Airline Opertations

Airline Deregulation Act of 1978

US law that paved the way for major structural changes in the airline industry

Effect of the Airline Deregulation Act on airline choices

Allowed airlines to select their own network and set their own fares

Effect of deregulation on airline protection

Airlines were no longer protected, and had to manage operations more efficiently to be profitable

Why airlines use operations research

They use numerous resources to provide transportation services, and planning/efficient management of these resources determines survival or demise

When did airlines start using operations research techniques?

Since the 1950s

What enabled airlines to tackle more complex OR problems?

Advances in computer technology and optimization models, allowing problems to be solved in a much shorter span of time

AGIFORS

Airline Group of the International Federation of Operational Research Societies; a professional society that seeks to advance, promote, and apply operations research within the airline industry

Examples of airline problems solved with OR techniques

Revenue management, crew scheduling, aircraft routing, fleet planning, and maintenance

Lindo.com

Software referenced in the book for solving linear/integer program models

MPL software

Software for solving linear/integer program models, found at Maximal-usa.com

CPLEX solver

Software for solving linear/integer program models, found at ilog.com

Network

A collection of points and lines joining these points, with flow normally moving along these lines from one point to another

Nodes

The points (circles) in a network

Arcs

The lines in a network, also called links or arrows

Flow

The amount of goods, vehicles, flights, passengers, and so on that move from one node to another

Directed Arc

An arc where flow is allowed only in one direction, graphically represented with arrows in the direction of the flow

Undirected Arc

An arc where flow can move in either direction, graphically represented by a single line without arrows

Arc Capacity

The maximum amount of flow that can be sent through an arc

Supply Nodes

Nodes with the amount of flow coming to them greater than the amount leaving them (positive net flow)

Demand Nodes

Nodes with negative net flow, where outflow is greater than inflow

Transshipment Nodes

Nodes with the same amount of flow arriving and leaving (zero net flow)

Path

A sequence of distinct arcs that connect two nodes, even if no single arc connects them directly

Source

The starting node in a path

Destination

The last node in a path

Cycle

A sequence of directed arcs that begins and ends at the same node

Connected Network

A network in which every two nodes are linked by at least one path

Shortest Path (Route) Problem

A network flow model that identifies the path from source to destination resulting in minimum transport time/cost; attractive for cargo handlers and origin/destination scenarios

Minimum Cost Flow Problem

A network flow model that seeks to satisfy node requirements at minimum cost; a generalized form of transportation, transshipment, and shortest path problems

Maximum Flow Problem

A special case of the minimum cost flow problem that finds the maximum flow from a source node to a destination node in a capacitated network

Multi-Commodity Problem

A model that seeks to minimize total cost when different types of goods are sent through the same network; used in the airline industry for crew pairing and fleet assignment models

Set-Covering/Partitioning Problems

Problems where each member of one set should be assigned or matched to member(s) of another set

Traveling Salesman Problem

A classical operations research problem that has received considerable attention in the literature

Hub-and-Spoke System

A network structure most airlines adopt in some variation, where major carriers operate up to five hubs and smaller airlines typically have one hub at the center of their served region

Non-stop flights between hubs

Air carriers normally assign large capacity aircraft to these routes, while smaller airplanes are assigned to hub-and-spoke flights

Advantages of Hub-and-Spoke

Higher revenues, higher efficiency, and a lower number of aircraft needed compared with point-to-point operations

Disadvantages of Hub-and-Spoke

Passenger discomfort, congestion and delays at hub airports, and higher personnel and operational costs

Strategic Route Development

Focuses on future schedules; responds to major changes in both business and operational environments

Tactical Route Development

Short-term changes to schedules and routes, done by constantly monitoring markets, competitors, and operations

Long-Range Scheduling Planning

60+ months out; covers fleet diversity, manpower planning, protecting/adding/changing hubs, and adequate airport facilities

Market Evaluations (scheduling stage)

36-12 months out; covers frequency/timing of service, adding/dropping markets, pricing policies, predicting competitor behavior, and code-sharing/alliances

Scheduling Optimization (scheduling stage)

12-3 months out; covers developing the initial schedule, assigning aircraft to flights, and evaluating facilities/manpower capabilities

Schedule Issues (scheduling stage)

4-1 months out; covers crew issues, arrival/departure times, and maintenance issues

Load Factor

The average percentage of aircraft seats filled with passengers; plays an important role in determining flight frequency between city pairs

ASM (ASK)

Available Seat Miles (Kilometers): annual airline capacity, or supply of seats during the year multiplied by the number of miles/km those seats are flown

RPM (RPK)

Revenue Passenger Miles (Kilometers): total number of paying passengers flown on all flight segments multiplied by the number of miles/km those passengers are flown; considered to be demand

Yield

How much an airline makes per revenue passenger mile (how much it makes per mile)

RASM

Revenue per Available Seat Mile, or "unit revenue"; how much an airline made across all available seats supplied, calculated by dividing total operating revenue by ASM

CASM

Cost per Available Seat Mile, or "unit cost"; the average cost of flying one seat for a mile, calculated by dividing total operating cost by ASM

Operating costs of a flight (formula)

CASM of the fleet x distance x number of seats on the aircraft

Passenger Spill

The degree to which average demand exceeds the capacity offered; caused by assigning small aircraft to flight legs with high demand

Effect of assigning large aircraft to low-demand flights

Leads to low utilization and consequently a low load factor for the airline

Spill Cost

The revenue lost from passengers who couldn't be accommodated due to insufficient aircraft capacity

Expected spill cost for a fleet (formula)

Expected number of passenger spill x RASM x distance

Recapture Rate

The percentage of spilled passengers who could be accommodated or recaptured on other flights by the same airline; typically very high among major airlines due to high flight frequencies and marketing incentives like frequent-flyer programs

Flight Cover (constraint)

Ensures that each flight must be flown

Aircraft Balance (constraint)

Ensures that an aircraft of the right fleet type will be available at the right place at the right time

Fleet Size (constraint)

Ensures that the number of aircraft within each fleet does not exceed the available fleet size

Aircraft Tail Number

A unique serial number assigned to each aircraft for each airline in each country

US Tail Number Format

Begins with 'N' (for US), followed by numbers identifying the particular aircraft, and letters representing the airline code (e.g., N316WN)

A-Checks

Aircraft maintenance completed every 60 flight hours

B-Checks

Maintenance involving a thorough visual inspection and lubrication of all moving parts, done every 300-600 hours

C-Checks & D-Checks

Maintenance that involves taking the aircraft out of service, performed every 1-4 years

Turn-Around Time

The minimum time needed for an aircraft from landing until it's ready to depart again, including taxi to gate, unloading, cleaning, inspections, and boarding

Valid Routing

A route that incorporates the necessary turn-around time

Closed Cycle (routing)

When an aircraft starts from a city and, at the end of a three-day cycle, returns to that same city to start another cycle; not typically required by airlines

Aircraft Routing Problem (decision variable)

The goal of assigning routes to individual aircraft within a specific fleet type

Aircraft Routing Objective Function measures

Maximizing through values, minimizing cost, and maximizing maintenance opportunities

Flight Coverage (routing)

Each routing candidate covers a certain number of flights in its three-day cycle, and each flight must be covered every day

Route Generators

Automated systems used extensively to generate and filter aircraft routes for airlines in a relatively short time

Crew Scheduling

The process of identifying sequences of flight legs and assigning cockpit and cabin crews to these sequences

Crew Cost Ranking

The second largest cost figure for airlines after fuel, but unlike fuel cost, a large portion of it is controllable

Why crew scheduling is computationally intensive

Because it involves two problems too large to address simultaneously: crew pairing and crew rostering

Crew Pairing

The first phase of crew scheduling; a sequence of flight legs within the same fleet that starts and ends at the same crew base

Crew Base

The home station or city in which a crew actually lives

Objective of Crew Pairing

To find a set of pairings that covers all flights and minimizes total crew cost

Duty

A working day of a crew that may consist of several flight segments; under federal law, pilots cannot fly more than 8 hours in a 24-hour period and must rest 8 hours in that same span

Sit Connection

A connection during duty; airlines typically impose minimum and maximum times between 10 minutes and 3 hours

Rest

A connection between two duties, also called an overnight connection or layover

Pairing Generators

Systems that generate pairings starting from a crew base, adding feasible flight legs according to rules, and ending at the same crew base; pairings may span one to five days

Crew Rostering

The second phase of crew scheduling; the process of assigning individual crew members to crew pairings, usually on a monthly basis

Bid Line Procedure

A method where US airlines develop monthly crew schedules independent of crew desires, and employees bid for pre-constructed rosters

Crew Rostering Methods

Assigning high-priority employees to high-priority pairings, developing rosters based on individual crew requests, or developing rosters without considering crew requests

Revenue or Yield Management

Concerned with maximizing or optimizing total revenue through tools and techniques rather than just managing it.

Main Challenge in Revenue Management

Setting the price based on current market conditions, deciding whether to turn down an existing customer in anticipation of more profitable ones.

Seat-Inventory Control Problem

Deciding if a seat should be sold at a current booking request or saved for a more profitable customer.

Static Seat-Inventory Control Problems

Mathematical models that attempt to determine seat allocations according to the demand pattern at the beginning of the booking periods.

Non-Nested Approaches

Distinct numbers of seats called buckets are exclusively assigned to each fare class.

Nested Allocations

Each fare class is assigned a booking limit (total seats assigned to that class plus all seat allocations to its lower fare classes).

Expected Marginal Revenue (EMR)

The probability of being able to fill a seat multiplied by the average fare of that class.

Littlewood's Rule (Non-Nested Model)

A two-fare non-nested system proposing that a seat should not be sold at a lower fare if the EMR from a higher fare passenger is larger.

Expected Marginal Seat Revenue (EMSR)

Introduced by Belobaba (1987), this extends the two-fare-class rule to multiple nested fare classes to generate nested protection levels.

Origin-Destination (OD)

The starting and ending points of an itinerary.

Nested by Fare Class

A network method where non-nested ODF allocations are summed together for each fare class on a flight leg.

Overbooking

Selling more seats than the capacity on a given flight to generate revenue from anticipated empty seats left by cancellations or no-shows.

Overbooking Challenge

Balancing the anticipated revenue from selling extra seats versus the anticipated cost of not having enough capacity to accommodate all passengers.