Airline Operations Management

Airline Operations Management

Practice of coordinating and planning the logistics of an airline

Broad overview of the airline industry and creates awareness

Mail is loaded on an

Embry-Riddle Waco Mail plan company.

MERGED into american airways

Post Office used what for night flying?

sequential beacon lights for night flying. Guide pilots along transcontinental airways, weather reporting, and new airports.

Name of World's first scheduled passenger airline service

St. Petersburg, FL -> Tampa, FL

St. Petersburg Tampa Airboat Line

Date of World's first scheduled passenger airline service

January 1, 1914

Details of World's first scheduled passenger airline service

21 miles

23 minutes

Capt. Tony Jannus

Abraham C. Pheil

Date of Airlines founded immediate aftermath of WW1

1918

First airline to use aircraft with Zeppelin

DELAG 1909

St. Petersburg-Tampa Airboat Line

recognized as the first regularly scheduled commercial airline using heavier-than-air aircraft.

KLM

Oldest Carrier still in operation.

Scheduled flights between London and Amsterdam in 1920 until this day.

DATE of Oldest Carrier still in operation.

Founded in 1919.

English Translate of KLM

Royal Dutch Airlines

Founder of KLM

Founded by Albert Plesman

Australia's Qantas

1920

First Aircraft of Australia's Qantas

Avro 504 for 1,425 pounds.

Early European Airlines

began as private companies and most could not survive independently.

Reliant on state subsidies.

1921

British Airlines - ceased operations until British Government implemented temporary and permanent subsidies.

Began an era of state control and direct ownership of European airlines

1924

Imperial Airways anointed the "chosen instrument" of the British government across British Empire.

Merger of four smaller airlines of Imperial Airways

Instone Air Line Limited

Handley Page Transport Limited

Daimier Airway (formerly Daimier Air Hire)

British Marine Air Navigation Company Limited

Airline Deregulation Act of

October 24, 1978

Paris Convention of

1919

Paris Convention

National Sovereignty of airspace

Warsaw Convention of

1929

Warsaw Convention

Established the first international airline liabilities and passenger rights

Airlines of the ratifying countries were required to - issue passenger tickets and baggage claim checks for checked luggage

Recognized the - Right to compensation for loss of cargo or luggage

President Jimmy Carter

signed Airline Deregulation Act on October 24, 1978. Phasing out the Civil Aeronautics Board (CAB)

Alfred E. Kahn

Chief architect and driving force behind 1978 deregulation act.

Civil Aeronautics Board (CAB)

given responsibility for economic regulation "promote the development and safety and to provide for the regulation of civil aeronautics"

CAB REGULATIONS:

Investment and operating decisions were highly constrained

Severely limited both route and price competition

Limiting routes and entry, and controlling prices

Both Prices and frequency were high, and load factors-the percentage of the seats were filled were low.

CAB REGULATIONS: Addressed three broad categories of airline operation

Initial approval to operate

Routes flown

Fares charged

Causes of regulations:

Prospective airline had to show Financial, Managerial, and Technical Capability.

- Proved to be a high standard.

Causes of regulations:

High barriers to entry into the marketplace

Carriers established after CAB had the most difficulty entering the market

Competition was largely absent

Based less on price and more on nonprice determinants (legroom, seat quality, in-flight amenities, flight frequencies) Carriers needed approval from the CAB to expand.

Causes of regulations:

CAB - refused to allow airlines operating older, slower, and less comfortable aircraft to charge lower fares.

Fare remained high - passenger load factors dropped from 70% in 1950 to 50% by the mid- 1970s.

Major carriers like American, Delta, and United competed in the interstate market

Smaller, local carriers like Pacific Southwest and Texas INternational FLew ion the intrastate market

Civil Aviation Administration (CAA)

Responsibility for non-economic regulation, for air traffic control, certification of aircraft and airmen, safety enforcement, and airway development.

Four waves of change since deregulation

First period: Expansion of the traditional airlines, and the growth of the new hub and spoke model.

Second period: Counterbalancing growth in point to point services, largely by new carriers

Third period: Growth of regional jet services by regional carriers

Fourth period: At present. Many things that used to be included ina tickets price now being charged extra or no longer being offered at all.

First period:

Expansion of the traditional airlines, and the growth of the new hub and spoke model.

Second period:

Counterbalancing growth in point to point services, largely by new carriers

Third period:

Growth of regional jet services by regional carriers

Fourth period:

At present. Many things that used to be included ina tickets price now being charged extra or no longer being offered at all.

Unforeseen outcomes of deregulation:

Many existing airlines went bankrupt, liquidated, or merged while new airlines entered the market

Scrambling to open up new routes - Airlines rapid growth

Growth of regional carriers

Lowered prices and barriers lead to traffic growth and higher load factors

Airport congestion was not seen as a predictable outcome

Traffic growth outpaces infrastructure development

Establishment of airline alliances

Brought about codesharing - agreement where two or more airlines share the same flight

Resulted in concentrations of market power in selected cities

Micro forecasting

Short-term, highly detailed prediction that focuses on specific, narrowly defined aspects of a business, market, or environment.

Used to make decisions regarding operational strategies, resource allocation, or targeted campaigns with a shorter time horizon.

Governing Body

Group of people who formulate the policy and direct the affairs of an institution

ICAO

International Civil Aviation Organization

IATA

International Air Transport Association

CAAP

Civil Aviation Authority of the Philippines

CAB

Civil Aeronautics Board

ICAO FOUNDED

April 4, 1948

WHAT IS ICAO

Provides a set of standards

Regulates operating practices and procedures

Uniform air transportation standards

ICAO MEMBERS

193 member states

Purpose of ICAO

Develop policies and standards in safety

Cooperation with the members of the organization

Minimum basis for creating the LAW

Fair opportunity

Promote flight safety

Minimize expenses and penalties

ICAO code

consists of 4 letters

ICAO codes have a regional structure

First letter - continent or group of countries within that continent

Second letter - country within that region, remaining two identity airport

Functions of ICAO: Creates regulations for:

Aviation safety

Aviation security

Aviation efficiency and regularity

Aviation environmental protection

Branches of ICAO

Council

Secretariat

Assembly

COUNCIL

Rule-making body of ICAO. Debating and adoption SARPS

If approved by two-thirds of the Council, SARPS are incorporated in to the Chicago Convention as Annexes.

Secretariat

Implementing policies

Implementing safety plans and environmental proteciton policies

SARPs. (Standard and Recommended Practices)

Assembly

Meets every three years to review ICAOs work

Sets policy

Approve a budget

Select which member states will have a seat on the rule-making body of ICAO

Examines and takes action on reports from the council

WHAT IS IATA

Global trade association

Lead and serve. Represent their interests

IATA FOUNDED

Founded in Havana, Cuba. April 1945

IATA REPRESENTS

Represents 260 airlines. 83% of total air traffic.

Include freight and passenger carriers. 53 countries

260 members from more than 117 nations

CRITERIA FOR IATA MEMBERSHIP:

IOSA

IATA Operational Safety Audit

Registration by the membership department

Air operator's certificate (AOC)

Certificate of Registration

Audited Financial Statements

Annual Report of the applicant airline

Valid insurance certificates

Traffic statistics for preceding two years

Published timetable/schedule

IATA PRORITIES

Safety

Security

Environment

Services

Simplying the business

Helping build the relationships within the industry

IATA Functions

Defines the standards of air transportation

Creates a fair competition among airline companies

Designates the cargo transportation procedures

Defines the standards for terminal designs and its management

A role in the standardization of the utilized equipment

IATA CODE MIGHT BE ASSIGNED

based on the name of the airport, name of city, or some other meaningful and relevant identifier.

Each airport has two codes.

IATA and ICAO airport code

Civil Aeronautics Board

Executive order no. 94 created the Civil Aeronautics Board (CAB).

Economic aspects of air transportation

Republic act no. 776.

Reorganized CAB.

Transferring it from Department of Tourism to the control and supervision of Department of Transportation and Communications DOTC.

What does Civil Aeronautics Board do

Regulation of civil aeronautics in the Philippines.

Mandated to regulate the economic aspect of air transportation

Attached agency of the Department of Transportaton (DOTr)

Can perform quasi-judicial functions

MANDATE OF CAB

Regulates, promotes, and develops the economic aspect of civil aviation of the Philippines

CAB has a general supervision, control, and jurisdiction over:

Air carriers

General sales agents

Cargo sales agents

Air freight forwarders as well as their property, property rights, equipment, facilities, and franchise.

FUNCTIONS OF CAB

Established passenger bill of rights

Right to be provided with accurate information before purchase

Right to receive full value of service purchased

Right to compensation

CAAP (Civil aviation authority of the philippines)

National aviation authority of the Philippines

Implementing policies on civil aviaiton for safe, economic, and efficient air travel

Formerly Air Transportation Office

Government-owned and controlled operation. Purpose of policy coordination.

MANDATES AND FUNCTIONS OF CAAP

Establish and prescribe rules and regulations for inspection and registration in the Philippines.

Establish and prescribe the corresponding rules and regulations for the enforcement of laws governing air transportation.

Fix and/or prescribe charges

Adminster and operate the Civil Aviation Training Center (CATC)

Operate and maintain national airports, air navigation

Perform such other powers and functions as may be prescribed by law

CAAP

Created through RA 9497. March 04, 2008.

CAAP SUMMARY

Air Transport Office (ATO)

National Aviation Authority of the Philippines

Implementing policies on Civil Aviation

Assure safe, economic, and efficient air travel

Investigates aviation accidents

Four ways of forecasting air travel demand

Macro forecasting

Route Level Micro Forecasting

Passenger Segmentation

Variation in Demand

Macro Forecasting

Predicting the overall future demand. The Big picture

How many people will travel in total.

Factors affecting macro forecasting:

1. Economic Growth - People make more, they travel more

Factors affecting macro forecasting:

2. Population Growth - Population grow, air travel has high demand

Factors affecting macro forecasting:

3. Tourism Trends - Popular destinations increase demand

Factors affecting macro forecasting:

4. Fuel Prices - High fuel prices result in higher fares, passengers travel less

Factors affecting macro forecasting:

5. Global Events - Pandemics, wars, natural disasters reduce air travel demand

Macro Forecasting in Aircraft Manufacturing

Predicting the total future demand for airplanes around the world or in a region.

Big picture of how many aircraft airlines will need in the coming years.

Helps Boeing, Airbus, or Embraer plan how many planes to build

Macro Forecasting in Aircraft Manufacturing

1. Growth in air travel demand - more passengers = more planes needed

Macro Forecasting in Aircraft Manufacturing

2. Economic growth - strong economies mean airlines buy more aircraft

Macro Forecasting in Aircraft Manufacturing

3. Fleet replacement - Old planes must be replaced by new ones.

Macro Forecasting in Aircraft Manufacturing

4. Fuel efficiency and technology - New designs save money and fuel.

Macro Forecasting in Aircraft Manufacturing

5. Tourism and population trends - More travelers mean airlines need larger fleets.

Route Level Micro Forecasting

Evaluating potential new routes or estimating growth in the existing network airlines

History traffic

Types of passengers

Competition

Prevailing fares

Route Level Micro Forecasting

Might rely on market research and expert opinion

Forecast demand - starting point for airline planning.

Called micro because it focuses on small, detailed segments (each route), not just overall trends.

WHY IT MATTERS? Route Level Micro Forecasting

Airlines use route-level micro forecasting to:

Decide how many flights to operate between two cities

Set ticket prices

Plan aircraft size

Schedule crews and maintenance efficiently

ACCURATE FORECAST MEANS: (Route Level Micro Forecasting )

Fewer empty seats (no wasted flights)

Happier passengers (enough flights available)

Better profits for the airline.

Passenger segmentation:

TWO TYPES OF AIRLINE PASSENGERS

Business passenger

Leisure passenger

BUSINESS PASSENGER

May be classified as lower and higher end.

High-end business travelers

are less price-sensitive and book near the departure date.

Lower-end business passengers

display more price sensitivity.

Passengers travelling for business tend to value:

Flight frequency non-stop flights

Choice of cabin classes

In-flight service

Flexibility of flight

Refundable fares

LEISURE PASSENGER

People who travel for fun, relaxation, or personal reasons

Tourists

TWO TYPES OF LEISURE PASSENGERS

VFR PASSENGERS

VACATION TRAVELERS

VFR PASSENGERS

Visit family or friends rather than sightseeing or tourism