The impact of Short haulOperation On A380 Fleet

(Airline Performance Case Study)

Mohammed S. AwedConsultantDate of Issue08 –07 -2015

RASK CASK

Load Factor

AirlinePerformance

The impact of Short haul Operation On A380 Fleet (Airline Performance Case Study)

By: Mohammed Salem Awed Consultant

Many Mega Airlines examine the operation of A380 with a short haul operation as Emirates and Singapore Airlines while the others are not as Lufthansa Group and Qantas. Actually the main core business for A380 is to address the long haul operation segments, traffic between the continents which reflects high stage length consequently reducing the cost, so based on CAPA cask cost comparison graph between Mega, Legacies and LLCs, which create the a base for collecting data for Mega Airlines, we hold this analysis.

The idea is to study the learning curve of LH group on all levels, short, medium and long haul operations, and use the airline industry trend direction of the curve, defining and calculating the factors of driving formula, (power function – constant and index factors).

Why we are addressing LH Group? LH Group operate A380, on a long haul operation, we are looking for the driving formula of airline to use it trend for another airlines as Emirates, and Singapore Airlines (displacement curve approach), by defining the new constant factor that satisfies the condition of passing the reported value for airline in CAPA Graph for Emirates and Singapore Airlines.

The CASK range for legacy airline from 5.2 – 11.5 ( EURO cent ). And average stage length 500 – 7000 Km. The CASK range for LCCs from 3.1 – 6.2 ( EURO cent ). And average stage length 500 – 1500 Km.

There are many short sectors that A380 flying by Emirates and Singapore Airlines as BKK-HKG, and JED-DXB. Which actually cost airline higher than their benefit operation in a short sector.

Fitting Actul Data to Power Distribution:

Two parameters that define Power distribution, constant and power factors, The idea behind this approach is curve fitting for power function which can be fairly fitted if R2 is greater than 80% - any figure below than that level will lead to improper decision. Then if the previous arguments consistent, that will lead us to use the formula of the resulting curve ( power function ) in such a way to satisfies the new point location of an airline used to compare by defining the new constant factor , i.e. to move and displace the whole curve to pass through the required point – keeping its trend direction, off course at different stages length. While for airlines it is good to concentrate on one airline, defining its short, medium and long haul values of CASK, this will give the clear picture about the right learning curve for the airline and defining the general airline trend, a fair example is Lufthansa Group, by developed its curve, we can create the resulting curve to use its for

formula in mapping the right curve to pass the required airline point (Displacements) for Emirates Airline.

Resulting Curve:

This curve addressing the relation between CASK and stage lengths for airlines, Yes there is a relation between CASK and stage length but to what level, what is the right distribution, is it exponential or

logarithmic or power one?. The two parameters power function is used for this curve, and re-calculated, and represented the other points – that defining the right displacement value ( constant coefficient for Emirates Airline ) to re-draw and map the new curve.

EK vs LH analysis: As mentioned previously, the relation between CASK and Stage Length is inversely proportional That’s means as the distance increase the value of CASK relatively decrease, but the question is at what slop, and what are the right parameters to calculate, so here we are in a position to define the extreme value limits of operating CASK. So defining the extreme limits of Emirates operating curve.(short haul will be 8.3 Euro cent and long-haul will be 5.2 Euro cent), similarly for Lufthansa the extreme limits of operating curve.(short haul will be 11.75 Euro cent and long-haul will be 7.3 Euro cent), this clearly show that’s Emirates has a better cost operational performance on Lufthansa with Almost 4.5 – 2 Euro cent (gap).

EK vs LCC analysis (short haul sector ):

No point for A380 to operate the short haul sectors as the extreme values for Emirates for short haul will be 8.3 Euro cent and long-haul will be 5.2 Euro cent, compare these values with the CASK range for LCCs i.e from 3.1 – 6.2 ( EURO cent ). And average stage length 500 – 1500 Km. almost 2.2 (Euro cent) gap this means A380 is bleeding and draining the money at short haul operation. From the resulting curve of Emirates the sector DXB-JED operate at 1725 Km by A380 which reflects 7.0 (Euro cent).

Summary:

Many factors can indicate the performance of an airline, mainly are Load Factor, RASK, and CASK, in this article we address the impact of short haul operation on cost operation for A380 by evaluating CASK values.

The result shows also that no point to operate A380 on a short haul sectors, as DXB-JED, BKK-SIN and HKG-SIN, they will have a negative impact on airline performance.

So most of the reported airlines by CAPA graph analysis can be mapping by defining their displacement factor (concept of displacement curve approach), to deliver a clear picture for each airline trend cost operating curve. Here we address LH and EK, which clearly shows the cost gap between airlines.

So based on the right stage length for each airline we can define the right cost level that creates by A380, consequently we can compare the financial results per fleet for each airline.