So, What Does Make a Good

Fleet Plan?
Flexibility
Flexibility
Does the aircraft design offer sufficient
payload versatility?

Long-haul aircraft, because they tend to be large
and with twin-aisles, tend to offer a greater
degree of flexibility than small, single-aisle
aircraft that serve local or regional markets.
Greater interior floor space and volume tends
to mean more opportunities in terms of seat
layout, positioning of toilets, galleys and other
amenities, design of overhead stowages,
provision of facilities for cabin and flight crew
and so on. A key question is whether the
inherent design of the cabin allows cost-
effective and rapid reconfiguration in order to
address a market change.
The issue of payload versatility can be seen from
the perspective of the longerterm design for the
market, or else as a day-to-day operational issue.
Airlines are far more responsive to market
changes than ever before, with regular
reconfiguration of the cabin environment now
commonplace. A complete image revamp for a
fleet can easily involve costs well beyond that of a
new aircraft. So, a good fleet planning objective is
to ensure that the cabin of any aircraft type can
be altered rapidly an economically.
Another aspect of flexibility that should be
considered, is the degree to which the aircraft
design offers alternative loading options. For
example, it is always beneficial
to be able to load full-sized pallets in a
transversal sense in both the forward and
rear cargo holds. An inability to place pallets in a
rear hold can restrict market opportunities.
Does the aircraft family offer sufficient operational
flexibility?
The most important ingredient in determining the
degree of flexibility, and one to which we shall return
many times, concerns that of multi-sized and multi-
range versions of the same aircraft family. Boeing,
Airbus and the former McDonnell-Douglas all
developed families of aircraft. Building up a family of
aircraft of varying sizes, but sharing overall design
and operational commonality, should be at the heart
of any successful fleet plan requiring different size
modules to serve different markets.
The family concept has had a dramatic effect
on fleet planning as airlines have reaped
enormous economies in terms of both
investment as well as operation. Where a
sequence of aircraft types is offered with
designed-in commonality, a fleet can be better
matched to expanding demand because
capacity can be added by trading-up in size as
well as in units.
Operational flexibility becomes especially
important in the fleet plan as future range
requirements can be more easily planned in
advance. There is much less risk involved in
making an aircraft selection where it is known
that solutions to future growth can be found
by simply moving-up to a larger-sized variant
of something you have already got.
Does the fleet plan allow easy phasing-in or out of capacity?
final flexibility
attribute concerns the degree to which the timetable of aircraft
deliveries can be
modified to reflect changing conditions. Airlines are enormously
affected by external
factors, ranging from competitors actions and changing macro-
economic conditions,
to new regulations and even war. The lead-times between the placing
of an order and
taking delivery of an aircraft are necessarily long, due to the sheer
complexity of the
product and its support in an operation.
Continuity
Is the product line coherent? Product coherence can be considered in two ways. Firstly,
we need to judge the degree to which each member of a product line acts as a point
of reference for the airline. For a supplier to break the monopoly of an aircraft
or engine type in an airline is extremely challenging. We can easily expect different
philosophies in design and maintenance, and different approaches to customer
service and management in general. There have to be good reasons to break the
mould. Of course, airlines may pursue a dual-supplier philosophy for strategic reasons,
such as spreading risk and encouraging more competitive offers from manufacturers.
Perhaps a dual-supplier policy is necessary because neither manufacturer offers
competing products, with Boeings dominance of the 747 market being a case in
point. In general, only large airlines can economically muster the internal resources
to support operating multiple types.

A second aspect of product coherence concerns the composition of the product
line itself. Airframe and engine suppliers have striven to build broad product ranges
so that plenty of choice is on offer. Both the Airbus and Boeing product range
address markets needing short-haul 100-seater aircraft through to markets requiring
high-capacity long-haul types. Yet what really counts is not the presence of a wide
variety of different aircraft types in the manufacturers portfolio, but the economic
fit of different members of a family.

Key Decision Criteria

Although there is no
magic recipe that can be applied to fleet
planning, a structured and prioritised set of
key criteria, relevant to the airline and its
position in the market, is essential.
Timing is Everything

Importantly, these decision criteria may evolve
over time. For example, in the early 1980s the
price of fuel was relatively high whereas interest
rates were low.

Timing is Everything
Against such an economic background fuel efficiency would
clearly assume greater prominence than aircraft first price. Yet
by the end of the decade fuel prices had fallen and interest
prices had risen, thereby influencing the ranking of decision
factors. The roller coaster continued when, in the mid-1990s,
fuel price remained low as the cost of borrowing reduced. By
middle of the 2000s, fuel price skyrocketed, throwing fuel
efficiency once more into sharp focus.

Timing is Everything
Sometimes it is the availability of the aircraft at a moment in time that determines
choice. The series of iterative loops that Airbus passed through in the definition of
the A350 clearly handed an advantage to Boeing, who could bring their competing
product, the 787, to market several years earlier. The difficult question to resolve is
whether an airline is able to wait for the better product and what kind of impact this
may have over the longer term.
The Effect of Technology Exhaustion

In the days of economic regulation of the airline industry, the pure cost of operation
mattered a great deal. Consequently, decisions for aircraft were mostly driven by the
unit-cost advantages. This was particularly true of the 747, for example. Deregulation
and the growth of competition saw the emphasis shift to revenues and the ability of
the aircraft to contribute to the brand of the airline.
The Effect of Technology Exhaustion
Another reason for technology assuming lesser significance is that manufacturers
are approaching the limits of what can actually be achieved through conventional
technology.

The Impact of External Forces on
Decision Criteria
It is clear that in a world of sweeping
liberalisation, markets are no longer stable, and
we have already examined the problems of
matching inflexible supply and volatile demand.

Other regulatory changes can also significantly affect fleet planning. The
airline industry is an obvious concern to the environmental lobby. Airlines finding
themselves in the thick of the environmental debate have no choice but to elevate the
issue to a key decision criterion. Airlines serve airports that are increasingly impeded
by environmental restrictions and the subject is becoming more and more a dominant
theme in aircraft design and fleet planning. For example, the QC2 noise restrictions
at Londons Heathrow Airport actually led to a review of the design of the A380.
Airlines may fall victim to exchange rate evolutions that may
completely overshadow any other cost parameter. The
weakening value of the local currency, in which revenues
but not costs will be generated, might well be the most
potentissue in fleet planning for some.

Geography also plays a role. Forces at work in one part of the globe will not
be apparent in others. For example, there is a tendency for Asian markets to expect
twin-aisle aircraft, even for short missions. The environmental lobby is a much less
significant issue in developing economies, unless airlines domiciled in such regions
aspire to serve markets in countries where environmental considerations apply
The Effect of Technology Exhaustion
In the days of economic regulation of the airline industry, the pure cost of operation
mattered a great deal. Consequently, decisions for aircraft were mostly driven by the
unit-cost advantages. This was particularly true of the 747, for example. Deregulation
and the growth of competition saw the emphasis shift to revenues and the ability of
the aircraft to contribute to the brand of the airline. Now we see a definite trend
whereby passengers see the airline product more and more as a commodity, despite
the best efforts of quality-driven airlines to convince us otherwise. Airline choice
decisions are driven by elements such as the schedule and on-time performance, with
brand loyalty sometimes taking a back seat. Such a trend deflects the technology of
an aircraft from a position of prominence in the list of decision criteria.
Another reason for technology assuming lesser significance is that manufacturers
are approaching the limits of what can actually be achieved through conventional
technology. Incremental improvements in fuel efficiency are becoming increasingly
difficult to realise.
Fixing the Key Decision Criteria
We have just concluded that key decision
criteria are unique to a particular situation,
are highly sensitive to timing, are becoming less
and less contingent upon technology,
and are governed by external factors such as
regulations, the environment and
geography.
DaimlerChrysler Aerospace (DASA) studied key buying factors of airlines worldwide
to help establish aircraft design objectives and provide economic and operational
targets for airlines and manufacturers

Perhaps unsurprisingly, economics is the single most important element in their
analysis irrespective of geographical region. Aircraft performance scored very
highly for European-based scheduled long-range operations. Comfort is also a
preoccupation for this type of operator, unlike in the United States. The lower score
assigned to commonality in the US is due to the comparatively larger fleets where
economies of scale are more easily present. In other regions, where fleet sizes are
much smaller, there are more potential synergies available through common aircraft
technologies.


The Market Evaluation

Measuring Production
Defining Production and Sales
A logical start to the fleet evaluation process is
to make an assessment of the degree of
productivity of the fleet, either for the airline
under study, or for the whole market.

Measuring by Available Seat-Kilometres (ASKs) and
Available Tonne-Kilometres (ATKs). One ASK equates to one seat being flown 1km
and one ATK represents one tonne being flown 1km. The corresponding Revenue
Passenger-Kilometres (RPKs) or Revenue Tonne-Kilometres (RTKs) are indicators
of how much of the production has been sold.
Another very important measure is the Revenue per ASK, or RASK. This is
a combination of the yield and the load factor. Thus, the ratio between ASK and
RASK gives an indication of both cost control as well as revenue generation.
Defining Load Factor
The ratio between ASKs and RPKs, or ATKs and RTKs, is the load factor.
A Macro Approach to Fleet Planning
Macro planning involves aggregating
data either for the entire network or, if the routes or markets served have different
characteristics, a number of smaller sub-networks.

Macro plans can be built quickly,
are versatile in that the small number of basic assumptions can be rapidly altered,
and require relatively little data and no complex analytical model to get a result.
Whatever type of fleet plan is adopted, we should always draw from historical data,
preferably for the entire market under study, rather than just for our airline. Problems
obviously arise in fleet planning for start-up carriers where no history exists, or for
route expansion, where data may be minimal. Once analysis has been completed for
todays situation, we must then make a forecast of our needs. Therefore, we need
inputs of future demand levels, as well as economic and market conditions.
Macro fleet plan is divided into two parts, one comprising the demand and the second
comprising the supply . Each part of the plan is
further sub-divided into several elements.

A Micro Approach to Fleet Planning
Taking a look at a network from the perspective of individual routes, city-pairs and
flight numbers gives us an opportunity of accurately reflecting the real operation. If
we can concoct a model that allocates demand, firstly according to a pre-determined
set of criteria, and secondly to each segment on a network by flight number, then we
have an opportunity of calibrating the prediction with historical values.
Market Segmentation and Spill

Motivations of Travel Demand
Segmentation of markets is not a new technique and is practised widely in the airline
industry and beyond. There is a tendency for segmentation to become over-complex,
particularly as revenue management systems have encouraged the creation of a large
number of booking classes. For example, British Airways operate 26 booking
classes, each of which has the potential to be sub-divided into 10 further portions.