Analysis of Airline Planning

INDIANINSTITUTEOFMANAGEMENTCALCUTTAWORKINGPAPERSERIESWPSNo.590/[e-mail],IIMCalcutta,DiamondHarbourRoad,JokaP.O.,Kolkata700104India&ManabendraNPalProfessor,IIMCalcutta,DiamondHarbourRoad,JokaP.O.,Kolkata700104,IndiaAnalysisofAirlinePlanningNitika*1,ManabendraNPal11OperationsManagementGroup,IndianInstituteofManagementCalcutta,IndiaAbstractThepapertriestoclassifytheproblemsandtheirsolutionsinairlineplanning,basedonpresentliteratureandthecorrespondinggaps.Herethescopeisnotrestrictedtoairlinescheduling.Thepaperfirstpresentsthestructureofthesystem,basedonthecomponentsoftheairlinesystemandtheirinteractions.Itstartsfromthemacrolevelrelationshipsandineachstepgoesintomoredetails.Thenbasedonthesestructureandinteractions,theproblemclasseshavebeendefined.Wehavealsodoneaclassificationoftheliteraturebasedonthedifferentwaystheseproblemshavebeenmodeledandsolved.1.IntroductionStartbybeingabillionaireandthenbuyanairline.-RichardBranson,chairmanofVirgin,Inanswertothequestionofhowonebecomesamillionaire……Andthenthisquotecanbequitetruebecauseofthecompetitivenatureoftheairlineindustry,whichisoneofthemostcompetitiveindustries.So,itisveryimportanttounderstandthevariouscomponents,theirinteraction,correspondingproblemsandtheirexistingorpossiblesolutions.Thepaperheretriestogiveapictureofthescenariosintheairlineindustryintermsoftheproblemsatvariousstagesandtheexistingandprospectivesolutions.Itdoesitbydefiningthevariouspocketsofproblemsbasedontheinteractionsandliterature.Itcomplementsitwithfewreferencesineachclassoftheproblem.Alsothepapertriestotellthegapsexistingintheliterature.Itisnotastate-of-artwork.Ratheritisaworkwhichcanbeusedasanintroductiontotheairlinesystem,theinteractionspresentandtheclassesofworkdoneintheseareas.Thepaperdiscussessomeproblemsinmoredetailthantheothers,duetothespaceconstraints.Thereasonforthisisthat,itisdifficulttosummarizetheairlineliteratureinapaper,asitistoovast.Anditmightcluttertheclassificationbythedetails.Thecontributionofthispaperisintermsofprovidingaformalframeworkoftheairlineindustryfromproblemsolvingpointofview.Allthisknowledgemightbepresentinbitandparts.Buttheworktriestoputthepiecestogetherandalsoshowtheinteractionsandthendiscussesthebridgesbetweentheseparts.Theutilityofthispaperisthatitcanbeusedasapreliminarystudyfortheintroductionoftheairlinesystem.Alsoatthesametime,whilegoingforanystrategicdecisions,itcanhelpinprovidingaframeworkforunderstandinginteractionsinthesystem,toanalyzetheeffectofonepartonotherandpresentscenariosfortheseproblems.*Correspondingauthor.Email:[e-mail]fersaproduct–servicesforairtravelanditconsistsoffleets,crewandothergroundfacilitiesasitsresources.Airlineneedstoplanitsresourcessuchthatitsfinalshortandlongtermprofitsaremaximized.Theobjectiveofanairlinelikeanyotherorganizationistoearnprofitandgaincustomershare&loyalty.Shorttermprofitsconsistofgettingmaximumprofitbymaximizingtherevenueandminimizingthecost,whicharemoreoftheoperationsproblems.Thelongtermbenefitamongotherthingsconsistsofcustomerretention,competitivestrategiesetc.So,themaingoalsaretoachievetheabovestatedobjectivestakingintoaccounttheconstraintsofresourceavailability,regulationsandtheinteractionsandbehaviorofthesystem.Thereissomedemandfortheproduct(flightservices)offeredbyairlines.Thisdemandconstitutespassengerswhowanttogofromaplacetotheother.So,passengerswantaproduct,i.e.schedule,forwhichtheyhavetopayminimumprice(fare+time)andgetthemaximumoutput–frequency,service,convenienceetc.Ontheotherhand,theairlinetriestominimizeitscostandearnthemaximumprofit,whileusingitsresourcesefficiently.Toachieveallthistherearetradeoffs.Forexample,theminimumcostforanairlinemightmeanhighercostforthepassengers.Loweringthefrequencyinamarketmightincreasepassenger’scostintermsoftime.Alsowhiletheairlinewouldliketokeepthefarehigh,thecustomerswouldlikeittobelow.Andallthesefactorsaffectthetotal(unconstrained)demand.Thencompetitionaggravatesthesituationevenmore.Thenthequestionbecomeshowtomodelallthesefactors.So,toprovidethisservicewhatairlineneedtodoittodecidethenetwork(hencemarketsandthecorrespondingfrequencyalongwithdeparturetime–fromnowonwewillconsiderthenetworkdesignincludingallthese)andthefares,takingallthesefactorsintoaccount.Thesetwomaptothecorrespondingproblemsofnetworkdesignandrevenuemanagement.Buttooffertheflights,solvingthesetwoproblemsisnotjustenough.Airlineneedtoplanthecrew,fleet(whichtypeforaflightanditsroute)etc.So,itisatotalproblemtoprovideaschedule,whichconsistsofflightsflown,theirdeparturetime,thefleetassignedtoeachflight,theroutetakenbyafleetandthecrewassignedtoeachflight.Theseproblemswhichmightseemtobeindependentarerelatedandsomeoftheinteractionshavebeenexplainedinthefollowingsection.Forexampleifonecombinesthefleetassignmentandnetworkdesign,thedeparturetimecanbechangedlittletoincorporatesomeextrapairingsResourcesPlanning&SchedulingObjectivetocheckandincludeinthefinalschedule.Similarlythemorecrewpairingmighthavesomanypossiblepai