Evolution of Low Cost Airlines

Evolution ofEvolution of Low Cost AirlinesM k Di d P i i l ICF SH&EMark Diamond, Principal, ICF SH&EMPP 1986

Prepared for:

21 September 2011

0icfi.com/aviation |

Agenda

1. ICF SH&E summary

2. What defines a Low Cost Carrier (LCC)?

3. Evolution of LCC’s

4. Added bonus: the airline network planning process

5. Q&A


SECTION 1

ICF SH&E summary

SECTION 1

2icfi.com/aviation | 2

ICF SH&E is a consulting firm exclusively dedicated to the global air transport industryg p y

Specialty consulting firm with over 70 staff

Founded in 1963

Performed over 8,000 individual engagements worldwidePerformed over 8,000 individual engagements worldwide

Full-service offices in Boston, New York and London, with specialists worldwide

Staff recruited from airlines airports academia finance Staff recruited from airlines, airports, academia, finance, government agencies, manufacturers and IT

Joined publicly-held ICF International in December 2007


Our client base spans the aviation industry and its participants

Passenger airlines

Air cargo express & integrated logistics operators Air cargo, express & integrated logistics operators

Major & regional airports

National, regional & local governments

International development agencies

Maintenance, repair, & overhaul (MRO) providers

Airframe, engine & avionics suppliersAirframe, engine & avionics suppliers

Leasing companies, IT, equipment & service providers

Investors & financial institutions

Booking, distribution & travel services

Corporate & business aviation


Selected airlines we’ve worked withSpain Ireland France UK Netherlands FinlandGermany RomaniaScandinavia Poland RussiaHungaryLuxembourg Czech.Bulgaria

ChinaChina EasternChina NorthernChina SouthernFormosa

So th Korea

pIberia Aer Lingus Air France

Air LittoralBABr. MidlandEasyJetVirgin Atlantic

KLM Finnairy

LufthansaCondor &Neckermann

Tarom

ItalyAlitalia

TurkeyPegasusTHY

AmericanAlaska/Horizon

MaxjetMesa Air

United States

CanadaAir CanadaWestJet

SAS Central WingsLOT

AeroflotS7UTair

g yMalev

gLuxair CSA

gBalkan

GreeceOlympic

CyprusAegeanCyprusHelios

Switz.flybaboo

South KoreaAsianaKorean Air

JapanANAJapan Airlines

Hong KongAir Hong Kong

Alaska/HorizonAlohaAm. WestAtlantic CoastAtlas AirBus. ExpressContinentalCommutairDelta

Mesa AirMidwestNetjetsNorthwest Pan AmPolarSkyLinkSouthwestSpirit Air Hong Kong

Cathay PacificDragon

TaiwanFormosa

ThailandThaiAirways

Delta DHLEmeryFalcon AirFedExGreat PlainsHarmonyHawaiian

SpiritTWAUnitedUPSUS AirwaysWestern Pac.Virgin America

MexicoAeromarAeromexicoALMAMexicana TAESA

Cayman IslandsCayman Airways

Airways

PhilippinesPhilippine

IndonesiaGaruda

MicronesiaAir Micronesia

VenezuelaAeropostalVIASA

EcuadorEcuatorianaTAME

Antilles

ChileLanChile

PeruAeroperu

ArgentinaAerolineasArgentinasCayman Airways

Central AmericaCopa AirlinesGrupo TACA

JamaicaAir JamaicaWest IndiesALM

MalaysiaAirAsiaMAS

New ZealandAir New Zealand

AustraliaQantasUganda Mauritius

OmanOman

KuwaitJazeeraKuwait

MadagascarEgypt

LebanonMEA

S AfricaIvory Coast

ALM

ColombiaAvianca

BrazilBRAGOLTransbrasil

Saudi ArabiaNASSaudiaNetjets

BahrainBex AirGulf Air

Austral

Sri LankaAir Lanka

U.A.E.Royal JetEtihad

EthiopiaMorocco


ALMBWIA

QantasAustralian

UgandaUganda Airlines

MauritiusAir Mauritius

MadagascarAir Madagascar

EgyptEgyptair

S. AfricaSAASA ExpressMango

Ivory CoastAir AfriqueTAM

VARIGVASP

EthiopiaEthiopian

MoroccoRoyal AirMaroc

Management consulting services

Strategic and business planning

Alliances

Privatization advisory

Process improvement

P bli li / i h Public policy / economic research

Litigation support

Business and industry analysisy y

Financial services support (investment analysis, due diligence & advisory)

Bankruptcy merger & financial restructuring Bankruptcy, merger & financial restructuring

Financial management audits


Financial and technical services

Asset management

Appraisals

Aircraft and engine repair oversightAircraft and engine repair oversight

Financial modeling

Interiors management

Reliability analysis

Inspection services

Litigation supportg pp

Future value forecasts

Maintenance reserve requirements

D dili Due diligence

Aircraft procurements

Aircraft & other asset remarketing


Airport services

Demand forecasting

Air service marketing and route development

Cargo marketing

Cargo facility & business planningroute development

Strategic & master planning

Airport system planning –commercial and GA

planning

Safety & security evaluations

Air traffic controlcommercial and GA

Capacity & delay analysis

Environment / noise analyses

Air traffic control infrastructure planning

Airport concession & lease structure

Economic impact studies

Airport privatization

Operational restructuring

Bilateral & regulatory advisory

Airport finance, rates & charges


Aviation safety & security services

Aviation safety and security audits of commercial i li i t d i ti th itiairlines, airports, and aviation authorities

Program design

Professional trainingProfessional training

Safety-related technical analysis

Security, quality and loss control

Legal and regulatory support

Aviation claims services


SECTION 2

What defines a Low Cost Carrier (LCC)?

SECTION 2

Low Cost Carrier (LCC)?


First of all – why is this important?

Whether you’re in industry or government, it’s critically important to understand how the industry works

LCC’s are a fundamental driver of airline industry evolution worldwide

• There are 9 LCC’s in the U.S. and 100+ worldwide, accounting for about 21% of U.S. airline industry revenue and about 25% of scheduled seats globally

Plus – it’s interesting


What defines a Low Cost Carrier (LCC)?

Simplicity, consistency, repeatability

Maximize asset utilization – to spread fixed costsM i i ft ti h d i k t• Maximum aircraft operating hours per day, quick turns

Minimize number of aircraft types• Enable economies of scale in crews, training, maintenance, procurement, spares g p p

inventory

Outsource non-core functions• E g reservations & distribution handling maintenance etcE.g., reservations & distribution, handling, maintenance, etc.

Drive costs out of the system & eliminate overhead wherever possible• Direct online booking vs. agency & Global Distribution System (“GDS”)

commissions automated check in etccommissions, automated check-in, etc.

Simplified pricing structure

Low unit costs > enable low fares > stimulate market


Low unit costs -> enable low fares -> stimulate market

How does the LCC model differ from the traditional “legacy” airline model?

Legacies have evolved, but were traditionally characterized by:

Complexity

Focus on revenue generation via hubbing• Susceptible to peaking of activity, poor resource utilization

More services performed in-house• Reservations, passenger handling, aircraft handling, maintenance, etc.

High overheadHigh overhead

Distribution via intermediaries• Travel agencies & GDS’s

Multiple aircraft types tailored to mission

Complex pricing structures

C ll ti b i i t


Collective bargaining agreements

Comparative domestic unit operating costs –U.S. LCC’s vs. Majors

$0.16

Domestic U.S. Cost per Available Seat Kilometer (CASK) – USD, CY 2010

Legacy

$0.12

$0.14

D

g yLCC

ContinentalUnited

$0 06

$0.08

$0.10

ASK

-U

SD

Vi i A iJetBlueAirTranSouthwest Hawaiian

FrontierUSA 3000Alaska

American

US Airways Delta

$0.02

$0.04

$0.06CA

SpiritAllegiant Sun Country Virgin AmericaJetBlueAirTran

$0.00

$

0 500 1,000 1,500 2,000 2,500 3,000 3,500Average Sector Length, Km


Source: US DOT Form 41, domestic entity

Cost & productivity metrics, U.S. LCC’s vs. Majors –domestic market: aircraft utilization, unit labor cost

13.9 13.0 11.6 11.2 11.2 10.4 10.210.6 10.3 9 9 9 8 9 3 9 1121416 LCC Legacy

Average Daily Narrowbody Aircraft Utilization, CY 2010Hours

10.2 8.86.0

10.3 9.9 9.8 9.3 9.1 8.6

02468

1012

Labor Costs Per ASK CY 20105.9¢

4.3¢ 3.8¢ 3.7¢ 3.3¢ 3.0¢ 3.0¢ 2.8¢ 2.6¢

6.0¢ 5.8¢ 5.7¢ 5.7¢ 5.5¢ 5.1¢4.5¢

3¢4¢5¢6¢7¢ LCC Legacy

Labor Costs Per ASK, CY 2010Cents

¢

0¢1¢2¢3¢



Revenue & traffic generation metrics, U.S. LCC’s vs. Majors – domestic market: yield vs. load factor

$0 16

Domestic Avg. Yield (Rev. per Passenger-Km, USD) vs. Load Factor, CY 2010

y

$0.12

$0.14

$0.16

DeltaUS Airways United

Continental

LegacyLCC

$0.08

$0.10

$0.12

d -U

SD

ContinentalAlaska

AmericanSouthwest HawaiianFrontierAirTran

JetBlueAllegiantS i itVi i A i

$0.04

$0.06Yiel

d AllegiantSpiritVirgin America

$0.00

$0.02

75% 80% 85% 90% 95%


Load Factor


LCC’s offer the potential for tremendous fare-driven market stimulation When Southwest launched service at T.F. Green Airport (PVD) in

Providence, R.I., in 1996, passenger traffic grew 85% in one year

T t l E l d P & A Yi ld (C t t 2010 $) t PVD CY 1991 CY 2007

14

16¢3,000,000

Total Enplaned Passengers & Avg. Yield (Constant 2010 $) at PVD, CY 1991 – CY 2007Enplanements Yield ($ / RPK)

10¢

12¢

14¢

2,000,000

2,500,000

4¢

6¢

8¢

1,000,000

1,500,000

Enplaned Passengers

0¢

2¢

4¢

0

500,000Enplaned PassengersYield (¢/RPK)

Southwest starts service Nov. 1996


Source: US DOT O&D Survey

History of Low Cost Carriers‘71 ‘72 ‘73 ‘74 ‘75 ‘76 ‘77 ‘78 ‘79 ‘80 ‘81 ‘82 ‘83 ‘84 ‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11

Midway (1979-1991)Midway (1979-1991)

Ryanair (1985 – Present)Ryanair (1985 – Present)People Express (1981 – 87)People Express (1981 – 87)

Southwest (1971 – Present)Southwest (1971 – Present)

Kiwi International (1992 1999)Kiwi International (1992 1999)

Shuttle by United (‘94 – ‘01)Shuttle by United (‘94 – ‘01)Easyjet (1995 – Present)Easyjet (1995 – Present)

Valujet / AirTran (1992 – Present)Valujet / AirTran (1992 – Present)Kiwi International (1992-1999)Kiwi International (1992-1999)

CAL Lite(‘93 – ‘95)CAL Lite(‘93 – ‘95)

1978U.S. Airline

Deregulation Act

1978U.S. Airline

Deregulation Act

Allegiant (1998 – Present)Allegiant (1998 – Present)

Gol (2001 – Present)Gol (2001 – Present)

1983U.S. Industry

Fully Deregulated

1983U.S. Industry

Fully Deregulated

WestJet (1996 – Present)WestJet (1996 – Present)yj ( )yj ( )

JetBlue (1999 – Present)JetBlue (1999 – Present)

Metrojet (USAirways) (‘98-’01)Metrojet (USAirways) (‘98-’01)

Gol (2001 Present)Gol (2001 Present)

Air Arabia (2003 – Present)Air Arabia (2003 – Present)

1997Completion of

EU Liberalization

1997Completion of

EU Liberalization

Song (Delta)(2003 – 2006)Song (Delta)(2003 – 2006)

Jetstar (Qantas) (2003 – Present)Jetstar (Qantas) (2003 – Present)Wizz Air (2003 – Present)Wizz Air (2003 – Present)

Ted (United)(2004 – 2009)Ted (United)(2004 – 2009)

Virgin America (2007 – Present)Virgin America (2007 – Present)

Air Asia XAir Asia X

Spicejet (2005 – Present)Spicejet (2005 – Present)


(2007 – Present)(2007 – Present)

LCC’s are operating today in every region of the globeEurope

A i

North America

AirTran Airways

Ryanair Bmibaby easyJet eastJet Switzerland Belle Air InterSky

Air One Smart Carrier Blu-express Meridiana Windjet airBaltic ArkeFly

Spring Airlines Air India Express Goair IndiGo JetLite

Jeju Air Jin Air T’way Airlines Air Asia AirAsia X

Asia

Allegiant Air CanJet Frontier Airlines JetBlue Airways Southwest Airlines Spirit Airlines

y Niki Jetairfly Wizz Air Wizz Air Bulgaria Wizz Air Ukraine Smart Wings

y Norwegian Air Shuttle Jet Air Blue Air Avianova Sky Express Vueling Airlines

JetLite Jet Konnect Kingfisher Red Spicejet Batavia Air Citilink Indonesia AirAsia

AirAsia X Firefly Air Blue Shaheen Air Airphil Express Cebu Pacific Spirit of Manila Airlines

Sun Country Airlines USA3000 Airlines Virgin America WestJet

/ C

g Climber Sterling Transavia Transavia.com France XL Airways France Germanwings TUIfly

g Anadolujet Corendon Airlines Onur Air Pegasus Airlines SunExpress Flybe

Indonesia AirAsia Lion Air Air Next Hokkaido Intl. Airlines JAL Express Skymark Airlines Skynet Asia Airways

Spirit of Manila Airlines Zest Airways Mihin Lanka Jetstar Asia Airways Tiger Airways Valuair Nok AirLatin America / Carib.

REDjet Azul Brazilian Airlines Gol Airlines WebJet Linhas Aereas EasyFly

Middle East/ N. Africa

Jazeera Nas Air

Sub Saharan Africa Fly540

y Iceland Express

y Jet2

Skynet Asia Airways StarFlyer Air Busan Eastar Jet

Nok Air Orient Thai Airlines Thai AirAsia Jetstar Pacific

EasyFly Viva Colombia Aires Interjet VivaAerobus Volaris LC Busre

Air Arabia Air Arabia Egypt Air Arabia Maroc Jet4You Flydubai RAK Airways

Aero Contractors Kulula.com 1Time Mango Velvet Sky

Australia/Pacific

Jetstar Tiger Airways Australia


LC Busre Peruvian Airlines Star Peru

Felix Airways Karthago Airlines

Some key prerequisites for a successful Low Cost Carrier operation:

Deregulated market• Little or no controls on fares, capacity, schedule, p y,

Ability to turn aircraft quickly• Premium on passenger & aircraft handling

Ability to drive costs out of the system• Work rules• Outsourcing• Strategic procurement

Financing

Understanding the market and the competition• Legacies will not sit still and let their market disappear


SECTION 3

Evolution of LCC’s

SECTION 3


Over the years the original LCC model pioneered by Southwest has evolved to include numerous variations

Point-to-point flying

Short-haul

Connectivity & hubbing

Long-haul

Single aircraft type

Domestic only

g

Multiple aircraft types

International

Operate in contested markets

“No frills”

Operate in unserved or underserved markets

Quality product, in-flight entertainmentvs.

Single class

Secondary airports

Go-it-alone distribution

Economy + business

Primary airports

Code-sharing & alliances Go-it-alone distribution

Direct booking

Standard, simple product

Code-sharing & alliances

Use of intermediaries for booking

Unbundling of services + ancillary


revenue sources

Many LCC’s now carry a considerable amount of flow traffic

U.S. LCC’s: Transfer Revenue (Multi-Coupon) as Percent of Total RevenueCY 2009

43%

31%

40%

50%

31%

21%20%

30%

8% 7%3%

0%

10%

Frontier AirTran Southwest JetBlue Spirit Virgin America


Source: US DOT Origin-Destination Survey

The lines between LCC’s and legacies have been blurring

L i h d t d t ffi i ti f hi hLegacies have adopted many cost efficiency practices, many of which were pioneered by LCC’s:

Outsourcing non-core functions

Direct on-line booking and automated check-in

Unbundling of services and ancillary revenue offerings

Focus on aircraft utilization “continuous hubbing” Focus on aircraft utilization, continuous hubbing

At the same time, LCC’s have moved closer to some legacy practices:

Greater focus on connectivity, hub-and-spoke

Code-sharing & alliances

Multiple aircraft types

L h l Long-haul

Quality on-board amenities, multi-cabin product

Primary airports


Distribution via GDS’s

Recent developments

JetBlue code-share with Lufthansa (2008)

Southwest code-share with Volaris (2010)

JetBlue & Westjet code-shares with American Airlines (2011)

Southwest launches service at New York LaGuardia & Boston Logan (2009)

Air Asia X – establishment of long-haul low cost service (2010)

Growth of international LCC joint venture carriers• Air Asia • Air ArabiaAir Asia

– Japan

– Philippines

I d i

Air Arabia– Morocco

– Egypt

Jordan– Indonesia

– Thailand

– Vietnam

– Jordan


Legacy “airline-within-an-airline” LCC’s have largely disappeared in North America & Europepp p

In an effort to hold back the growth of independent LCC’s, a number of legacy carriers launched their own LCC’s:• CAL Lite (Continental): 1993-1995

• United Shuttle (United): 1994-2001

• Delta Express (Delta): 1996-2003

• Bmibaby (British Midland): 2002-present

• Song (Delta): 2003-2006

• Ted (United): 2004-2009• Delta Express (Delta): 1996-2003

• Metrojet (US Airways): 1998-2001

• Go (British Airways): 1998-2003

Ted (United): 2004 2009

• Jetstar (Qantas): 2004 - present

• Mango (South African Airways): 2006-present

• JAL Express (Japan Airlines): 1998-present

• Tango (Air Canada): 2001-2003

Many have now disappeared

• FlyDubai (Emirates): 2009-present

Many have now disappeared

• Difficult-to-resolve issues: Cannibalizing the parent airline’s business, and achieving enough independence from the parent carrier to achieve true low costs

Th d f LCC b idi i h d d l t i h


• The need for LCC subsidiaries has decreased as legacy parent carriers have reduced costs and become more efficient

Legacy airlines have reduced their costs in recent years, but there is still an important cost gap relative to LCC’s

The wide wave of Chapter 11 filings in 2002 – 2007 helped the Majors considerably in restructuring their costs

F l t i diffi lt t t l t d i f b th l i & LCC’ Fuel costs remain a difficult-to-control cost driver for both legacies & LCC’s

LCC and Legacy Carrier Average CASK (Constant 2010 $)CY 2005 - CY 2010

2010 US$

10¢

12¢2010 US$

4¢

6¢

8¢

0¢

2¢

4¢LCC Legacy


¢2005 2006 2007 2008 2009 2010

Source: US DOT Form 41

Public policy implications of LCC’s

Stress on airport and airway infrastructure, potential for congestion• From fare driven market stimulation• From fare-driven market stimulation• LCC’s now account for 29% of scheduled operations and 33% of scheduled seats at

Boston Logan

O t it t d l i i d l l i t Opportunity to develop air service – and local economies – at underserved airports and markets

Outside the U.S.: • Whether / how to protect a nation’s flag carrier from encroaching LCC competition? • Whether / how to ease the market into liberalization?


Added bonus: the airline t k l i

SECTION 4

network planning process


Network management is one of the core planning activities of any airline

Route selection, capacity & frequency planning, scheduling, code-sharing & alliances fleet selection aircraft assignment rotation plan

y

sharing & alliances, fleet selection, aircraft assignment, rotation plan

Can have a huge impact on profitability and ROI

But highly complex to manage

Carriers must understand:

• The implications of market & competitive developments

• Where they’re making and losing money

• How networks can be optimized to generate the most revenue with the most cost-effective use of resources


Network planning is all about managing trade-offs

Yield On-Board Load vs.

Local O&D (Origin-Destination) Flow Traffic vs.

Locally Focused Schedule Connectivity-Focused Schedulevs.

Schedule to Meet Market Needs Schedule to Maximize Utilizationvs.

Higher Frequency with SmallerAircraft -- But Higher Unit Costs

Lower Frequency With Larger Aircraft – But Lower Unit Costsvs.

High Frequency / High Capacity to Risk of Excess CapacityHigh Frequency / High Capacity to Generate “S-Curve” Market Benefits

Risk of Excess Capacity, Diluting Loads and Yieldsvs.

Planning Your Network toMeet Customer Needs

Managing Constraints – Fleet, Airport Capacity Regulatoryvs.


Meet Customer Needs Airport Capacity, Regulatory

The “S-Curve” concept: adding frequency & “presence” in a market will increase demand, yield and revenue, y

Risk: too much capacity can dilute onboard loads and / or yields

S-Curve Illustration: Revenue Share vs. Capacity ShareS Curve Illustration: Revenue Share vs. Capacity Share

80%

90%

100%

50%

60%

70%

80%

Shar

e (%

)

30%

40%

50%

Rev

enue

S

0%

10%

20%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Frequency or Capacity Share (%)

Hubbing concept: each new spoke exponentially increases the number of O&D city-pair markets an airline can accessy p

Risk: too much focus on connectivity may result in undesirable schedules for important (and higher yield) local passengers

350

Illustrative Hub-and-Spoke Network:Number of Spokes vs. Number of O&D City-Pairs

200

250

300

ty-P

airs

100

150

200

O&

DC

it

0

50

0 5 10 15 20 25S k


Spokes

The network planning process:P fit bilit L d F t

Evaluate Industry Trends and Projected Demand

Evaluate Current Network Performance Profitability, Load Factor, Yield, RASK, CASK, Utilization, etc.

Traffic Growth, Regulatory Actions, Price Elasticity by Segment, etc.

Develop Strategic Options for Network Optimization

Evaluate Competitor Actions and Plans Aircraft Orders, Capacity & Schedule Trends, etc.

Incremental Change vs. New Business Models

Model and Test Network Scenarios

Translate Strategic Options Into Fleet & Network Scenarios

Destinations, Routes, Frequencies, Aircraft Payload/Range, Fleet Size

Forecast Share, Traffic, R P fit bilit

Refine Into Routed Schedule

Select Optimum Network Plan

Model and Test Network Scenarios Revenue, Profitability

Iterative Testing

Incorporate Aircraft Rotations,

R i R lt

Operate

Refine Into Routed Schedule Other Operating Constraints

Tactical Adjustments

Measure Results and


Review Results Measure Results andIncorporate Lessons

Modeling of network scenarios has become a widespread practice

Evaluate Industry Trends and Projected Demand

Evaluate Current Network Performance Profitability, Load Factor, Yield, RASK, CASK, Utilization, etc.

Traffic Growth, Regulatory Actions, Price Elasticity by Segment, etc.

Develop Strategic Options for Network Optimization

Evaluate Competitor Actions and Plans Aircraft Orders, Capacity & Schedule Trends, etc.

Incremental Change vs. New Business Models

Translate Strategic Options Into Fleet & Network Scenarios

Destinations, Routes, Frequencies, Aircraft Payload/Range, Fleet Size

Forecast Share Traffic

Select Optimum Network Plan

Model and Test Network ScenariosForecast Share, Traffic, Revenue, Profitability

Iterative Testing

I t Ai ft R t ti

Operate

Refine Into Routed Schedule Incorporate Aircraft Rotations, Other Operating Constraints

Tactical Adjustments


Review Results Measure Results andIncorporate Lessons

A network model permits rapid testing of “what if” network scenarios and hypotheses

Proposed new routes andnetwork & capacity plans

New schedules & schedulemodifications

Optimal service timing &Optimal service timing &hubbing analyses

Aircraft size vs. frequency trade-offs

Code-shares & alliances

Fleet planning – optimal aircraft types & fleet size

Predict the impact of competitor actions

Rationale: Model the impact of scenarios to understand


likely results, before risking costly assets and resources

The fundamental principle: projected results are related to the airlines’ service attributes relative to the competition

Departure/arrival times

In each O&D city-pair market across the carrier’s network

p

Total elapsed trip time from origin to destination

Capacity offered (seats)

Service frequency

Number of stops enroute

N b f ti t Number of connections enroute

On-line vs. code-share vs. interline

The model calculates a “QSI” (“Quality of Service Index”) value for each service offered in every O&D market, based on a combination of these attributes

The carrier’s projected share of that market is a function of its


The carrier s projected share of that market is a function of its“QSI” value relative to its competitors

Effective network optimization typically requires multiple rounds of iterative testing and retestingg g

Base

Analyzing a proposed network and schedule scenario:

C lib t C t NI tBase Schedule

Calibrate Model

Create New Network & ScheduleScenario

Market Sizes

Time of Day Preference

Input Constraints Operational

CommercialTime of Day Preference

Airline Preference

Aircraft Preference

Non-stop or Connecting Service

Maintenance

Run Proposed

Analyze Results

Adjust Network &

Final Optimized

Service

Network & Schedule in

Model

ScheduleScenario

Network & Schedule Share

Projected Traffic & Spill

Projected Load Factor


Revenue

Profitability

SECTION 5

Q & A

SECTION 5


Evolution of Low Cost Airlines

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