Scenario tree airline fleet planning for demand uncertainty

This paper proposes an innovative multi-period modeling approach to solve the airline fleet planning problem under demand uncertainty. The problem is modeled using a scenario tree approach. The tree is composed of nodes, which represent points of decision in multiple time stages of the planning horizon, and branches, representing demand variation scenarios. The branches link the decision nodes in consequent time stages and compose scenario paths. Fleet decisions are modeled according to these scenario paths, resembling the real-life process in which fleet plans are not defined in a single moment but instead are adjusted according to the demand development. Given that some scenario paths share common decision nodes, decisions among scenarios need to be synchronized. A mixed-integer linear programming model is proposed to determine the ideal fleet composition for each scenario in the tree and to describe this interdependency between scenarios. Considering the probability of a scenario, fleet composition probabilities for each time-period can be determined. Two real-world based case studies are performed to show the validity of the model. Results show that the proposed scenario tree approach can provide flexible multi-period airline fleet plans, which are more robust to future demand scenarios than fleet solutions obtained using the traditional approach of considering a single deterministic demand evolution scenario.     

Airline fuel usage and carbon emissions: Determining factors

Using annual data on individual US airlines over the 1995–2015 period, this paper presents regression results relating an airline's total fuel usage to seven variables: the available ton miles of capacity (passengers plus freight and mail) provided by the airline; the average seat capacity of its aircraft, average stage length (flight distance); average load factor (measured by weight); the average vintage (construction year) of its aircraft; the percentage of the airline's flights that are delayed; and the average annual fuel price. The results show how fuel usage and carbon emissions depend on a small set of crucial variables. The estimated fuel-price effect allows the emissions impact of an optimal emissions charge to be computed, and the estimated delay effect shows the emissions impact of an industry-wide reduction in flight delays. The regression model is generated from a theoretical framework.     

From passenger growth to aircraft movements

Airlines are able to deal with passenger growth by either increasing the frequency or the aircraft size, which may entail different numbers of aircraft movements. Forecasting the latter is necessary for evaluating technologies, approaching future emissions or anticipating capacity constraints. Purpose of this paper is to forecast a typical fleet mix and the growth of aircraft movements on flight segments worldwide based on an assumed passenger growth. The methodology is implemented in a model called Forecast of Aircraft Movements. Basic approach is the assignment of each flight segment worldwide to a distance, passenger number and aircraft category. For each combination of distance and passenger numbers a typical fleet mix is defined. The forecasted worldwide growth of passenger demand and the empirically determined fleet mix is applied to all segments in order to derive a future scenario. Assuming a certain seat load factor, the frequency growth can be deduced from the aircraft movements generated for all segments. The paper includes a forecast for aircraft movements in a future scenario based on real schedule and passenger data and gives a detailed overview of the methodology and results considering airlines' behaviour.     

A robust mathematical model and heuristic algorithms for integrated aircraft routing and scheduling,with consideration of fleet assignment problem

One of the most important airline's products is to determine the aircraft routing and scheduling and fleet assignment. The key input data of this problem is the traffic forecasting and allocation that forecasts traffic on each flight leg. The complexity of this problem is to define the connecting flights when passengers should change the aircraft to reach the final destination. Moreover, as there exists various types of uncertainties during the flights, finding a solution which is able to absorb these uncertainties is invaluable. In this paper, a new robust mixed integer mathematical model for the integrated aircraft routing and scheduling, with consideration of fleet assignment problem is proposed. Then to find good solutions for large-scale problems in a rational amount of time, a heuristic algorithm based on the Simulated Annealing (SA) is introduced. In addition, some examples are randomly generated and the proposed heuristic algorithm is validated by comparing the results with the optimum solutions. The effects of robust vs non-robust solutions are examined, and finally, a hybrid algorithm is generated which results in more effective solution in comparison with SA, and Particle Swarm Optimization (PSO).     

Grounded: Characterising the market exit of European low cost airlines

The aim of this paper is to undertake a comprehensive study of low cost carrier (LCC) market entry and exit in Europe between 1992 and 2012. In the 20 year period between 1992 and 2012, 43 LCCs have taken advantage of the progressive liberalisation of the European aviation market and commenced scheduled flight operations within the continent. Of these 43, only 10 remain operational, a failure rate of 77%. This paper contributes to extant literature on LCCs by examining the market entry, business practices, operating longevity and fate of failed operators to characterise European LCC market exit. Drawing on the findings of a detailed continental-wide study, the paper identifies that an airline's start-up date, the nature and size of its operation and the size and composition of its aircraft fleet are key factors which influence LCC success and failure. The implications for both European and emerging LCC markets are discussed.     

Airline emissions charges and airline networks

Emissions charges are an effective tool to control aviation carbon dioxide emissions. This paper investigates how airline emissions charges affect a monopoly airline's network choice. By considering simultaneously fully-connected, hub-spoke and mixed networks, we find that the impact of emissions charges on airline network configuration depends crucially on some relevant parameters, for example, the marginal benefit of the reduction of schedule delays and the disutility of additional travel time of connecting flights. Welfare analysis shows a discontinuity in the network configuration from the social planner's perspective and an inefficiency related to the airline's choice on mixed network.     

Local emission charges – A new economic instrument at German airports

In January 2008, charges were introduced at selected German airports aimed at reducing local emissions of nitrogen oxide and hydrocarbon. The charge is aimed at setting economic incentives to accelerate the introduction and foster the use of environmentally friendly engine technology and is designed to be revenue-neutral in the sense that it does not increase the airports' overall revenues from air traffic. To achieve this, the general landing fees need to be decreased by the amount of the emission charge. The introduction of this charge will have economic impacts on airlines and may have an impact on airline competition in the German air transport market. Case studies based on empirical data are presented for selected German airports. The results indicate that airline's finances will be affected differently by the emission charge, depending on the engines employed and on the aircraft population of the airport considered.     

Analysis of the recent evolution of commercial air traffic CO2 emissions and fleet utilization in the six largest national markets of the European Union

This paper presents the results of a study performed to analyze the evolution of commercial air traffic and CO₂ emissions in the European Union, from 2010 to 2013. Data sources are the European Commission's Eurostat Air Transport Statistics (Eurostat) and EUROCONTROL flight plans database. The changes in the fuel efficiency are analyzed and the potential reasons for those changes investigated. The evolution in the airline fleet composition during the last decade is presented as one of the reasons for the improvement in fuel efficiency, measured in burnt fuel per total Revenue Tonne Kilometre (RTK), as well as the different parameters depending on the airline business model (network carriers, low cost companies, etc.) and the aircraft type.Results show a slight reduction in the traffic, both for passengers and cargo (about −0.8%), and a more important reduction in CO₂ emissions (−4.3%), thanks to an improvement in the fuel efficiency parameter (−3.5%) for the three years period. There has been a relevant change in the fleet composition in the last ten years, with the replacement of older models for more efficient ones, and a shift to larger aircraft, particularly in the regional segment. Traffic has decreased in shorter distances (internal EU traffic), but increased in more efficient long range flights (extra-EU traffic), resulting also in an improvement of the efficiency parameter as average aircraft size and stage length increases.     

Fleet composition of commercial jet aircraft 1952–2005: Developments in uniformity and scale

The fleet composition of an airline is important in determining its costs and operational performance. This composition can be measured using numerical values. An index for measuring fleet uniformity is available, and a structured way of measuring fleet scale is introduced here. The history of all jet aircraft operated by commercial passenger or cargo airlines world-wide is analyzed both in general terms and using these measures. The analysis shows that uniformity in airline fleets has been steadily decreasing, while their scale has been steadily increasing.     

A comparative performance analysis of airline strategic alliances using data envelopment analysis

As “open skies” agreements became more common among different countries and thus began to open up international routes to further competition, the global airline industry has undergone accelerated structural changes for the last two decades. These changes include the consolidation and expansion of airline strategic alliances throughout different regions of the world. Though airline strategic alliances are generally perceived to be a major driver for enhancing the operating efficiency and the subsequent competitiveness of participating member airlines, the concrete evidence supporting such a perception is still lacking in the literature. This paper is one of few attempts to evaluate the comparative efficiency of the strategic alliances among global airlines and then assess the managerial impact of airline alliances on the airline's comparative performances.     

The impact of carbon emission fees on passenger demand and air fares: A game theoretic approach

The implementation of an environmental market-based measure on U.S. aviation industry is studied. Under this policy, each airline pays a carbon fee for the carbon dioxide emissions it generates. The impact on ticket prices and corresponding market shares is investigated via the joint estimation of an air travel demand model and an airlines' behavior model. In the demand model, aggregate air traffic data is used to determine the marginal effects of flight attributes that are specific to itinerary, airline and airport on market share. The airline's behavior model incorporates the carbon fee in the airline marginal cost. After the implementation of the carbon policy, the increased cost forces airlines to adjust ticket prices in order to maximize profits. The results obtained by the proposed model indicate a moderate price increase which strongly depends on the per tonne carbon price. Air travel demand falls from 2.4% to 21% depending on the carbon price level.     

Optimizing station location and fleet composition for a high-speed rail line

This paper proposes a new strategic planning model for high-speed rail ventures. It is a mixed-integer optimization model that applies to a given line and focuses on two key strategic decisions: station location and fleet composition. Our purpose is to improve on previous station location models by including fleet composition decisions. In the new model, we additionally take into account in an approximate fashion the interrelationships between strategic and subsequent tactical decisions, regarding line planning, train scheduling and fleet assignment issues. The usefulness of the model is demonstrated for a case study involving a planned Lisbon-Oporto high-speed rail line.     

An empirical analysis of the optimal overbooking policies for US major airlines

Overbooking in the airline industry has been studied intensively. However, these studies have paid little attention to the future revenue implications of rejecting (bumping) passengers. This paper seeks the optimal overbooking policies for US major airlines by considering how denied-boarding passengers would behave after they are bumped. The results imply that overbooking improves an airline's “current” revenue, but it also reduces the airline's future revenues. The results also imply that, although there is a significant negative overbooking effect, no airline should decrease overbooking levels because the positive side of overbooking is so strong that it more than offsets its negative side.     

The impact of an aircraft's service environment on perceptions of in-flight food quality

Airlines are currently striving to improve the quality and quantity of in-flight food, because research has shown that catering is a key attribute for a customer's satisfaction with airline service quality. But the role of an airline's service environment in forming customer perceptions about food quality has not yet been properly investigated. Using electronic word-of-mouth data from N = 3996 airline passengers, this study deploys a linear regression model at multiple levels to relate perceived in-flight food quality with both the overall service environment and its formative components. The results clearly unveil the importance of an aircraft's service environment on perceived in-flight catering quality; perceptions of food quality are primarily influenced by the quality of cabin staff service, followed by entertainment and seat quality. Instead of continuing with the current practice of signing up top chefs to improve menus, airlines may instead consider putting their management focus on service improvements.     

A dynamic approach for aircraft assignment and maintenance scheduling by airlines

The problems of assigning planes to flights and of fleet maintenance operations scheduling are considered in this paper. While recent approaches make use of artificial intelligence techniques running on main frame computers to solve combinatorial optimization problems for nominal operations, a dynamic approach is proposed here to face on-line operation conditions. The proposed solution mixes a Dynamic Programming approach (to cope with the fleet assignment problem) and a heuristic technique (to solve the embedded maintenance schedule problem). When applied to a medium charter airline, this approach shows acceptability characteristics for operational staffs, while providing efficient solutions. The proposed solution scheme can be considered as the basis for the development of an on-line decision support system for fleet operations management within airlines.     

Frequency and aircraft size dynamics in a concentrated growth market: The case of the Chinese domestic market

Despite the explosive growth of the Chinese aviation sector and the major industry reforms undertaken in recent decades, the Chinese domestic market remains highly concentrated with a significant element of regulation and governmental control in areas such as market entry and airline fleet planning. In this study, we investigate the frequency strategies and aircraft choices of airlines operating in this concentrated growth market. Our empirical investigation suggests that airlines mainly accommodate rapid traffic growth by flying more frequently, although increased aircraft size also contributes to market expansion. We also find a negative relationship between market concentration and flight frequency. Due to the more balanced market structure resulting from mergers among leading airlines since 2002, there has been a moderate reduction in market concentration at route level, contributing to a 3.7% increase in traffic volume from 2002 to 2008. The results of our study suggest that Chinese travelers have yet to fully enjoy the benefits of market liberalization, and airports should prioritize increasing capacity related to aircraft movements over the accommodation of larger aircraft.     

Diversity in airline alliance portfolio configuration

Alliances in the airline industry operate as a basic strategy to stimulate competition and both the number and the types of alliances have increased over time. Each airline maintains alliances simultaneously with a variable number of partners. The set of airline's alliance partners constitutes its alliance portfolio. A central theme of these portfolios is the way in which partner selection improve performance. Is the alliance portfolio configuration based on either similar or different partners? We examine how the differences can arise from differences between the partners themselves, from resource complementarity, and from the partners structural positions in the network. The relations between these types of differences and whether they affect firm performance are studied. Codeshare alliances established between airline companies at a global level are analyzed to establish their effects on performance. In particular, the study comprises 135 alliance portfolios all of which from major airlines. The results suggest that structural homogeneity and complementarity improve performance and that alliance portfolio diversity favors network resource complementarity.     

Aircraft replacement scheduling: A dynamic programming approach

This study developed a stochastic dynamic programming model to optimize airline decisions regarding purchasing, leasing, or disposing of aircraft over time. Grey topological models with Markov-chain were employed to forecast passenger traffic and capture the randomness of the demand. The results show that severe demand fluctuations would drive the airline to lease rather than to purchase its aircrafts. This would allow greater flexibility in fleet management and allows for matching short-term variations in the demand. The results of this study provide a useful reference for airlines in their replacement decision-making procedure by taking into consideration the fluctuations in the market demand and the status of the aircraft.     

Why Ansett Airlines Failed and How to Prevent It Happening Again

Ansett Airlines, Australia's second largest, ceased operations in September 2001. With debts of $A3 billion it was placed in administration on behalf of creditors. The immediate consequences included 16,000 employees out of work and, on the day flights ceased, an estimated 47,000 passengers with tickets in hand but no planes to board. Anger and annoyance triggered a search for somebody to blame and many reports in the media, along with ministers in the Australian Government, blamed the airline's management. An analysis of the case leads to a different conclusion. While Ansett's management might have been deficient, a factor that seems to have triggered the failure, a deeper issue is its principal cause. It is the policy of competitive markets imposed on Australia's domestic airlines by successive governments. In a country where the resident population and the tourist destinations are dispersed over great distances, there is high dependence on airline services. Simultaneously the small population combined with the geography of major air routes and the economics of airlines means that air travel markets cannot sustain a highly competitive airline industry of the sort seen in the USA in recent decades and introduced in Australia in the 1990s. Australia needs intelligent airline regulation, a co-operative and sustainable industrial framework within which competition is tolerated, but only in a limited scope.     

Identifying airline cost economies: An econometric analysis of the factors affecting aircraft operating costs

This paper provides the results of an econometric analysis of the influences of airline characteristics on the average operating costs per aircraft movement. The analysis combines a comprehensive selection of airline-output variables, airline-fleet variables, and airline-market variables. The results confirm the existence of economies of density, economies of load factor, economies of aircraft utilisation and economies of aircraft size. The paper does not provide evidence of economies of scale, economies of stage length or economies of fleet commonality. Furthermore, airlines that additionally operate full freighters, airlines that are members of a worldwide alliance and airlines that operate a multi-hub system face higher average operating costs per aircraft movement. Surprisingly, the regression results demonstrate that airlines that use newer aircraft have higher average operating costs per aircraft movement, suggesting that ownership costs (depreciation and leasing costs) of new aircraft outweigh the increasing maintenance costs of old aircraft. Finally, the results show that airlines that have a dominant position at their hubs or bases have higher operating costs per aircraft movement, implying that the absence of serious competitive pressure enables airlines to charge higher ticket prices and, with that, leads to a limited focus on cost savings.