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
