Week 3 - Airlines

Question 1

Types of Airlines

Answer 1

• Traditional Airlines (major airlines)
• Regional Airlines (Operate smaller aircraft on short-haul routes)
• Low-cost Carriers (Offer lowest possible fares to passengers)
• Cargo Airlines (Freight Only)
• Integrators (Offer door to door delivery, full shipping network)

Question 2

Law of Demand

Answer 2

As prices increase, fewer people will be willing to make a purchase

Question 3

Law of Supply

Answer 3

If passengers are willing to pay more, airlines offer additional routes

Question 4

Factors that Impact Demand

Answer 4

Advertising, Income, Passenger Confidence, Ticket Prices of Competitor Airlines, Derived Demand, Traffic Characteristics, Elasticity, Politics

Question 5

Factors that Impact Supply

Answer 5

Cost of Business, Competitors, Expectations of Future Sales, Time, Oversupply, Network, Fixed Cost, Failed Airlines, Seating, Perishability

Question 6

Air Transport Market Structure Continuum

Answer 6

• Monopoly (single airline offering route)
• Oligopoly (Few airlines offering route)
• Monopolistic Competition (Many airlines offer routes with some airlines having control over prices)
• Perfect Competition (Many airlines offer routes with no airlines having control over prices)

Question 7

Airline Performance Indicators

Answer 7

• Available seat kilometers (number of seats available times distance flown)
• Cost per available kilometer (Operating cost divided by ASK)
• Revenue passenger kilometers (number of paying passengers on aircraft times distance flown)
• Yield (ticket revenue divided by RPK)
• Passenger Load Factor (RPK divided by ASK)

Question 8

Cargo Performance Indicators

Answer 8

• Revenue tons per kilometer (tons of cargo sold per flight)
• Freight ton kilometers (Measure of cargo traffic)
• Weight Load Factors (Ratio of RTK to available cargo capacity)
• Freight Yields (Total revenue divided by FTK)

Question 9

Costs of Airlines

Answer 9

• Flight Operations Costs (Fuel, aircraft, pilots, navigation, flight equipment)
• Ground Operations (Maintenance, Airport charges)
• System Operations (IT, passenegr service, flight attendants, general and administrative, sales and promotions)

Fuel is most expensive by far, over 30% of all costs!!!

Question 10

Aircraft Purchase factors

Answer 10

• Purchase Cost
• Operational Cost (Direct operational costs and indirect operational costs)

Question 11

Lessors

Answer 11

• Companies that provide aircraft for lease
• Dry, wet, and damp leases

Question 12

Cost Optimization Factors

Answer 12

Aircraft Size, Stage Length, Load Factor, Service Quality

Question 13

Airline Network Designs

Answer 13

Hub and Spoke, Point to Point, Gateway Networks

Question 14

Codeshares and Alliances

Answer 14

• No airline has network that covers entire globe
• Two flights on one aircraft with a codeshare
• Group of partnered airlines is an alliance
• Airline loyalty programs

Question 15

Dangerous Goods

Answer 15

9 classes outlined in Annex 18: Safe Handling and Transportation of Dangerous Goods