In a series of blogs, Sum evaluates and researches the big question "How to Save Air India". In the first part of the series integrating the scheduling decisions of an airlines in a revenue management framework is discussed. The framework discussed below is general as it applies to all the airlines. Specific references and the case as it applies to Air India will be discussed in the next blog.
Scheduling is a means of matching consumer demand with supply. An airline’s flight schedule defines its core product and is a key determinant of its profitability. Scheduling determines where and when the airline will fly, and what aircraft capacity and types to assign to these routes. Customers make their purchase decisions based primarily on the schedule – the routes, days of operation, departure times and connections the airline offers. The time-sensitive business customer looks for convenient, consistent and high- frequency departure times particularly at the beginning and end of the work day and work week; the leisure customer may be more concerned with the availability of routes to exotic destinations or convenient connections between flights. Aircraft equipment types and age may also influence customer demand. Some customers have preferences, particularly on long-haul flights; others may have related safety concerns. Another factor that customer may consider is service delivery.
Maximizing profitability is the primary goal of airlines. Scheduling is the means of matching supply (aircraft seat capacity) to passenger demand. Airlines try to improve their profit margins by creating a schedule that will attract as many customers as possible in a wide variety or origin & destination (O&D) markets.
By ensuring that proper capacity is assigned to the right markets at the right times. Airlines can meet or exceed their financial targets. This may involve considering new route opportunities or looking for more profitable ways of deploying aircraft within the current route network. Many different groups and departments provide input at different points to ensure that the optimized schedule is also feasible and efficient.
There is a wide range of opportunities and threats in the marketplace that can affect both the development and management of the schedule. Airlines compete in a complex dynamic environment. They must continue to monitor the schedule up until the time of departure and may need to adjust capacity in response to external influences raging from mundane to crisis situations. These might include shortfalls or excesses in anticipated customer demand, special events, economic upturns or downturns, natural disasters, pandemics, terrorism and war. Those airlines that can respond quickly and effectively are at a competitive advantage.
Most of the major carries operate extensive hub-and-spoke networks. A hub system allows an airline to enter markets and offer access to more destinations. Without the combined traffic from the other stations, the airline would not be able to operate these flights. In a hub-and-spoke network a passenger can fly Chandigarh to New York by connecting through the hub in New Delhi. There is not enough passenger traffic between these two cities to warrant non-stop direct service between them. However, with a hub-and-spoke configuration, passengers originating from Chandigarh, Licknow, Jammu, Amritsar, Varanasi, Jaipur etc can all conect at the hub in new Delhi to the flight to New York.
To maximize when developing and optimizing the airline schedule, it is important to adopt a network-based perspective. A leg-based approach would concentrate on local point-to-point traffic with minimal connection opportunities. This provides only and isolated view of each flight. It doesn’t consider where the passengers connecting to the flight are coming from or where the passengers connecting from the flight are going to. Although an airline schedule is composed of flight legs, airline products and revenues are based on passenger O&D markets. A network or O&D based approach optimizes the total network by combining direct point –to-point traffic with connection traffic. It maximizes profits by looking at the big picture of how each flight in the network affects the traffic on the rest of the network.
Schedule banks are specific time periods in an airport hub city during which a large number of arrivals and departures are timed to connect with each other. This combination of arriving and departing aircraft within a window of time is done to maximize connection opportunities.
Timeline and Organizational Perspectives
Developing and maintaining an airline schedule is a dynamic process extending over a long period of time that involves many people in different departments across the organization. The processes involved in network planning, schedule development, and capacity adjustment occur at different points in time and at different levels within an airline’s organizational structure.
• Long-term strategic planning by top level management;
• Medium –term planning and schedule design by the network planning group; and
• Short-term management by the current schedule group.
Keep in mind that the specific organizational structures, division of duties, and points of time when the schedule off between groups will very from airline to airline.
Corporate strategy and financial targets are communicated downward; information on historical and current performance and forecasted demand is reported upward and across the organization. It is the responsibility of the network planning group to determine how to distribute capacity in the different O & D markets and create the schedule. Given this scheduled capacity, the revenue management group implements seat allocation and pricing strategies to achieve corporate revenue and traffic targets. As the date of departure approaches, the current schedule group makes capacity adjustments in response to actual booking levels and changes in market conditions.
Core Schedule
An airline’s schedule is displayed in the computer reservation system 12 months in advance. It is desirable to work with a rolling core schedule that is consistent through the year. Flights are added to the schedule for the peak periods when demand increases. The core framework basically remains intact from season to season.
This type of open-ended, yet consistent, rolling schedule has a number of advantages. Frequent air travelers prefer a consistent predictable schedule. It also provides stability in the future booking schedule. Group bookings often happen very early in the booking cycle and should be based on a schedule that is as close as possible to final. Other branches within the airline can use the schedule for budgeting and planning purposes.
Ideally, an open-ended rolling schedule should be 70 to 80% accurate in terms of departure times and capacity.
Schedule Design Parameters
From a commercial standpoint, there are a few core requirements you need to have when designing a schedule. You want to be able to provide hourly flights in key markets and have both business & economy cabin seats available in competitive and business markets. Other commercial constraints may be a result of particular market characteristics or contractual obligations. For example, flights to Florida from Canada need to be timed the cruises. Some airlines have contractual obligations to transport cargo in certain (mostly international) markets.
There are a large number of operational constraints that must be factored into the schedule. These include maintenance requirements as well as airport configuration, capacity and issues. There are also certain regulatory bilateral agreements between countries that result in operational constraints.
You must also factor in minimum turn times, crew rest, possible ground handling issues and curfews when determining departure and arrival times. When an aircraft arrives into a station it needs to stay on the ground for a minimum set time.
There are also limitations to that can be used in certain markets. This may be due to bilateral agreements with countries that may restrict the type of aircraft used. These agreements sometimes also dictate how often you can fly to a certain city or country. There may be runway length, gating or slot issues at various destinations that affect the type of aircraft you can assign to a flight or when you can aircraft in you can assign to a flight or when you can arrive or depart.
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