Airline Route Planning Planning a journey that could optimize airline profit while bearing the costs Balancing the demands and capacities

Introduction This is where airlines deal with the application of forecasting method in determining the costs of a route of one flight from one destination to another eitherThis is where airlines deal with the application of forecasting method in determining the costs of a route of one flight from one destination to another either –Domestic or –International In terms of …In terms of … –Flight personnel –Fuel consumption –Facilities and Airport cost –Passenger Movement and Air Cargo

Its significance Determine the feasibility and possibility to flyDetermine the feasibility and possibility to fly Determine what is required and what can be offeredDetermine what is required and what can be offered Determining the kind of costs and expensesDetermining the kind of costs and expenses Determine ways to gain profitDetermine ways to gain profit

Determine the FEASIBILITY The 9 freedoms of the air in airline business: The Freedoms of the air are a set of commercial aviation rights granting a country's airline(s) the privilege to enter and land in another country's airspaceThe 9 freedoms of the air in airline business: The Freedoms of the air are a set of commercial aviation rights granting a country's airline(s) the privilege to enter and land in another country's airspace

Freedom 1 It was also known as technical freedom. The right to overfly a country without landing. It grants the privilege to fly over the territory of a treaty country without landing.It was also known as technical freedom. The right to overfly a country without landing. It grants the privilege to fly over the territory of a treaty country without landing. Member states of the International Air Services Transit Agreement are granting this freedom (as well as the Second Freedom) to other member states, subject to the transiting aircraft using designated air routesMember states of the International Air Services Transit Agreement are granting this freedom (as well as the Second Freedom) to other member states, subject to the transiting aircraft using designated air routes

Freedom 2 It was also a technical freedom. The right to stop in a country for refueling or maintenance on the way to another, without transferring passengers or cargo.It was also a technical freedom. The right to stop in a country for refueling or maintenance on the way to another, without transferring passengers or cargo.

Freedom 3 It was the First Commercial Freedom. The right to carry passengers or cargo from one's own country to another.It was the First Commercial Freedom. The right to carry passengers or cargo from one's own country to another.

Freedom 4 The right to carry passengers or cargo from another country to one's own.The right to carry passengers or cargo from another country to one's own. Third and fourth freedom rights are almost always granted simultaneously in bilateral agreements between countries.Third and fourth freedom rights are almost always granted simultaneously in bilateral agreements between countries.

Freedom 5 It is also called a connecting flight. The right to carry passengers from one's own country to a second country, and from that country to a third country. An example of this could be Emirates Airlines flights originating in Dubai, then going on to Bangkok, and then from Bangkok to Sydney, where tickets can be sold on any or all sectors.It is also called a connecting flight. The right to carry passengers from one's own country to a second country, and from that country to a third country. An example of this could be Emirates Airlines flights originating in Dubai, then going on to Bangkok, and then from Bangkok to Sydney, where tickets can be sold on any or all sectors. Two sub-categories exist. Beyond Fifth Freedom allows the right to carry passengers from the second country to the third country. Intermediate Fifth Freedom allows the right to carry passengers from the third to the second country.Two sub-categories exist. Beyond Fifth Freedom allows the right to carry passengers from the second country to the third country. Intermediate Fifth Freedom allows the right to carry passengers from the third to the second country.

The Silk Road extending from Southern Europe through Arabia, Somalia, Egypt, Persia, Pakistan, India, Bangladesh, Java and Vietnam until it reaches China. Land routes are red, water routes blue

Freedom 6 The right to carry passengers or cargo from a second country to a third country by stopping in one's own country.The right to carry passengers or cargo from a second country to a third country by stopping in one's own country. Cathay Pacific Airways, Thai Airways, Malaysia Airlines, Singapore Airlines and other airlines in Asia use sixth-freedom rights extensively to fly passengers between Europe and Australasia. Likewise, American Airlines connects passengers from Europe and Asia to other countries in the Americas via U.S. ports, and British Airways commonly tickets passengers from America to Asia via London. Icelandair sells tickets between Europe and North America via Iceland, Finnair sells tickets from North America to Asia via Helsinki.Cathay Pacific Airways, Thai Airways, Malaysia Airlines, Singapore Airlines and other airlines in Asia use sixth-freedom rights extensively to fly passengers between Europe and Australasia. Likewise, American Airlines connects passengers from Europe and Asia to other countries in the Americas via U.S. ports, and British Airways commonly tickets passengers from America to Asia via London. Icelandair sells tickets between Europe and North America via Iceland, Finnair sells tickets from North America to Asia via Helsinki.

The Kangaroo Route traditionally refers to air routes flown by Qantas between the countries of Australia and the United Kingdom, via the Eastern Hemisphere.

Freedom 7 The right to carry passengers or cargo between two foreign countries without continuing service to one's own country.The right to carry passengers or cargo between two foreign countries without continuing service to one's own country. The seventh freedom is rare because it is usually not in the commercial interest of airlines, except in Europe where an EU open sky has seen many carriers, particularly low cost carriers, operate flights between two points, with neither of them being in their home country.The seventh freedom is rare because it is usually not in the commercial interest of airlines, except in Europe where an EU open sky has seen many carriers, particularly low cost carriers, operate flights between two points, with neither of them being in their home country.

Freedom 8 The right to carry passengers or cargo between two or more points in one foreign country.The right to carry passengers or cargo between two or more points in one foreign country. The eighth freedom is also known as cabotage, and is extremely rare outside of Europe.The eighth freedom is also known as cabotage, and is extremely rare outside of Europe. The main real life example of eighth-freedom rights is the European Union, which has granted such rights between all of its member states.The main real life example of eighth-freedom rights is the European Union, which has granted such rights between all of its member states.

Freedom 9 The right to carry passengers or cargo within a foreign country without continuing service to or from one's own country.The right to carry passengers or cargo within a foreign country without continuing service to or from one's own country. Sometimes also known as stand alone cabotage. It differs from the aviation definition of true cabotage, in that it does not directly relate to one's own country.Sometimes also known as stand alone cabotage. It differs from the aviation definition of true cabotage, in that it does not directly relate to one's own country. The EU agreements mentioned above also fall under this category.The EU agreements mentioned above also fall under this category.

Freedoms of the air

Determine the DEMANDS Passenger Demand:Passenger Demand: –How many? –How many seats available? –The kind of aircraft to be used? –The kind of facilities needed? (i.e., catering, baggage handling, airport facilities) Fuel:Fuel: –How much is the consumption? –How far is the journey?

Determine YOUR CAPACITY Cabin CrewsCabin Crews Facilities-Airport servicesFacilities-Airport services Ground Handling-MROGround Handling-MRO

Determine the COSTS Remember the categories of costs in airline business?Remember the categories of costs in airline business? –Two major costs –Direct, indirect and non-operating costs –Major and unpredictable costs

DIRECT COSTS Expenses associated with and dependent on the type of aircraft being operated, including all flying expenses such asExpenses associated with and dependent on the type of aircraft being operated, including all flying expenses such as –Flying operations costs Flight crew expensesFlight crew expenses Fuel and oilFuel and oil Airport and en route chargesAirport and en route charges Aircraft insurance costsAircraft insurance costs Other flight-operations expensesOther flight-operations expenses –MRO costs

INDIRECT COSTS Those costs that will remain unaffected by a change of aircraft type because they are not directly dependent on aircraft operations such asThose costs that will remain unaffected by a change of aircraft type because they are not directly dependent on aircraft operations such as –Station and ground expenses –Reservations, sales and promotional costs –General and administrative costs

Non-operating costs Those expenses and revenues not directly related to the operation of an airlines’ own air transportation services likeThose expenses and revenues not directly related to the operation of an airlines’ own air transportation services like –Gains or losses raising from the retirement of property or equipment –Interest paid on loans, banks or deposits –Gains or losses raising from an airline’s affiliated companies –Direct gov. subsidies and payments

Costs for Cargo Airline CommoditiesCommodities Containers (if any)Containers (if any) MRO (Overnight)MRO (Overnight) FuelFuel Crew Expenses (Pilot and Co-Pilot)- Lesser than passenger airlineCrew Expenses (Pilot and Co-Pilot)- Lesser than passenger airline

PROFITS GAIN Service chargeService charge Ticket PricingTicket Pricing –Destination –Fuel –Seat –Catering InsuranceInsurance Airport TaxAirport Tax

Example of Calculations COSTSPROFITS DIRECT COSTS FuelFuel Charge Labor MROMRO Charge Ground HandlingBaggage Handling Airport ChargesAirport Tax InsurancesPassenger Insurance INDIRECT COSTS General and administrative costsService Charge Flight planning and weatherService Charge Reservations, sales and promotional costsService Charge TOTAL =ATOTAL =B TOTAL PROFITS: B – A= C

Exercises (Quiz 5) deal with the application of forecasting method in determining the feasibility of a route of one flight from one destination to another. Discuss in your own words the Freedoms of the air and provide a route example at each freedoms.Airline Route Planning deal with the application of forecasting method in determining the feasibility of a route of one flight from one destination to another. Discuss in your own words the Freedoms of the air and provide a route example at each freedoms.