Aviation Managment

• Constitution of the BoD: Team based on culture and trust, role skills (critical thinker, controller, innovative thinker). Special committees (audit, nomination and remuneration, risk management).
• Chairperson of the BoD: Lead by example, open corporate culture of trust betw. shareholders, the BoD, EM and workforce. He must ensure provision of punctual and relevant information to the entire BoD.
• Avoidance of conflicts of interest
• Objectives and assessment of Board of Directors and EM
• Remuneration: BoD has to ensure that the aviation enterprise remunerates the members of the board and EM.
• Instruction and training
• Succession planning: Assessment for higher qualified postholders as well as of members of the board of directors or EM.

• Information and reporting: Management Information System (MIS)
• Communication and Whistle Blowing System
• Risk Management and Safety Management System
• Compliance with regulations
• Keeping minutes
• Financial auditors
• Annual report to the owner

Different prices are charged to different groups of consumers for an identical service, for reasons not entirely explained by costs

• Consumer groups with different price elasticity (or Willingness to Pay, WTP)
• No arbitrage (Schiedsrichtbarkeit). Lower paying customers cannot resell to higher WTP customers.

No, not fair but if every customer would pay the same price, airlines would not make a profit. PD can increase efficiency.

• Time betw. booking and travel
  • Advanced purchase
• Desired Travel Pattern
  • Weekend vs. Midweek
  • Saturday night stay
  • Length of stay
• Desired Travel Flexibility
  • Rebooking, Refund

Pricing creates "Fare Products" with conditions (rules) attached. Customer provides information by selecting a product.

Price discrimination creates significant opportunity costs:

• Customers with higher WTP tend to book later.
• Seat capacity cannot always accomodate complete demand.

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

By putting booking limits on low fares, restricting the availability. Sell a few seats for a cheap price but not more.

Booking limits by RM can declare a class to be closed, even if there is still physical space available.

Opportunity Costs=Expected Revenue from High Fare. After a certain number of seats are sold for a high fare, the capacity gets smaller. I.e. the 12th seat is sold for half price (250 instead of 500).

Opportunity costs increase when there is less capacity. Opportunity decreases with time.

The closer you get to the departure the smaller is the opportunity.

See picture!

Via global distribution systems (GDS).

Sum up the Bid Price with Revenue*Allocation (Reservierung).

A combination of the Linear Program with stochastical leg methods (EMSR or DP) is ised. The main problem is however to forecast demand by booking class, booking time and itinerary.

• Departure dates
• Time of Booking

Bookings are continuously reduced by raising prices. Microeconomics: Increase prices-->less bookings

Traditional airlines started to reduce fare rules: fenceless fares
Without counter-measure, the automated RM system induces spiral-down to the lowest fare (Alle Airlines haben sich gegenseitig unterboten):

• High WTP customers find low fare booking classes open and book those
• Forecaster sees less high WTP demand.
• Optimizer protects less seats in higher classes
• Go To 1

Additional (manual) closure rules need to be introduced.

1. What is the optimal availability given prices and independent demand estimate?
2. Which fare levels, which rules, match or not match etc.?

--> The real problem is: What price should I charge?

Optimal Point of Marginal Revenue = 0, optimality condition: Slope=Marginal Revenue=0, MR=dR/dQ=0

Slope = Marginal Revenue (Grenzerlös) = Marginal Cost (Grenzkosten)

Marginal Cost = Opportunity Cost (Nicht ausgeschöpfter Gewinn, verpasster Gewinn) = Bid Price (Angebotspreis)

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

Opportunity Costs: Gewinn, der erzielt worden wäre, wenn ein Alternativweg gewählt worden wäre

OD, Point of Sale (POS)=Verkaufsort, Date-Range, Time of Day Range, Days to Departure, Routing, Weekday, Booking Class,...

Elasticity forecast: system estimates of elasticity by observing demand in relation to open booking classes.

The Federal Council

Non profit organisation, 1.55.- per slot (Arrival and Dep = two slots=3.10.-)

Only the coordination is financed by the Slot service fee.

Mainly due to obligations at the airport. DUS has 2 RWYs but only one can be used at once acc. law.

Because the airports in NA are far away from the city centre and there is no need of protection..

• The growing imbalance between air transport needs and adequate airport and airspace infrastructure.
• Lack of airport growth potential.
• Operational Condition Limitations.

Because there is only one capacity, you cannot have competition is this field. It is regulated.

• Independence of the coordinator at a coordinated airport by separating the coordinator functionally from any single interested party.
• The system of financing the coordinator's activities shall be such as to guarantee the coordinator's independent status.
• Coordinator acts acc. to this regulation in a neutral, non-discriminatory and transparent way.
• Coordinator and the schedule facilitator must monitor schedules in cooperation with airport and ATC authorities.

Non Coordinated

• No constraints (Grenzen)
• No coordination in charge
• Data collection voluntary

Schedule facilitated (Helping airlines and airports with small changements in schedule, good for miled congestion)

• Some constraints applicable
• Schedule facilitator in charge
• Data collection
• Proposed schedule adjustments by facilitator are voluntary for airlines/operators
• No slot allocation
• No historical precedence (Priorität)

Cordinated

• All declared constraints applicable
• Coordinator in charge
• Data collection
• Slot allocation (Zuteilung) by coordinator is obligatory for airlines/operator
• Historical precedence
• Coordinator shall monitor usage slots

Balance betw. too much demand and capacity.

Obligatory has to be followed by the operator.

• RWY capacity for planning purposes
• Ramp Stand capacity
• Terminal/Pax capacity
• Restrictions like curfews or quota rules (Quota rules: Upgrade but only this amount of traffic)

"Slot" shall mean the permission given by a coordinator 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 and time for purpose of landing or TO as allocated by a coordinator in acc. with this Regulation (EEC 95/93).