Airline Management Simulator: Learn Business Strategies & Financial Planning

1. Welcome to class ofAirline Simulation GamebyDr. Satyendra SinghUniversity of WinnipegCanada

2. Learning Objectives Objectives: • To appreciate and understand • Business and strategic plan • The complexity of managing an airline • Strategies within the concept of airline • Staff organization and sizing • Fleet planning • Schedule planning • Yield Management • Marketing Management

3. Financial • Cash : $20m • Current fuel price: $1.05/litre • Loan • You can take loan up to $1.25m (50% of stocks’ value) • 2% of loan is deducted each quarter and applied to the loan. If defaulted, 5% of the loan value is added to the loan amount. • Bonds: Issue • Stock market: 50m shares at $0.05 $2.5m, if sold • You can buy stocks of other airlines, if you wish • Dividends, stock value • Income tax: 20% (fixed  i.e., no change in govt.policies) • Interest rate: 10% (fixed  I.e., economy is stable) • Interest earned: if you have $ in your bank • Bankruptcy: 4 straight quarters of losses

4. Human Resources • Pilot training • Support staff needed per 100 seats in the fleet = 1 • Support staff needed per 100 seats at airport = 1 • Cargo staff needed per cargo handling centre = 100 • For each leased airline, extra staff needed = 20 • Managers • Scheduling  gives advice on checks • Purchasing  reduces maintenance cost by 10% • Training increases effectiveness of staff by 20% • Reporting  provides maintenance reports

5. Airports • About 20 National and International airports • Choose home office, size • Given Beijing and Winnipeg • Airport departures (hourly movements) • Terminal capacity option to buy own terminal • Airport parking/landing fee based on aircraft size • Cargo operations • Suggested cargo rate $1.47per km for every 1000kms • Cargo handling facility – must have • You may lease it out to up to 10 airlines • If you underpay your staff, they will go on strike • Contract cancellations carry penalties • You can sell the cargo handling centre

6. Fleet • Aircraft: Boeing and Airbus • I have given you two. • If lease new aircraft, 10% deposit reqd. If cancelled, you lose the deposit • Configuration: passenger, cargo or both • Age of the aircraft, buy or lease, runway length • Lease out, sell it • Maintenance: In-house or global outsource • A check (at any airport) Every 60 flight hours • B check (Engine Overhaul Centers) 500 flight hours; needs 200 man-hours • C checks (airframe manufacturer) 7500 flight hours; needs 2000 man-hours; allow 6 weeks for this check. • D checks (Restore as new) 22000 flight hours; needs 25000 man-hours

7. Marketing • Airfare • F = First, J = business, Y = economy class • Q = Discount economy class (80% of Y fare) • N = Discount economy class (60% of Y fare) • I = Discount economy class (50% of Y fare) • Service Level • Meals, headphones, video, tel., drinks, alcohol • Luggage • By default, one carry-on luggage is free • International first piece $25, second piece $35 • Domestic first piece $15, second piece $25 • Advertising • TV, radio, print, sponsorship, billboard • Check effectiveness • Commission to travel agents • Rename airline • Bankruptcy, crash, accidents

8. Operations • Forecasting for demands • Arrivals and departures • Technical stop, if long haul. Load limit (5-20%) can increase range and decrease runway requirements • Schedule for checks • Try to arrive in the morning and depart in the evening • Scheduling within a foreign country • You must have your own office in that country • Code sharing • Offering seats on your flight for sale in bulk to other airlines to sell and market as their own • You can buy or sell seats through the code sharing

9. Performance • Balance sheet • Loss and profit account • Passengers carried • Cargo carried, if applicable • Capitalization • Fleet size • RASK: Revenue per available seat • CASK: Cost per available seat • ASK: Available seat kilometers • RPK: Revenue passenger kilometers

10. Some Points • Be careful when leasing, you cannot undo it • Age of aircraft will affect public perception • To make $, your aircraft (passanger/cargo) must be configured  $0 • To make $, you must set airfare on scheduled flights  Otherwise $0 • Check airfare carefully  Expensive tickets may fly empty seats • Usually, short haul flights are more expensive than long haul flights • Aircraft < 1 year cannot be leased • You cannot lease a leased aircraft • If an aircraft is up for lease, it cannot be scheduled • If you buy an aircraft before lease it expired penalty • You get discount for bulk order of aircrafts • Check—not all used aircrafts are configured, in case you buy used one • For every hour an aircraft is not flying, a parking fee is charged • If outsourcing all maintenance, be careful, it will delete schedules • Maintenance depends on different airframe/engines • Reduction (e.g. 20%) in paylaod will reduce the runway requirements • Through passengers vs. point-to-point passengers (e.g. 30% for through)