sharing & alliances fleet selection aircraft assignment rotation plan
y
sharing & alliances, fleet selection, aircraft assignment, rotation plan
Can have a huge impact on profitability and ROI
But highly complex to manage
Carriers must understand:
• The implications of market & competitive developments
• Where they’re making and losing money
• How networks can be optimized to generate the most revenue with the most cost-effective use of resources
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Network planning is all about managing trade-offs
Yield On-Board Load vs.
Local O&D (Origin-Destination) Flow Traffic vs.
Locally Focused Schedule Connectivity-Focused Schedulevs.
Schedule to Meet Market Needs Schedule to Maximize Utilizationvs.
Higher Frequency with SmallerAircraft -- But Higher Unit Costs
Lower Frequency With Larger Aircraft – But Lower Unit Costsvs.
High Frequency / High Capacity to Risk of Excess CapacityHigh Frequency / High Capacity to Generate “S-Curve” Market Benefits
Risk of Excess Capacity, Diluting Loads and Yieldsvs.
Planning Your Network toMeet Customer Needs
Managing Constraints – Fleet, Airport Capacity Regulatoryvs.
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Meet Customer Needs Airport Capacity, Regulatory
The “S-Curve” concept: adding frequency & “presence” in a market will increase demand, yield and revenue, y
Risk: too much capacity can dilute onboard loads and / or yields
S-Curve Illustration: Revenue Share vs. Capacity ShareS Curve Illustration: Revenue Share vs. Capacity Share
80%
90%
100%
50%
60%
70%
80%
Shar
e (%
)
30%
40%
50%
Rev
enue
S
0%
10%
20%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Frequency or Capacity Share (%)
Hubbing concept: each new spoke exponentially increases the number of O&D city-pair markets an airline can accessy p
Risk: too much focus on connectivity may result in undesirable schedules for important (and higher yield) local passengers
350
Illustrative Hub-and-Spoke Network:Number of Spokes vs. Number of O&D City-Pairs
200
250
300
ty-P
airs
100
150
200
O&
DC
it
0
50
0 5 10 15 20 25S k
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Spokes
The network planning process:P fit bilit L d F t
Evaluate Industry Trends and Projected Demand
Evaluate Current Network Performance Profitability, Load Factor, Yield, RASK, CASK, Utilization, etc.
Traffic Growth, Regulatory Actions, Price Elasticity by Segment, etc.
Develop Strategic Options for Network Optimization
Evaluate Competitor Actions and Plans Aircraft Orders, Capacity & Schedule Trends, etc.
Incremental Change vs. New Business Models
Model and Test Network Scenarios
Translate Strategic Options Into Fleet & Network Scenarios
Destinations, Routes, Frequencies, Aircraft Payload/Range, Fleet Size
Forecast Share, Traffic, R P fit bilit
Refine Into Routed Schedule
Select Optimum Network Plan
Model and Test Network Scenarios Revenue, Profitability
Iterative Testing
Incorporate Aircraft Rotations,
R i R lt
Operate
Refine Into Routed Schedule Other Operating Constraints
Tactical Adjustments
Measure Results and
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Review Results Measure Results andIncorporate Lessons
Modeling of network scenarios has become a widespread practice
Evaluate Industry Trends and Projected Demand
Evaluate Current Network Performance Profitability, Load Factor, Yield, RASK, CASK, Utilization, etc.
Traffic Growth, Regulatory Actions, Price Elasticity by Segment, etc.
Develop Strategic Options for Network Optimization
Evaluate Competitor Actions and Plans Aircraft Orders, Capacity & Schedule Trends, etc.
Incremental Change vs. New Business Models
Translate Strategic Options Into Fleet & Network Scenarios
Destinations, Routes, Frequencies, Aircraft Payload/Range, Fleet Size
Forecast Share Traffic
Select Optimum Network Plan
Model and Test Network ScenariosForecast Share, Traffic, Revenue, Profitability
Iterative Testing
I t Ai ft R t ti
Operate
Refine Into Routed Schedule Incorporate Aircraft Rotations, Other Operating Constraints
Tactical Adjustments
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Review Results Measure Results andIncorporate Lessons
A network model permits rapid testing of “what if” network scenarios and hypotheses
Proposed new routes andnetwork & capacity plans
New schedules & schedulemodifications
Optimal service timing &Optimal service timing &hubbing analyses
Aircraft size vs. frequency trade-offs
Code-shares & alliances
Fleet planning – optimal aircraft types & fleet size
Predict the impact of competitor actions
Rationale: Model the impact of scenarios to understand
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likely results, before risking costly assets and resources
The fundamental principle: projected results are related to the airlines’ service attributes relative to the competition
Departure/arrival times
In each O&D city-pair market across the carrier’s network
p
Total elapsed trip time from origin to destination
Capacity offered (seats)
Service frequency
Number of stops enroute
N b f ti t Number of connections enroute
On-line vs. code-share vs. interline
The model calculates a “QSI” (“Quality of Service Index”) value for each service offered in every O&D market, based on a combination of these attributes
The carrier’s projected share of that market is a function of its
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The carrier s projected share of that market is a function of its“QSI” value relative to its competitors
Effective network optimization typically requires multiple rounds of iterative testing and retestingg g
Base
Analyzing a proposed network and schedule scenario:
C lib t C t NI tBase Schedule
Calibrate Model
Create New Network & ScheduleScenario
Market Sizes
Time of Day Preference
Input Constraints Operational
CommercialTime of Day Preference
Airline Preference
Aircraft Preference
Non-stop or Connecting Service
Maintenance
Run Proposed
Analyze Results
Adjust Network &
Final Optimized
Service
Network & Schedule in
Model
ScheduleScenario
Network & Schedule Share
Projected Traffic & Spill
Projected Load Factor
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Revenue
Profitability
SECTION 5
Q & A
SECTION 5
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