ATE

Yield means the revenue per PAX resp. per PAX-mile
Yield depends n the average revenue per PAX respective of the seat load factor

Yield-Mngmt aims at optimising the revenue (maximise return)
- differentiation by market segment/client category
- differentiation by time of consumption
- differentiation by time of booking
Yield Mgmt can be understood as development & implementation of fares & booking classes as well as the control of the theoretic load factor along the period.
 

Different prices are charged to different groups of consumers for an identical service

Conditions:

• Consumer groups with different price elasticity (or Willingness to Pay)
• No arbitrag, lower paying customers can't resell to higher WTP customers

-> different WTP is related to purpose of trip: leisure vs business

Price discrimination creates significant opportunity costs:

• customer with higher WTP tend to book later
• seat capacity cannot always accomodate complete demand

If a seat is sold at low price now, the opportunity is lost to sell it at a higher price later

Revenue Mgmt takes advantage of this optimization potential by puting booking  limits on low fares, restricting the availability

• High WTP customers find low fare booking classes open & book those
• forecaster sees less high WTP demand
• optimizer pretects less seats in higher classes
• go to 1

Without counter-measure, automated RM system induces sprial-down to the lowest fare

Additional (manual) closure rules need to be introduced.

Revenue Mgmt: What is the optimal availability given prices & independent estimate?

Pricing: Which fare levels, which rules, match or not match?

The real problem: What price should I charge?

Answer (theory): Choose price such that marginal revenue equals opportunity costs (+variable costs)

A slot & capacity manager is needed, especially in Europe

• growing imbalance between air transport needs & adequate airport & airspace infrastructure
• lack of airport growth potential
• operational condition limitations

Level 1 → non coordinated
no constraints, no coordinator in charge, data collection voluntary

Level 2 → schedule facilitated
some constraints applicable, schedule facilitator in charge, data collection, proposed schedule adjustments by facilitator are voluntary for airlines/operators, NO slot alocation, NO historical precedence

Level 3 → coordinated
All declared constraints applicable, coordinator in charge, data collection, slot allocation by coordinator is obigatory for airlines/operators, historical precedence, coordinator shall monitor usage of slots

ZRH: restrictions like curfews or quota rules & RWY capacity for planning purposes
GVA: terminal / passenger capacity + above mentioned (ZRH)
 

A slot is a user right not a possession!

Slot means the permission given by a cordinator in accordance with this regulation to use the full range of airport infrastructure necessary to operate an air service at a coordinated airport on a specific date & time for the purpose of landing or take-off as allocated by a coordinator in accordance with this regulation [European regulation EEC 95/93 amended 793/2004 Article 2A]

ATC Slot versus ATFM?
As long as ATFM capacity is sufficient NO ATC slot is needed (comparable to traffic light system)

Airport Slot versus ATFM?
Airport Slot = longer term airport planning instrument for ARR & DEP to opimize & balance scarce airport system capacity & to contribute to a better balanced ATFM

• Capacity Review
• Historical Precedence (Grandfather Rights - use it or loose it rule)
  • A series (min 5) sots allocated to an air carrier, entitles that carrier to the same series of slots in next equivalent scheduling period
• Submission
• Initial Coordination
  • Historics = basis (first historic submission then historic re-timings)
  • new entrants (fewer than 5 slots on specific day)
  • new requests
• IATA Slot Convention
  • twice per year
  • open for airlines & officially appointed coordinators
  • main task: coordination/allocation of t/o & ARR slot, evaluaton alternaties, slot exchanges, bilateral evaluation projects
• Slot Return
• Slot Monitoring
  • CRS Monitoring (after Slot Handback deadline, twice a year)
  • performance monitoring (bi-weekly after start of season)
  • SHL monitoring (after end of season)
  • Ad-Hoc monitoring (weekly)

• Supply < Demand: undercapacity
• ⇒ good yields, everybody achieves good results
• ⇒ gathering of market shares, excessive capacity growth
• ⇒ Supply > Demand: overcapacity
• ⇒ price wars, yield deterioration
• ⇒ cost & capacity Cutting
• ⇒ Supply < Demand
• ⇒ and so on :)

high capacity share usually leads to an even higher market share & is basis for good profitability
→ better SLF, higher quality of traffic

Drivers:

• width of offering → many destinations
• depth of offering → many frequencies
• customer loyality programm

- Attraction for business passengers rises along with the frequency
- The profitability performs nearly similar to the S-Curve
- if airports become too crowded, delays are more likely, which leads to a decrease in passenger market share
 

1. Geographical position of a hub
   • defines feasible connections via hub
2. destination portfolio (longterm)
   • defines theoretic feasible connections, from/to destination in demand, carrier is flying to
   • all own operated & code share operated destination
3. Hub/Transfer quality (shortterm, but limited)
   • defines real offered connection, within certain transfer-quality-parameters
   • parameters:
     1. Bi-directionality
     2. MCT of the hub
     3. MCT EU-EU 90min, EU-IC 150min
     4. min 4 weekly frequencies

• how big is the demand potential of the route?
• which transfer O&Ds can be attracted? Which connections are necessary?
• how often should the route be served? (Frequencies per day / timings / days)
• which aircraft size should be employed?
• are ressources available? (traffic rights, slots, aircraft, crew)
• commercial evaluation (year 1 to 3)

Line nets
Advantages: Simple planning, understandable Steering
Disadvantages: low frequencies, massive station costs, low personnel productivity, high marketing costs

Raster nets
Advantages: Attractive for business passengers
Disadvantages: low frequencies, high station costs, high marketing costs

Hub-and-Spoke nets
Advantages: marketing leverage (increase of offer), dominance (strategic value), production economies of scale (production, infrastructure)
Disadvantages: risk of marginal cost pricing (if transfer traffic), creation of hub-concentration peaks, high delay liability

Markets: line ops (cont. - intercont.), charter, freight transport, GA

Carriers: national flag carriers, hub carriers & alliances, LCC, specialised freight operators, specialised business aviation

Characteristics: global market (few borderlines), impacts local - regional - global, HiTech-Industry, early liberalisation & deregulatin, private acotrs - public ownership structures, high level of exposure (visibility, vulnerability)

Linienfluggesellschaften: Geschäftsreisen, Wochenendflüge

Charter: Pauschalreisen

Billigflieger: Preissensibles Freizeit-/Besuchsgeschäft

Direktverkehr

Hubverkehr

Netzverkehr durch Allianz

No frill: reducing to the max (outsourcing to the customer)

Direct relations with short slots & quick circulations, high load factors

Standardised fleet for short haul flights

Internetmarketing & ticketing

Beneficial age structure, high productivity

Low cost airports(no hub airports!)

1. Hoheitsgebeit eines fremden Staates ohne Landung überfliegen

2. Nichtgewerbliche Zwischelandung (Tanken, Wechsel Flugpersonal, Technical Stop) in fremden Staat (keine Aufnahme/Absetzung von Gästen, Fracht)

3. Transport von Gästen, Fracht in fremden Staat (aus Heimat)

4. Transport von Gästen, Fracht aus Vertragsstaat in Heimatstaat

5. Transport von & nach Drittstaat, wobei Start oder Ende in Heimatstaat sein muss

6. Transport von Vertragsstaat nach Drittstaat (mit Zwischenlandung in Heimatstaat)

7. Transport zwischen zwei fremden Staaten (ohne Verbindung zu Heimatstaat)

8. Transport zwischen zwei Orten innerhalb eines fremden Staates (Kabotagerecht) mit Zubringer aus Heimatstaat

9. Transport zwischen zwei Orten innerhalb eines fremden Staates (Kabotagerecht) ohne Zubringer aus Heimatstaat

Before: no market access (single destination), capacity reduction by bilateral agreements (50/50 rule), pooling & code sharing (bilateral allocation), tariff control, state ownership

After: new production concepts (LCC, Hub carrier): economies of scope, concentration & alliances: economies of scope & scale, globalisation & regionailsation: economies of scope & density, massive reduction of tariffs -> boost of demand, new ownershp models & financing schemes

Organic growth (securing the leading positionin traffic flows)

Partner & Alliances (developing global presence)

Acquisitions (strengthening the position of hometurf)

1. Markt & Nachfrage (Strategie/Marktanteil, Pax-Volumen, Wettbewerb, Kooperationen..)

2. Operative Parameter (Leistungsdaten, Crew, Technolgie, Abfertigung..)

3. Planungsparameter & Restriktionen (Flotte, Slots, Blockzeiten, Verkehrsrechte..)

Airline tariffs: from monopoly pricing to dynamic pricing systems (yield management), dynamic pricing & best prices (early & late booking), differentiated hub & feeder prices, pass through of fuel prices

Airport fees: landing & pax charges, parking & terminal charges, environmental surcharges, slot peak charging (partly)

ATC charges: 2 part pricing (fixed baseprice & distance related charging), no differentiation according to slots

Taxes: VAT & mineral oil taxes only for national transport, Emission trading scheme in EU

The costumer value consists of perceived benefits & extra-benefits of the customer in the process of collaboration & for the effort/service of the supplier

Qualitative analysis: in-depth interviewing, case-based research, observation sutdies...

Quantitative analysis: survey research (personal interviews, surveys), experimental research

Explicit preferences: stated preferences are affected by the actual condition or event (identity with home carrier, support of national airline..)

Implicit preferences: hidden preferences will be published unconsiously & represent almost real situation (comfort not to switch to other systems, insecurities about other airlines..)

time of day

day of week

journey purpose

importance of speed, cost, frequency

area

1. Trip generation & attraction [Activity?]

2. Trip distribution (combinations of origin & destination) [Which destination?]

3. Mode choice [Which modus?]

4. Assignment (assign flows to links, connection (public transport) & routes (car) [which route/connection?]

RP Data: real world choices, attribute likely correlated, only existing alternatives, limited obersvations per respondent

SP Data: hypothetical context (experiment), attribute relations controlled, present & future options, reliable only if taken seriously, multiple observations per decision maker, design issues

=> can be combined!