Question

1.12 Consider an airline that operates a network of flights that serves 200 cities in the continental United States. What long-range forecasts do the operators of the airline need to be successful? What forecasting problems does this business face on a daily basis? What are the consequences of forecast errors for the airline?

Answer 1

There is no final solution to this Question but please find the Variables below which will impact the profitability and image of airline

Boradlu it is divided into 3 groups

-> Enterprise Planning

1.) Route Structure

2.) Fleet

3.) Maintenance Bases

4.) Crew Bases

5.) Facilities

-> Product Planning

1.) Schedule

2.) Pricing Policies

-> Tactics and Operations

1.) Price

2.) Restrictions

3.) Availability

Planning and Marketing define an airline’s products and determine how they will be sold. This is a continuous process which begins 5 or more years before a flight’s departure and operates until the last passenger is boarded and the aircraft door is closed. This process can be viewed as a series of overlapping sequential steps that include scheduling, marketing and distribution. This process requires an exchange of data and feedback between scheduling, pricing and revenue management and distribution. In addition, other considerations such as crew resources, maintenance and engineering and ground services help define the boundaries by which the airline schedule must operate and be managed .

1.) Scheduling: Scheduling determines where and when the airline will fly. Schedules are built to maximize long-term profitability. The revenue and cost associated with each schedule are based on very different views of the same information. Although the schedule is composed of individual flight legs between two cities, the airline’s product and revenues are based on passenger origin and destination (O&D) markets. An O&D market is defined by a passenger’s point of entry and exit from the airline system. The schedule is built to maximize its attractiveness to customers in a wide variety of O&D markets. The development of hub and spoke networks was based on providing maximum O&D coverage with a limited number of flight legs. The costs of operating the schedule depend on the flight legs, which drive the number and type of aircraft used. The schedule must consider the cost and availability of cabin and flight deck crews, as well as the requirement that aircraft cycle through maintenance bases at regular intervals. As a result, the schedule also determines the location and size of ground facilities, and the number and location of crew and maintenance bases.

2.) Fleet Assignment

The fleet assignment process represents one of the most important and well studied applications of operations research in the airline industry. In many ways the schedule development and fleeting process embodies the complexities and computational difficulties characteristic of many aspects of the airline industry. To begin, many carriers use the fleet assignment process to help finalize market frequencies, flight times and enforce various operational requirements on the schedule. These may include operational needs such as station purity in which particular stations are limited to one or two types of fleet to meet maintenance and engineering capabilities, the incorporation of minimum revenue guarantees (MRG) in which municipalities contract for service to their airport, and the increase or reduction of available aircraft due to retirements and new deliveries. Later in the schedule development process, the fleet assignment process and optimization tools are used to finalize the fleet assignments, distribute various subfleets within the network based on operational limitations such as range, and incorporate maintenance opportunities and crew considerations. For example, a carrier might fly several markets with a Boeing 737 but some of the markets may require a 737–800 rather than a 737–200 due to range limitations. Incorporating maintenance opportunities may involve having a specified number of aircraft of a specific type on the ground for 12 hours beginning between 1800 (6:00 p.m.) and 2000 (8:00 p.m.) in the evening to ensure that enough aircraft are available to launch operations the following morning. The carrier may also want their flight crews to stay with the same aircraft for as long as possible to minimize ‘‘crew connections’’ in which the crew leaves one aircraft upon arrival and flies anotheraircraft for their next scheduled flight. Having the crew stay with the aircraft saves time for both the crew and the airline and results in a more efficient operation and better utilization of the aircraft. It also facilitates a more effective line maintenance operation during the operating day due to the opportunity for maintenance personnel to discuss issues with the crew during aircraft turns when needed. The efficient utilization of expensive resources is an objective of any profitable airline. One important aspect of this utilization process is fleet assignment. Fleet assignment involves the optimal allocation of a limited number of fleet types to flight legs in the schedule subject to various operational constraints. The most common form of the FAM makes simplifying assumptions about passenger demands, revenues and network flows to approximate the expected revenue for each flight leg in the schedule.

3) Marketing: Marketing determines what specific products will be offered for sale and how many of each will be sold. The two primary components of airline marketing are pricing and yield management. Since deregulation of the U.S. domestic airline industry, both have evolved into very complex processes. Prior to deregulation, individual airlines served specific market segments. Scheduled carriers served the business traveler while charter carriers served the leisure market. Scheduled carriers flew with relatively low load factors but remained reasonably profitable due to the limited competition created by government regulation

4.)Aircraft Maintenance Opportunity Routing:

The initial aircraft maintenance routing process focuses on evaluating routing feasibility of the fleeted schedule to meet various maintenance and operational requirements. In reality, the schedule planners simply try to insure that aircraft have ample opportunity to receive maintenance within specified time intervals. The routing of individual aircraft within the schedule happens much closer to the day of departure and changes frequently due to operational events such as weather delays throughout the network. FAA regulations require periodic maintenance checks for commercial aircraft based on metrics such as flown hours, the number of take-offs and landings and elapsed time in service since the last maintenance check. These safety and maintenance requirements are very strict and aircraft not meeting the minimum requirements will be grounded. In addition to meeting regulatory requirements, many carriers try to uniformly add wear and tear to the aircraft. For example, over a period of one month it is better to add approximately 300 flying hours to all aircraft of a given fleet rather than add 400 hours to half of the fleet and only 200 hours to the remaining fleet. To accomplish this, many carriers attempt to develop routings that represent an Euler Tour. For the maintenance routing problem, the nodes represent stations or airports and the arcs represent lines of flying over the day. An Euler Tour in a directed graph represents a closed tour such that each arc or line of flying is traversed exactly once even though nodes or airports may be traversed multiple times. Once an Euler Tour exists, all aircraft will repeatedly experience the same sequence of dial routes though in any given day, each aircraft is assigned a different daily route

5.) Aircraft Rotations Generally, the FAM and the fleeting process are driven by overall system profit or cost and do not determine aircraft turns within each station in the network. As a result, the schedule planners must determine the best aircraft rotations by ‘‘connecting’’ or ‘‘turning’’ the schedule in an efficient manner. During this process, schedule planners will attempt to maximize the efficiency of the station by effectively managing ground time and removing any excessively long ground times known as ‘‘drips’’.