Homework
Chapter 6
The Airline Planning Process
1. Describe each of the following terms. Provide the units (as applicable) and the equation
used to define the term.
a. Annual Scheduled Flights = (Total Scheduled Flights in one direction) x (2)
b. Annual Block Hours = [(Total Scheduled Flights in one direction x Block Hours
in Outbound direction) + [(Total Scheduled Flights in one direction x Block
Hours in Inbound direction)]
c. Average Passengers per Flight = (Total Passengers Outbound + Total Passengers
Inbound) * [(Total Scheduled Flights in one direction) x (2)]
d. Revenue Passenger Miles (RPM) = Annual Scheduled Flights * Average
Passengers per Flight * Non-stop Miles Origin-to-Destination
e. Passenger Yield = Total Revenue/RPM
f. Available Seat Miles (ASM)= Annual Scheduled Flights * Seats per Flight *
Non-stop Miles Origin-to-Destination
g. Seat Departures = (Total Scheduled Flights in one direction) x (2)] * Number of
Seats
h. Average Load Factor = RPMs/ASMs = (Annual Scheduled Flights * Average
Passengers per Flight) /(Annual Scheduled Flights * Seats per Flight)
i. Aircraft Operating Costs per Bock Hour = Crew Costs + Fuel/Oil Costs +
Ownership Costs + Maintenance Costs
j. Total Route Direct Operating Costs = Aircraft Operating Costs per Block Hour *
Annual Block Hours
k. Total Route Pax Service Costs =Indirect Operating Costs * RPMs
l. Total Route Traffic Service Costs = Traffic Servicing Costs * Passengers
Enplaned
m. Total Route Aircraft Service Costs = Annual Scheduled Flights * Aircraft
Servicing Costs
n. Total Route Promotion and Sales Costs = Promotion and Sales per $ Revenue *
Total Route Revenue
o. Total Route G&A Costs = G&A per ASM * ASM
p. Total Route Operating Costs = Total Route Direct Operating Costs + Total Route
Pax Service Costs + Total Route Aircraft Service Costs + Total Route Promotion
and Sales Costs + Total Route G&A Costs
q. Total Route Operating Profit = Total Route Revenue - Total Route Operating
Costs
r. Total Route Profit Margin = Total Route Operating Profit / Total Route Operating
Costs
2. Compute the Route Profitability of the MSY-DEN Route using an A320. Use the values
of parameters below. Show computation of all intermediate steps (i.e. parameters defined
in Question 1).
Annual Demand ROUTE PROFITABILIUTY ANALYSIS DEMAND AND AIRFARE ESTIMATES FOR ONE YEAR Total MSY‐DEN local Passengers (both directions) Expected market share for one daily flight (%) Local MSY‐DEN passengers on new flight Additional Traffic Connections behind MSY to/from DEN Connections to/from MSY beyond DEN Connections behind MSY to/from destinations beyond DEN Total Passengers all Directions Additional Cargo Revenue (=10% of pax revenue) TOTAL REVENUES INPUTS AND ASSUMPTIONS Aircraft Type Number of Seats Total Annual Flights each direction (=98% completion of daily schedule)) Block Hours MSY to DEN Block Hours DEN yo MSY Non‐stop miles (MSY to DEN) Aircraft Operating Costs per Block Hour Crew Costs Fuel/Oil Ownership Maintenance Total per Block Hour Indirect Operating Cost Traffic Servicing Aircraft Servicing Promotion and Sales G&A 102,000 70 59,740 24,000 12,000 4,500 A320 100,240 149 358 8:00 9:00 1383 $477 $2,413 $730 $523 $4,143 $0.02 $22 $1,800 9.00% $0.002 Prorated Average One‐
way Revenue $450 $425 $400 $375 per RPM per Enplanement per Departure of Passenger Revenues per ASM