EC330 Final (Lectures 7-10)

How much does it cost Southwest to operate a typical flight of 160 seat capacity between New York and Los Angeles?

$37,000

How much did airlines make in ancillary revenue in 2017?

$82 billion

How many U.S. airlines appear on the world's 30 best carriers, as rated by Skytrax? How about European airlines?

1 American, 9 European

Table 1 shows that the average non-stop distance flown per departure in miles increased by what percent?

1.2%

The fare on a budget airline in the US (Europe) is _____ ( ______ ) percent less expensive than the fare charged by traditional carriers.

10-20% less in US versus 50-66% less in Europe

Contract Air Mail Act

1925, private air mail

Air Commerce Act

1926, Safety standards

Civil Aeronautics Administration & Civil Aeronautics Board

1940 CAA -> ATC and safety CAB -> fee regulation and schedules

When was the Federal Aviation Administration created?

1958

Airline Deregulation Act Features

1978 Eliminated CAB Mergers of local carriers Hub n Spoke

When was the first "open-skies" agreement signed?

1992

What is the average "padding" time for airlines like American and United?

20-30 minutes

When did American Airlines introduce a fee for a passenger's first checked bag?

2008

Why is the transcontinental route New York to Los Angeles one of the most competitive in the world?

3.5 million annual passengers and 5 major airlines with the route

From what distance above earth is recognized as the beginning of space in the US?

50 miles

In the ten years following deregulation, how many airline mergers and acquisitions took place?

51

The article claims that sophisticated crew scheduling practices could allow airlines to avoid what percent of crew-related delays. (Dartmouth article)

60-80%

The biggest four carriers in the U.S. between them control what percentage of the market? What is the corresponding percentage in Europe?

80% in US, 45% in Europe

Which two planes have dominated new cycles worldwide?

A380 and 787

Each airplane in question 1 (A380, 787) is used primarily in which type of route network?

A380 for hub-n-spoke long haul, high demand 787 for point-to-point, made it possible to do long haul with less demand

Two cost categorizations

Administrative Functional

Functional cost categories

Aircraft Operating (flying costs) Aircraft Servicing (landing fees/handling plane) Traffic Service (Processing pax/baggage) Passenger service (flight attendants, in-flight) Promotion and Sales (reservations) Other (General, depreciation)

3 Main Functional Cost Categories

Aircraft Ops, AoC (50%) Ground Ops (30%) System Costs (20%)

Name the four categories of operational factors related to pilot scheduling in the article (Dartmouth article)

Aircraft change Connection buffers Crew legality Crew swaps

Name three factors taken into consideration when determining the block time and specific departure and arrival times.

Airport itself Airport infrastructure Connections

Increased aircraft productivity is positively correlated with: More flight departures per day, either through shorter turnaround (ground) times or off-peak departure times Longer stage lengths More seats in same aircraft type (no first class seating and/or tighter "seat pitch") All of the above

All of the above

Which airline carried the most passengers on international flights to and from the U.S. in 2018?

American

Among foreign airlines, which carried the most passengers on flights to and from the U.S. in 2018?

British Air

Why are flexible tickets more expensive?

Business travelers need flexibility

How do low-cost airlines make much of their money given that they charge low prices?

Charging for extras, even if those things don't cost the airline anything

What is calculated by dividing operating costs by available seat miles?

Cost per available seat mile

What is the principal benefit of mergers?

Cost rationalization

The three theoretical pricing strategies that airlines can utilize in determining prices to charge are

Cost-based, demand-based, service-based pricing

As legacy carriers introduced "basic economy" to fend off competition from the low-cost airlines, which among the three legacy carriers in the article provides the use of overhead bins for basic economy passengers?

Delta

Which countries do not recognize the ICAO?

Dominica Liechtenstein Tuvalu

Which of the following innovations have allowed airlines to reduce costs? Deregulation E-ticketing Frequent Flyer Programs None of the Above

E-ticketing

Name two benefits of alliances from the article.

Easier bookings and connections Merge major routes for cost effectiveness

Which world region has the most prominent budget airlines?

Europe

What is the major benefit of global alliances to the airlines and consumers?

Expanded and optimized route network

Airline fares are defined based on an airline flight leg rather than O-D market.

False

Government policy should favor domestic airlines over foreign airlines.

False

The Deregulation Act 1978 had a negative impact on the air transportation industry

False

The economic concept of "willingness to pay" (WTP) is defined as the minimum price that a given number of consumers will pay for a specified product or service.

False

What are overflight fees?

Fees for use of airspace

8th Freedom

Fly between two cities in a country, then continuing to one's own

7th Freedom

Fly between two foreign countries, not touching one's own

4th Freedom

Fly from another country to own

3rd Freedom

Fly to another country from own

9th Freedom

Fly within a country, not coming/going from own

6th Freedom

From a foreign to another, stopping in own for non-technical reasons

What is the largest of the ever-present threats to airline profitability?

Fuel costs

What is the tradeoff that Crandall describes?

Good for cost, bad for service

What is your opinion on this tradeoff? Is it currently fair?

I think more people fly because it is cheaper, but also a lot of people don't as often as they would because it is a hassle and uncomfortable. And if it is comfortable, it's really expensive. The cost breakdown also means that people pay for things that don't cost airlines anything, which couldn't be considered fair - even if it is smart in a business sense.

Airline Regulation Advantages

Industry in need of protection Viewed as public utility Customer service

According to the article, how will alliances affect service quality in the future? Why?

It may get even worse due to worker morale

What is the interpretation of the figure in the article? (Breaking down Southwest's cost)

It provides a graphical representation of how varying costs affect operating cost and ticket prices

What category remains the biggest cost component for Southwest?

Labor (40%)

Which types of airlines (low-cost vs. legacy) operate banked hubs? List three disadvantages of a banking system.

Legacy operate them They require more resources (more gates and people because everything happens at the same time) Planes sit longer Make delays more probable

Why do airfares increase closer to departure?

Leisure buy far out and business buys last minute

Why are flights from North to South America difficult to schedule?

Little time change and the long flight makes it difficult to schedule for connections without letting planes sit

In the video, the author refers to the term "long and skinny". What does that mean? Provide three examples of "long and skinny" routes.

Long routes thin demand Examples: Tokyo-Seattle London-Chennai Wuhan-San Francisco

What are the recommendations to promote competition in the U.S. airline industry?

Loosen foreign ownership cap Break up big airlines Promote secondary airports

What were the budget airlines created by Delta, US Airways, United, Air France, and Lufthansa?

Lufthansa create eurowings Airfrance made transavia Delta created song US Airways created metrojet United created shuttle then ted

Why do some airlines in some cases drop prices below being profitable?

Maintain market share

Factors affecting airline scheduling decision (Macro level)

Market demand Fleet composition Location of crew Maintenance bases Gate Restrictions Landing slot restrictions Bilateral agreements

Measurement of Aircraft Utilization

Measured in block hours per day door close to door open

Increased aircraft productivity methods

More flight departures Longer stage lengths More seats

What is the most important factor (after price) for passengers when selecting a flight?

Overall travel time

Airline revenue management techniques includes

Overbooking Fare class mix for flight leg optimization Traffic flow control for network optimization

What AA's hub airports are crucial connection airports?

PHX, DFW, ORD

Why is the low-cost model uncertain in developing countries?

Pax willing to go to an extra extent to save money and avoid paying for extras

How do carriers take advantage of time on the ground in South American airports?

Perform maintenance

Why does a one-way flight from New York to London disproportionally more expensive than a round-trip flight from New York to London.

Restrictions including minimum stay requirements, and since they can't predict when the traveler will return, they book them into the least restrictive fare class

5th Freedom

Right to fly between two foreign countries, originating or ending in one's own

1st Freedom

Right to fly over a foreign country without stopping

What are the three main European budget airlines mentioned in the video?

Ryanair, easyjet, Wizz

schedule planning problem can be broken into what subproblems?

Schedule Design Fleet Assignment Maintenance routing Crew scheduling

Which budget long-haul carriers extensively use the 787 Dreamliner?

Scoot Jetstar Norwegian

2nd Freedom

Stop for technical reasons in a country on way to another

What does the term "metal neutral" mean? (Stronger Together article)

They don't care who you fly on as long as it's a revenue sharing partner, even if it operates the entire trips itself

How is block time defined in the article?

Time between departure and arrival times

What regulations do airlines need to factor when determining crew schedules?

Total flying time Sit time Rest time Total time away from base

A time-space flight network is an expansion of the static flight network in which each node represents both a location and a point in time.

True

Air transportation has become more affordable since 1978 and more people are flying now

True

Airline schedule optimization involves the design of future schedules for aircraft and crew.

True

Airlines use differential pricing principles an attempt to make those with higherWTP purchase the less restricted, higher-priced fare product options.

True

In solving the airline schedule planning problem, each of the above subproblems is typically solved in order, with output of previous subproblems used as input for the next subproblem.

True

Price discrimination is the practice of charging different prices for the same (or very similar) products that have the same costs of production, based solely on different consumers' "willingness to pay".

True

Prior to the airline industry deregulation of 1978, the Civil Aeronautics Board (CAB) used a mileage-based formula to ensure equal prices for equal distances.

True

Product differentiation involves charging different prices for products with different quality of service characteristics and therefore different costs of production

True

The Deregulation Act 1978 had a negative impact on the airlines

True

The North American airline industry has historically been the most dominant player in the global aviation industry.

True

The crew scheduling problem is to determine cost-minimizing assignments of crew, namely, pilots and cabin crew (flight attendants), to each flight leg in the airline's schedule.

True

The fleet assignment problem is to find a profit-maximizing assignment of aircraft types to flight legs in the airline's network.

True

The maintenance routing problem is to assign to each flight leg a specific aircraft (tail number), maintaining consistency with the results of the fleet assignment problem and ensuring that each individual aircraft can be assigned a sequence of flight legs (a routing) that allows the aircraft to undergo periodic maintenance checks.

True

The schedule design problem is to design the airline's flight schedule, specifying the set of flight legs to be operated by the airline, given the outcomes of the route evaluation and frequency planning processes.

True

To capture the temporal nature of the fleet assignment problem, flight networks are modeled using time-space networks.

True

Which budget airline took Ryanair's model to the extreme?

Wizz

What is Crandall's answer? (are we better off after deregulation)

Yes and no depending on whose perspective and what they value (cost versus service)

Form 41 Contains

traffic, financial, and operating cost data