Aviation Managment

Airlines have a greater entry barrier. It is much harder for them to start their business because there is such a great and hard concurrence. Therefore, reservation systems, airports and leasing companies are more profitable.

The air traffic regulations are very restrictive and this is why airlines have a hard business. They have to fulfillthe law and this costs a lot of money.

The brand, the customer basis and the position at a hub.

Networls and therefore network management.

Airline managers need to look for strategies, which allow them to become more efficient mostly by applying economies of scale either through the size of their own company or by cooperating with other airlines in alliances.

• Network: Optimise network effects by optimal hub and network structures. Offer integrated products at comparably high quality in form of attractive OD's. Alliance strategies to strengthen their networks.
• Regional: Geographically limited networks within alliances. They might operate regional hubs. Mainly serve the main hubs of the alliances. I.e. SAS or AUA. They have strong competition from LCC. Regional carriers are torn between being intergrated into large networks or developing into LCC business model.
• Charter: Fly point-to-point traffic, weekly rotations to tourist attractions, were not allowed to sell single seats only to tour operators. Cheaper cost structure and less complex operations than networkers.
• LLC: Most operate point-to-point business model. Lean costs because of less complex operations that enable short turnaround times and intensive AC utilisation.

Coorporate aviation and air taxi services which represent a growing market. Two models: traditional business aviation with traditional business jets for short- and long-haul routes and Very Light Jet Air Taxi models, which operate with smaller Very Light Jets shorter routes.

Airline strategy  involves a whole system of activities. It is a combination of three fields. They can be built on the basis of market advantages, advantages in networks and advantages with regard to resources.

Offering good service to pax like direct connections from airport to a secondary airport. B787 and A350 provide a nice cabin with new technologies.

Let's consider a hub airport where a big airline has its network but there are also other smaller airlines operating. These airline do not have much chance against the big airline and the big airline is the one which survives.

On the supply side the marginal costs decrease with bigger size of network. On the demand side the marginal utility increases with network.

I.e. the network consisting of three main hubs (Frankfurt, Munich and Zurich) operated by the Lufthansa Swiss Group. An advantage of that system is a good combination of the internalisation of hub economies and reduced dependency and redundancy through a multitude of hubs.

I.e. bigger hubs with more connections typically are more sensitive to delays. Delays pile up throughout the day the entire network, potentially leading to a reduction of perceived quality and compensation costs. Furthermore, the operation of hubs always leads to hub load peaks.

If poor meteorological conditions or technical reasons, such as the closing of a runway, lead to operational restrictions, the service quality decreases and delays may occur. The development of a hub requires high specific investments within the whole network. Modifications are very expensive.

No, hubs are operated with waves. I.e. at Zurich airport there is the morning wave where all lonh-haul aircraft are landing early in the morning and an hour later all short-haul aircraft are taking off. At midday and towards the evening (4 to 5 pm) it's the same. At these three times the airport operates at its maximum capacity.

• Yield management
• Fleet assignment (i.e. short-term change of AC size)
• Distribution and sales, i.e. special campaigns

Ideal plane to connect mega hubs in big markets on different continents.

Fuel efficiency per passenger, economies of scale and scope, and mega “hubbing” are the key reasons for an airline to invest in such an airplane.

Efficient engines and lower weight thanks to carbon fibre construction will enable a larger range of intercontinental point-to-point connections. Moreover, new technologies concerning air pressure and air humidity in the cabin will lead to more comfort for passengers and will therefore increase the customer value resulting in a readiness to pay a higher price for air travel.

1. Issues of vehicular congestion, safety, noise and air pollution will come into play and provide strong arguments for building that ‘new’ airport in that ‘new’ location. Inability to expand, consolidation (combine two existing airports), environmental impact, financial benefits (tax benefits)
2. Security reasons (away from concentrated population centres), well maintained airports, well equipped, long RWYs, long taxiways, a lot of space, diverse facilities

Phase 1: Airport requirements analysis (including forecasting)
Phase 2: Site selection (for new airports)
Phase 3: Airport layout (and phased development)
Phase 4: Financial planning (scheduling)

1. Pax travel to and from the airport (in some cases this produces greater pollution that that experienced by the air traffic)
2. Water pollution (as a result of de-icing, painting activities, waste, etc.)
3. WIldlife habitat destruction (estuaries, bird migrations, etc.)
4. Light pollution
5. Waste generation (all types, incl. cabin waste)

Airports directly affect the economies of the communities within which they operate.

• Job creation (directly and indirectly, on and off the airport)
• Payment of taxes
• Provision of education, training and the introduction of new skills
• Purchase of parts, supplies and consumer goods

Business customers: Service before and after the flight (Limousine, Lounge), convenient transfer to and from the airport, special treatment during the flight, fast tracks through security, priority luggage delivery, ticket price does not matter that much, frequent flyers

Leisure customers: Seek the lowest ticket prices, less concerned about the service being offered or frequency of flights or the number of destinations being served

I think that it is very important that the business and first class customers who fly frequently are kept. The service there has to be exclusive so that these customers are not willing to change the airline. There should be any shortage in service.

1. Endorsed brands: Strong endorsement, linked name, token (symbolisch)
   1. Like a certificate or a sub-label, communicates certain values and quality, i.e. alliances
2. Subbrands: Master brands as drivers, Co-drivers, i.e. Lufthansa who operates daughter companies for specific market or functions like Lufthansa Regional

It seems clear that due to the tendency to employ marginal pricing within a competitive market, yield management systems may lead to lower average ticket prices. Airlines can only avoid this development by implementing strict capacity control and if they have the ability to apply skimming strategies thanks to a superior product.

Flat rates have the advantage that less investment in yield management is necessary, both in terms of software and manpower. For the customer, flat rates provide greater market transparency and reduced transaction costs and might therefore help to increase customer trust into services. However, until today, wherever flat rate systems have been competing with flexible pricing systems, the latter have succeed because most customers are not willing to accept slightly higher prices for the sake of long-term stability and transparency.

1. Travel intention: Problem recognition, perceived risk and uncertainty of travel
2. Information Search: Internal and external sources of information
3. Alternative Evaluation: Cognitive evaluation of the alternatives in the evoked set
4. Purchase Decision: Decision rules and heuristics lead to one purchase decision, making a three way choice (airline, airport and access mode)
5. Future Travel Intention: Experience is satisfactory or dissatisfactory and this influences the pax behaviour intentions in future

1. Personal: Personal factors refer to determinants that are unique for each pax (age, sex, place of domicile, occupational and economic conditions, lifestyle personality and self-concept), AIO (Activities, Interest and opinion)
2. Psychological: Motivation, perception, learnings, beliefs and attitudes
3. Socio-cultural: Setting of basic values, perceptions, wants, and behaviours learned by a member of society from family etc. sub culture that includes nationalities, religions, racial groups and geographic regions. Social structure and cultural influences influence consumer behaviour.

Trip features: Time Pressure and Cost Restrictions, Business / Leisure Travel, Perceived Risk and Uncertainty of travel

The data that are systematically published by the aviation industry are not immediately revealing the information relevant to the influence of trip features on the decision making process of passengers. Passengers tend to be treated not as individuals but as ‘movements’. I.e. passenger/km or pax who make a change of airline or plane during a journey. Passengers are counted twice or more if they change flight at the same airport. Trip features and most importantly the purpose of trip are one of the most influencial factors of pax behaviour.

Heart of airline marketing became its pricing tactics and frequent flyer programmes (FFPs).

Consumers have embraced the Internet for convenience and the depth of information available through electronic channels.

More comfortable with making purchases over the Internet, total online travel sales are expected to further grow in double digits. At the same time, airlines have realised that the Internet allows them to reach a widely dispersed base of potential consumers very quickly, while, simultaneously, it reduces distribution costs by 75% or more. Sales on an airline’s own website are by far the least expensive avenue for airlines,

The growth in popularity of the Internet has made information search and comparison of airline prices much easier.Through comparing prices of other airlines average prices of airlines have declined.

A further feature of passengers’ choice set is the distinction between business and leisure travel including the associated amenities. While the business travel market has seen a marked change in recent years, but still remains vital to airlines, it is the leisure travel market that shapes the airline industry.

15% of the airlines’ capacity is allocated to business class, which in return generates 28% of revenue. More importantly, the operating profit margin of the business class in 2002 was 29% compared to just 5% of the economy class. From 2000 onwards, however, the proportion of travellers using business class has been falling. Declining sales of business class tickets and increased downgrading behaviour has shown that the business market does display price elasticity.

Airline passengers have raised their expectations with regard to the level of service quality, while seeking better value for their money.

Service Quality: Service quality is considered as the leading measure of performance in the service sector, but the literature also reveals that service quality is neither easy to define nor easy to measure. Analysing several different services, they identified tangibility, reliability, responsiveness, assurance and empathy as the five principal components that consumers use to evaluate service quality. “Courtesy of attendants” and “responsiveness of attendants”.

Customer Satisfaction: Satisfaction is the consumer’s fulfilment response. It is a judgement that a product or service feature, or the product of service itself, provided (or is providing) a pleasurable level of consumption-related fulfilment, including levels of under- or over-fulfilment.

Perceived value: Perceived value is considered to be one of the most significant factors in organisation success being labelled as “the new marketing mania and the way to sell”. The utilitarian perspective of value is based on the concept of trade-off derived from the field of economics. It states that price is the value of a service, and therefore consumers spend their income so as to maximise the “value” they get from services. Customer value is a customer’s perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer’s goals and purposes in use situations.

Similarities / Differences: Much debate about distinction of service quality and customer satisfaction. service quality perception requires neither experience with the service nor with the service provider and in contrast customer satisfaction is purely experimental. In this dominant line of research, service quality is viewed as a more enduring concept, whereas customer satisfaction is a more extensive (umfangreich) concept.

The value creation reflects the increased recognition of perceived value as one of the most important measures in gaining a competitive edge. “Value is the customer’s overall assessment of the utility of a product based on perceptions of what is received and what is given”.

Probability expresses a tendency for a system failure to occur which applies equally to the whole population. However, as it is the application of a ratio that is essentially a binary condition, it must always be wrong for any particular case.

For a passenger considering a flight in one of those 100 aircraft, the significant consideration is not the probability, but if it will arrive safely. It is a case of different views, different passenger's perception of risk.

Ironically, due to the psychological impact of aircraft disasters, flying represents a life-or-death decision for many people, yet a recent study showed that the vast majority of aircraft accidents are survivable.

Perceived risk: .the amount that would be lost (i.e. that which is at stake) if the consequences of an act were not favorable, and the individual’s subjective feeling of certainty that the consequences will be unfavorable.

Thus perceived risk is conceptualized on losses, significance, and uncertainty where the amount of loss is proportional to the degree of mismatch between the required outcome and the attained reference outcome on a particular attribute.

This amount can be converted into risk perception by taking into account the probability of the attribute failing to meet the required outcome and the significance of the attribute.

Finally, a multiplicative combination of the significance and uncertainty of each loss determines perceived value.

ICAO

• Sovereignty of States
• Right to fly
• Provide infrastructure, safety and security
• Create friendschip and understanding among the nations and peoples in the world
• Oversee the development of safety regulatory frameworks of regional and national level