|
Dynamic Fleet Planning - a Regional Application |
|
|
|
|
Written by Courtney Miller
|
|
Tuesday, 24 January 2006 |
|
Page 5 of 9
3.0 The Potentials of Dynamic Fleet Planning
The airline pricing policy is to fill as many seats of the high-yield as possible, then fill in the rest with the low-paying passenger. Unfortunately the real world tends to run contrary to this with the low-yield passengers tending to purchase their tickets early, and the high-yield business traveler waiting closer to the date of departure.
This means that when you have demand spill, the customers you are spilling are the high-yield customers; the very ones you don’t want to turn away. Currently, revenue management divides the aircraft seats into several “buckets” of different fares and restrictions. When one bucket is filling faster than another, the revenue management system makes adjustments to either increase price in that bucket, or to allocate more seats to it by taking them from other buckets. With DFP, when a bucket is filling faster, a decision can be made to make the entire aircraft bigger, thereby not compromising the revenue from the seats in the other buckets as well. The main goal of this system is not to fill as many low-yield passengers as it can into the aircraft, rather it is to reduce the number of high-yield passengers who would have been forced to find another flight, or worse another airline, to complete their trip. While the loss in ticket revenue is substantial, it only accounts for approximately 25% of the total cost of losing a passenger. The opportunity cost of sending a high-yield passenger to another airline is enormous, and has been estimated at 75% of the total cost. Unfortunately it is very difficult to quantify opportunity cost, since the value of revenue that hasn’t yet arrived is impossible to calculate.
Delays and cancellations are inevitable at an airline and must be minimized. The same opportunity cost mentioned earlier need not be incurred durring a delay, but can be recovered, by an increase in on-time performance that can be achieved using the flexibility of DFP. The quick calculations of the computer algorithm used can be used to instantly find a replacement aircraft with a minimal interruption to the schedule. This greatly reduces the impact irregular operations has upon the integrity of the schedule. With an increase in on-time performance and operational dependability, not only will an airline reduce the cost of delays, but they will also increase the amount of new customers.
|
