Transcript Document

Biography for William Swan
Chief Economist, Seabury-Airline
Planning Group. AGIFORS Senior
Fellow. ATRG Senior Fellow.
Retired Chief Economist for Boeing
Commercial Aircraft 1996-2005
Previous to Boeing, worked at
American Airlines in Operations
Research and Strategic Planning
and United Airlines in Research and
Development. Areas of work
included Yield Management, Fleet
Planning, Aircraft Routing, and
Crew Scheduling. Also worked for
Hull Trading, a major market maker
in stock index options, and on the
staff at MIT’s Flight Transportation
Lab. Education: Master’s,
Engineer’s Degree, and Ph. D. at
MIT. Bachelor of Science in
Aeronautical Engineering at
Princeton. Likes dogs and dark
beer. ([email protected])
© Scott Adams
New Perspective on Fleet Planning
Prepared for AGIFORS 2002 Symposium
October 2002
William M. Swan
Chief Economist
Boeing Commercial
Review of Fleet Plan Techniques
• Put and Take
• Push Down
• Vest Pocket
• Abandon all Hope
Put ‘n Take Fleet Plan Replaces Airplanes in a Schedule
ORD
SEA
DTW
19:65
19:66
19:78
19:79
19:85
19:86
19:89
19:90
20:10
BOS
DFW
20:12
Push Down Fleet Plan Reassigns Schedule
3
17 old
N110s
20 old
N110s
15 New
N142s
15 New
N142s
25 Medium
N240s
10 NEW
N220s
18 Medium
N240s
7
Airplanes Needed for
Departures
Vest Pocket Fleet Plan Uses Demand
Distributions
30
25
20
Notional 1985
15
10
5
0
0
300
250
200
150
100
50
Demand (monthly avg per departure) US domestic Airlines
Airplanes Needed for
Departures
Divide Distribution by Airplane Size to get
Fleet & Mix
30
25
Notional 1985
20
15
10
100-seat
5
150-seat
0
0
200-seat
50
100
150
200
250
300
Demand (monthly avg per departure) US domestic Airlines
Grow Demand Distribution Based on Trends
Airplanes Needed for
Departures
40
35
30
25
Feb-90
Notion-85
20
15
10
5
0
0
300
250
200
150
100
50
Demand (monthly avg per departure) US domestic Airlines
Aside:
Airplanes Needed for
Departures
Trend Changes with RJs
50
45
40
35
30
25
20
15
10
5
0
Feb-95
Feb-90
Notion-85
0
300
250
200
150
100
50
Demand (monthly avg per departure) US domestic Airlines
Further Aside:
Airplanes Needed for
Departures
RJs Big Time
50
45
40
35
30
25
20
15
10
5
0
Feb-00
Feb-95
Feb-90
Notion-85
0
300
250
200
150
100
50
Demand (monthly avg per departure) US domestic Airlines
Review of Fleet Plan Techniques
• Put and Take
• Push Down
• Vest Pocket
• Abandon all Hope
Seats/Departure Aug 2001, Same Pair
Big Markets Do Not Mean Big Airplanes
450
400
350
300
Average
250
200
150
0
1000
>5000km, 5+deps/week
2000
3000
4000
5000
6000
Seats/day Aug 2001 by Airport Pair
7000
Big Markets Do Not Mean Big Airplanes
450
400
Seats Per Departure
350
300
250
200
150
Average
100
50
0
0
2000
4000
6000
8000
10000
12000
Seats Per Day
All Airport Pairs under 5000km and over 1000 seats/day
All Airport Pairs under 5000km and over 1000 seats/day
14000
16000
18000
Big Markets do not Mean Big Airplanes
Seats/Departure
250
200
150
100
50
data for markets > 4/week 1991 & 2001
0
0
1000
2000
3000
4000
5000
6000
Seats/day in Airport Pair, European Regional Aug 2001
Seats/Departure Aug 2001, Same Pair
Big Aircraft Markets Do Not Stay Big
450
400
350
300
250
200
150
150
>5000km, 5+deps/week
200
250
300
350
400
Seats/Departure Aug 1991
450
Size in 1990 Not a Forecast for Size in 2000
Size in 1990 Not a Forecast for Size in 2000
Seats/Dep in 2000 (same pair)
450
400
350
300
250
200
150
150
200
250
300
350
Seats/Departure in 1990, Atlantic pairs
400
450
Seats/Dep Aug 2001, same
pair
Size in 1991 not a Forecast for 2001
250
Size Getting
Larger
200
150
100
50
Size Getting
Smaller
0
50
100
150
200
250
Seats/Dep Aug 1991 Pairs (Europe>4/week)
300
Small Airplanes not in New Markets
450
Seats
400
350
New
Old
300
250
200
Distance (km)
150
5000
7000
9000
Atlantic Airport Pairs with Service Aug 2000 but not Aug 1995
11000
Seats/Departure Aug 2001, Same Pair
Big Markets Do Not Mean Big Airplanes
450
400
350
300
Average
250
200
150
0
1000
>5000km, 5+deps/week
2000
3000
4000
5000
6000
Seats/day Aug 2001 by Airport Pair
7000
Small Airplanes Not in New Markets
Seats/Departure, Aug 2001
450
400
350
300
250
200
150
5000
6000
>5000km, 5+dep/week
7000
8000
9000
10000
Distance (Km)
11000
12000
13000
Small Airplanes not in New Markets ?
Seats/Dep, Aug 2001
250
200
150
100
50
0
0
Old Markets
New Markets
Log. (New Markets)
500
1000
1500
2000 (Old Markets)
2500
Log.
Distance (Km), European Regional Markets
Why No Pattern in Size?
Cost per Seat Declines with Size
$350
$300
$/Seat
$250
Cost/Seat
$200
$150
$100
$50
$0
100
200
Seats
300
400
Revenues Track Costs
[30 business + discount fill to 80% LF]
$350
$300
Cost/Seat
Rev/Seat
$/Seat
$250
$200
$150
$100
$50
$0
100
200
Seats
300
400
Revenues Track Costs II
[30 business + 90 discount, with Spill]
$350
$300
$/seat
$250
Cost/Seat
Rev/Seat
$200
$150
$100
$50
$0
100
200
Seats
300
400
Any Size Will Do
[Averaged Demand Curve]
$350
$300
$/seat
$250
Cost/Seat
Rev/Seat
$200
$150
$100
$50
$0
100
200
Seats
300
400
Any Airplane Size Works
•
•
•
•
Cost and Revenue Lines are the same shape
Profit nearly the same at any size
Possibility of a minimum profitable size
Upper limit at twice that size?
– Limit not set by airplane technology
– Limit possibly set by market entry, split in ½
– Or does cost curve rise due to ground costs?
This is Speculation, Not Proof
• Strong lack of pattern in airplane size as used
• Need for model to explain observed behavior
• Proposed model explains what we see
• Proof by “Occam’s Toothbrush”
not convincing
Bonus: An example of business sleaze
(Occam’s Toothbrush)
Introducing a technique often used in business
Proof by Assumptions “Test”
What is the most reasonable set of assumptions
That fits all known data points
And allows our guess to be right?
Any Size Will Do
[from minimum to 2x]
$350
$300
$/seat
$250
Cost/Seat
Rev/Seat
$200
$150
$100
$50
$0
100
200
Seats
300
400
William Swan:
Data Troll
Story Teller
Economist
[email protected]
http://www.sauder.ubc.ca/Faculty/Research_Centres/Centre_for_Transportation_Studies/William_Swan_Publications