LUFTHANSA AIRLINES

CHRIS, JOE, MARTY

LUFTHANSA INFORMATION

• Flagship airline for Germany

• Largest airline in Europe in terms of passengers traveled & fleet

• Founding member of Star Alliance

• World's fourth largest airline

• Flies to 18 domestic destinations, 203 international in 78 countries

• Brand is synonymous with quality, innovation, reliability, competence,

and safety

o http://en.wikipedia.org/wiki/Lufthansa

AIRLINE INDUSTRY

• Airline industry was affected by Recession 2008

• Global air travel decreased from by 2.9% for the month of October in

2008 from the previous year

• African air travel decreased by 12.9% during this time frame

• Despite poor market conditions, Lufthansa actually increased

passenger traffic during this time frame to all markets except a small

decline in Europe

\

• Passenger traffic movement from October 2006 to September 2008

• This data will help us forecast passenger traffic movement by using 4 methods:o 4 period Moving Averageo Exponential Smoothing Averageo Holt's Modelo Winter's Model

4-PERIOD MOVING AVERAGE & FORECASTING ERROR

4-PERIOD MOVING AVERAGE & FORECASTING ERROR• Moving average is used in situations when only deseasonalized data is

preset.

• Trend and seasonality are not observed.

• The 4 period moving average is calculated by averaging the passenger traffic for the previous 4 periods.

• In the same table the Absolute Error, the Mean Squared Error, the Mean Absolute Deviation and the Mean Average Percentage Error are also shown.

EXPONENTIAL SMOOTHING

• Like Moving Average, Smoothing Average is used only when level is observed

• ES tries to smooth the fluctuations in demand of different periods by using Alpha

• First: Calculate the Level of traffic flow of initial period by taking average traffic flow for last eight quarters (2 years)

• Alpha = 0.1

o Ft+1= Dt + 1- (Ft)

EXPONENTIAL SMOOTHING

HOLTS MODEL

WINTERS MODEL

CONCLUSION

• Having the whole supply chain in mind it is important to look at not only the supply side but also the demand side.

a. After observing demand we see that passenger traffic is not uniform throughout the year.

• In order to level out demand management can take a few steps.a. Create more market strategies to develop demand in slower periodsb. Charge higher rates during peak periods to try and encourage some

passengers to take their flight at a less busy time.c. Offer discounted rates at the slower periods to encourage passengers

to fly then.d. Find new destinations that may be more appealing during slower

periods.

• Using the moving average, simple exponential smoothing, and Holts and Winters models gives managers valuable information about demand in different quarters.

a. This information allows them to make changes to move with the demand of the customers.

• This study did not take into consideration the current economy and different security threats around the globe.

a. Because of this management will not be able to get the clearest picture of why market trends increase or decrease.

b. Future studies should take this into consideration. • Winter's Model appears to have the lowest forecasting error and they

have followed historical patterns most closely.