perspective ...

with Hugh Jones

President, Sabre Airline Solutions
vices come into play. Discovering new
consultants come directly from
the airline industry. As former
airline executives, they under-
stand the business, and they
are passionate about improving
the air transport industry.
Our consulting team also
includes former management
consultants from McKinsey,
KPMG, and Deloitte & Touche.
Combined, our 100-plus subject
matter experts possess more
than 1,000 years of airline expe-
rience. We built this team with
the primary purpose of helping
airlines around the world be the
best they can be.
It goes without saying that we
work in a complex industry that
changes at a phenomenal rate. Special Section: Strategic Planning For
Managing daily operations and Your Airline —A Consulting Perspective
ensuring that travelers arrive
safely at their destinations is a
significant responsibility. That redesign and change management, so
task combined with examining no matter the nature of your business
ways to improve the overall challenge, our subject matter experts can
operation can be taxing for air- partner with you to resolve your issues.
line leaders. And sometimes it’s I hope you enjoy this issue of Ascend,
downright overwhelming, but and I look forward to working with you to
it’s necessary since becoming achieve the results you, your customers,
complacent in our environment your employees and your shareholders
won’t sustain an airline for long. expect. a
That’s where consulting ser-

M
any technology companies have ways of doing business that drive pro-
an arsenal of software solutions. ductivity, lower costs, achieve substantial
However, their focus should span revenue growth and promote customer
well beyond supplying those solutions loyalty is crucial in this volatile, constantly
to their customers. What about helping changing industry.
customers identify problem areas, build- Whether it’s using Net Promoter Score ®
ing strategies to solve those problems, to measure your customers’ satisfaction
creating processes around industry best levels, finding new methods for planning
practices and looking into the future and managing partnerships with other air-
to help achieve long-term growth and lines to expand your network and generate
success? additional revenue, taking a new approach
All of these activities are essential to an to pricing and revenue management to
airline’s health and wellbeing. That’s why achieve optimal results or moving from
we don’t just develop and sell software. a reactive to a proactive management
We also thrive in the area of consulting style to improve the overall business, our
services so our customers know, well consultants can evaluate your airline from
before purchasing and implementing new an objective perspective and help drive
technology, that their investments are the change your airline needs.
sound and necessary. We cover these and more topics in our
We have made significant investments special section to give you a small sampling
in our consulting practice. And what of the types of projects our consulting
makes our consultants unique isn’t neces- team undertakes. What’s more, you don’t
sarily their high-level of education or their have to implement one of our solutions
passion for technology. Certainly, those to take advantage of these services. Plain
attributes are important. However, what and simple, we specialize in business pro-
distinguishes them is that many of our cess consulting, organizational structure
 ASCEND I TABLE OF CONTENTS

PROFILE INDUSTRY
In It For The “Long Foundation For
10Haul”
18 Modern Skies
34 Aircraft Selection
Norwegian Air Shuttle SMART NAS aims to accelerate Technical, operational and
offers long-haul flights at transformation of the U.S. financial analyses for aircraft
low costs
30
National Airspace System selection

Swinging The
14GOL’s Upswing
22 Profit Pendulum
GOL applies more accurate, Repairing maintenance and fuel
timely data costing

27 System Failure
Diminishing the impact of an
airport technology malfunction

Flight Numbering
30 Alternatives
Alternative options for numbering
flights have become a necessity

14

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 ASCEND I TABLE OF CONTENTS

66

SPECIAL SECTION COMPANY SOLUTIONS

Real-Time
44 Voice Of The Customer
62 Knowledge Is Power
66 Revenue Reporting
Net Promoter Score drives Travel industry leverages Big Keep an eye on revenue
sustained revenue growth Data for competitive advantage realization for every seat sold

47 Proactive Over Reactive

69 The Art Of Calibration
Proactive management must Unleashing the power of network
prevail in the ever-evolving planning
airline industry
74 Secret Ingredient
50 Partnering For Success A proven method for airlines to
Finding the right kind of grow their contracted corporate
partnerships business

54 Codeshare Alerts
78 Morale Boost
Monitoring codeshare partner New shift- and vacation-bidding
pricing and inventory availability technology improves employee
satisfaction levels

56 A System View
The strategic value of
operations

Creating, Communicating
59 And Connecting
Strategic planning for pricing and
revenue management

69

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 Our Heros When Norwegian Air Shuttle entered the Norwegian domestic market 12 years ago, it challenged a well-estab-
lished and long-lasting airline monopoly. Therefore, the airline appropriately adorned the tails of its aircraft with Norwegian
personalities who have pushed the boundaries, challenged the established and inspired others. Those personalities, who
the airline refers to as “our heros,” include famous figures such as Norwegian Explorer Fridtjor Nansen, Writer Camilla
Collett, Actress Asta Nielsen, Author Elsa Beskow and Poet Johan Ludvig Runeberg.

IN FOR THE “LONG HAUL”

Norwegian Turns Up The Heat With
Affordable Long-Haul Service
Norwegian Air Shuttle ASA (Norwegian) challenges airlines
to think differently about long-haul transportation with
its extremely low pricing.

Photos: Norweigian Airlines

By Christen Garcia I Ascend Contributor
 ASCEND I PROFILE
E
xperiencing the vast array of
cultures around the globe first-
hand is one of life’s priceless
opportunities. Yet, these traveling
opportunities are often altered,
cut short or eliminated due to
the hefty price tag typically accompanying
them. The main culprit? Roundtrip airfare,
which often constitutes a large majority of
the overall cost of a trip abroad.
What if the cost was drastically reduced,
making long-haul transportation more
affordable and the total cost of interna-
tional travel a more-realistic option for
travelers on a budget? This is exactly
what Norwegian aims to do — offer a truly
unbeatable price for long-haul air transpor-
tation to the budget-conscious traveler. As
of May 2013, Norwegian stands as the only
European low-cost carrier to offer trans-
Atlantic routes to London from New York,
Los Angeles and Fort Lauderdale, starting
at rates under US$300 for a one-way ticket.
Norwegian’s Story
Norwegian has grown substantially in its
20 years in business. It is Europe’s third-
largest low-cost carrier and the continent’s
ninth-largest airline in terms of passengers
boarded. In 2008, it announced its first
destination outside of Europe — a non-stop
route from Scandinavia to Dubai.
On the heels of this announcement
came yet another, stating plans to fly to
a variety of other intercontinental destina-
tions, including New York, Fort Lauderdale
and Bangkok as well as cities in North
Africa.
Fast forward to present day. Norwegian
offers trans-Atlantic flights at incredibly
low rates and provides affordable options
to those desiring to travel abroad. As
part of the airline’s strategy to offer low
fares and high-quality service — including
WiFi onboard, direct-to-plane for those
not checking bags, in-flight entertainment,
SMS ticket, etc. — it plans to expand in
the near future to other U.S. destinations
including Orlando, Florida; and Oakland/
San Francisco and Los Angeles, California;
as well as European destinations such
as Budapest, Hungary; Sicily, Italy; and
Santorini, Greece.
How is Norwegian able to offer long-
haul flights at such reasonable rates?
Much of the airline’s success is credited
to the Boeing 787 Dreamliner, Boeing’s
most fuel-efficient aircraft. The airline has
purchased/leased 10 Dreamliners, which
enables it to fly greater distances at lower
costs. The aircraft’s aerodynamic design
and green infrastructure accommodates
up to 330 passengers, a drastic difference
from the jumbo Boeing 777 and Boeing
747 that carry up to 600 passengers. (The
12 ascend
Dreamliner is Boeing’s most fuel-efficient
aircraft and the world’s first airplane manu-
facturer to use composite materials as the
primary material in the construction of its
airframe. The Dreamliner is 20 percent
more fuel efficient than the Boeing 767 it
replaces.)
Ultimately, this means lower fuel costs
for the airline, as it carries less weight in
bags and passengers. In addition, it high-
lights Norwegian’s business strategy by
demonstrating how an airline’s selection of
aircraft equipment is an important contribu-
tor to the success of its business model.
Let’s put Norwegian’s strategy to a test.
Lauren is a 24-year-old female who lives
in the United States and graduated with a
university degree. Before her full-time job
begins, her dream is to travel the world.
But with student loan payments looming,
she is extremely price conscious.
After researching online, she discovers
the cost of a roundtrip ticket from New York
City to London is around US$2,000 — a
large chunk of cash for anyone to part with,
especially a recent graduate. Furthermore,
this price does not include her hotel accom-
modations, meals, cab fares, train tickets,
souvenirs, entertainment, etc. Needless to
say, the cost of Lauren’s dream is rapidly
nearing an unthinkable amount of money.
Many airlines may not think there are
enough “Laurens” in the world to con-
sider Norwegian’s strategy viable, but think
again. According to the Boston Consulting
Group, studies show that Lauren and her
Dreamliner Goes The Distance Norwegian Air Shuttle has purchased/leased 10 Dreamliner aircraft,
which it uses on longer-haul routes at lower costs. The airline received three of the aircraft last year,
and it will take delivery of four more this year, one next year and two in 2016. The Dreamliner, which is
20 percent more fuel efficient, replaces the Boeing 767.
peers will be at the core of travel spend
in just five to 10 years from now for both
leisure and business travel. In fact, this
group is projected to represent more than
half of the total spend on business airfare
by 2020.
In addition, this particular population seg-
ment is incredibly vocal and willing to share
both good and bad experiences with their
social networks. Tools such as Facebook,
Twitter and Instagram disperse this informa-
tion to their networks instantaneously, and
research indicates that this collective data will
heavily influence the opinions and decisions
of those it touches.
A Glance At The Future
So what does Norwegian’s strategy mean
for the airline? In short, the airline could
potentially be on the brink of a major move-
ment for both the LCC model and the overall
airline industry. In other words, if the airline
secures long-term success with its low-fare,
high-quality service strategy, it could influence
and/or change the way other airlines position
themselves in the trans-Atlantic market.
“Norwegian’s decision to operate high-
quality services on new long-range aircraft
offering good-value fares to the United States
from London Gatwick is a significant industry
game-changer,” said Stewart Wingate, chief
executive of Gatwick Airport in London, in an
interview with MailOnline.com. “This is one
of the most exciting route developments
since Gatwick’s change of ownership four
years ago.”
Offering affordable trans-Atlantic air
transportation opens doors to possibilities
and opportunities once unimaginable by
breaking down one of the largest barriers
for international travelers — expensive
roundtrip airfare. For the budget-conscious
traveler, long-haul travel becomes more of
a reality, enabling people such as Lauren
to see the world and experience foreign
cultures.
But with the airline’s strategy still in
its early stages, some questions remain:
Is this just the beginning of a potential
major movement by airlines competing
in the trans-Atlantic market? Will other
LCCs around the world follow suit, or will
they maintain their long-standing practice
of providing low-cost competition in local
markets only?
What does this mean for
traditional network carriers?
A number of major airlines have flown routes
between London Gatwick and the United States
for decades. However, despite the credibility
they have established over the years, compet-
ing with new low-cost entrant Norwegian in
this territory will be no simple task.
“Launching long-haul routes between
London Gatwick and the United States is
an important part of our strategy to expand
internationally and obtain a stronger foothold in
markets outside Scandinavia,” Norwegian Chief
Executive Officer Bjørn Kjos told MailOnline.
com.
Norwegian’s strategy indicates its intent
to compete with major airlines and win
Stringent Safety Measures In addition to providing its customers with exceptional, high-quality ser-
vice, Norwegian’s in-flight crewmembers, as part of its strict safety protocol, are required to use a Web-
based reporting system to log irregularities. This information is used for statistical analysis and trend
monitoring.
market share by introducing extremely
low fares (while the fares come with a
certain amount of complimentary services,
naturally there are some optional expenses
such as meals, fees for checked bags,
reserved seats, etc). Travelers are some of
the most price-sensitive consumers in the
global marketplace, displaying incredibly
high levels of patience and diligence in
their search for inexpensive airfares. Most
of them utilize the Internet, which enables
them to compare fares from various air-
lines on dozens of websites. Norwegian’s
fares hardly come close to what most
major airlines charge for roundtrip trans-
Atlantic routes, which ultimately makes
the price-conscious traveler’s purchasing
decision a simple one.
Norwegian’s overall expansion strategy
may pose a serious threat to long-established,
full-service carriers, possibly giving them a
sense of urgency to adapt and respond quickly
to remain relevant and competitive. To do
so, they will need to either lower their prices
in these particular markets to more closely
match Norwegian’s fares, differentiate them-
selves by building and sustaining best-in-class
service or, perhaps, a combination of the two.
Powered By Technology
Clearly, the Boeing 787 Dreamliner is a
big enabler for Norwegian’s new service.
However, the airline’s success also depends
on its ability to effectively reach travelers
worldwide as they search for affordable
trans-Atlantic fares. This is where technol-
ogy plays a significant role.
ASCEND I PROFILE
As part of its low-cost, long-haul strate-
gy, Norwegian entered its content into the
Sabre ® global distribution system, enabling
Sabre ® Connected travel agencies to sell
the airline’s total seat inventory with real-
time, interactive confirmation.
“By moving into the long-haul busi-
ness, it’s extremely important to have cost
control/focus” said Lars Sande, senior vice
president of sales for Norwegian. “Having
the newest, most cost-efficient aircraft,
and having high utilization is vital. We also
need to be efficient on the commercial
side. Offline marketing is way too expen-
sive, and it’s hard to measure the effect of
money spent. So moving forward, digital
marketing and wide, efficient distribution is
key. It’s important that customers find us in
the channels in which they buy their tickets
in the markets we step into.
We feel we get that with our partnership
with Sabre Travel Network ®. To succeed
selling tickets in the U.S. market, Sabre is
important.”
This move enables Norwegian to con-
nect its new service offerings with the
global demand. In addition, it provides the
airline with access to more sales oppor-
tunities than ever before, as well as the
ability to generate revenue far beyond the
limits within its local markets. In addition,
as Norwegian continues to expand into
new markets, it will have access to more-
sophisticated distribution solutions, further
securing its growing global footprint.
As for the future of long-haul travel,
there is a method to Norwegian’s mad-
ness. However, only time will tell how the
industry at large will respond to the airline’s
long-haul, high-quality service strategy. a
Christen Garcia is a process
consultant for Sabre Travel
Network ®. She can be contacted
at christen.garcia@sabre.com.
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 By Simone Silveira I Ascend Contributor

Getting Back On Track By Applying More Accurate and Timely Data

GOL Linhas Aéreas (GOL) leveraged its low-cost model to become a successful South
American startup in the early 2000s. Then, economic headwinds deterred further
upward movement. Today, GOL is applying better data sources and renewed purpose
to regain traction in a challenging marketplace.

14 ascend ascend 15
 ASCEND I PROFILE
B
eing a trendsetter can lead to
early success, especially for
a new company. However, it
can also present challenges
that, left unaddressed, may
trigger a downturn.
Such is the history of Brazil-based GOL, which
in 2001, entered the marketplace as South
America’s first low-cost carrier and forged a
success story during the first several years
that attracted attention throughout the airline
industry.
Not only did GOL steadily increase the size
of its fleet of Boeing 737 aircraft from less
than 10 in 2001 to more than 140 today, it also
acquired Brazil-based competitor Varig in 2007,
along with the popular Smiles frequent-flyer
program.
GOL was making headlines as a business
phenomenon and at the same time was assem-
bling a route structure that now connects not
only the major metropolitan areas of Brazil
but also flies to other high-profile destinations
across South America. In addition, GOL has
added flights to destinations in the Caribbean,
as well as to Miami and Orlando, Florida.
Today, GOL — with its low-cost model —
and TAM have emerged as the dominant forces
among Brazil’s commercial carriers, with TAM
at No. 1 in the Brazilian marketplace and GOL at
No. 1 with the largest domestic operation and
volume of passengers in Brazil.
Nevertheless, several developments since
GOL’s early success have altered Brazil’s — as
well as much of the industry’s — economic
landscape. As a result, the carrier has struggled
to remain among the leaders in international
commercial aviation, given current business
conditions.
Rising fuel costs, of course, have hit all
carriers at their bottom lines.
Additional unforeseen factors, including
stronger competition and a more-diverse
flying public that has the economic means to
fly higher-cost carriers in the region (as the
middle class and incomes have risen across
South America), have adversely impacted
GOL’s strategic planning efforts.
GOL was founded by Grupo Áurea, which
also operates Brazil’s largest bus system.
Knowing the “common-citizen” nature of
bus travelers provided a marketing advantage
that helped bring about GOL’s early suc-
cess, as the airline benefited from many
South Americans’ newfound financial ability
to travel not only by bus, but also on low-cost
carriers.
In response, GOL expanded its route
system to the extent that when the global
economy slowed down in 2008 and 2009,
some of its flights were half or even three-
quarters empty. This served as a red flag
to route planners who were trying to better
manage the airline’s routings and flight fre-
quencies for maximum profitability.
16 ascend
In Brazil, a high depreciation rate of the Real,
the country’s official currency, has exacerbated
what was already a difficult economic equation.
In addition, ongoing labor difficulties at GOL
(some of which are related to the airline’s 2012
acquisition of low-cost competitor Webjet) have
added further pressure, spurring GOL execu-
tives to construct a more resilient strategic
plan.
During the past year, one of GOL’s primary
objectives has been to effectively address prob-
lem areas to staunch its deeper-than-anticipated
excursion into red ink. The carrier is determined
to regain the positive growth pattern it estab-
lished in 2001 and sustained through its early
years as an expanding business entity and
phenomenon.
As GOL’s executive team pondered the
options for regaining its foothold in the industry,
one thing became clear. The airline needed
more accurate and reliable information on eco-
nomic conditions.
With better, more-timely information, the
airline could make better, more-informed
decisions. For example, it could easily and
accurately determine which routes to include
or expand and which to cut back.
Additionally, better decision-making would
help strengthen the carrier’s approach to:
Labor costs,
Aircraft allocation,
Amenities,
Frequent-flyer program,
Business travelers,
Aircraft configurations.
Smiles Miles As part of the Varig acquisition, GOL inherited the popular Smiles Program, which offers
numerous member benefits such as differentiated service at check-in, extra baggage allowances, access
to SMILES VIP lounges, as well as access to its exclusive customer-service center.
GOL addressed its needs for more timely
and accurate information and statistical analy-
sis by implementing Sabre® AirVision™ Market
Intelligence software.
The results can be clearly seen in GOL’s
upward-trending financial results. In the third
quarter of 2013, for example, GOL had a 21
percent increase in net passenger revenue
per available seat-kilometer, representing 14
percent growth for the year.
Furthermore, net passenger-seat-kilometer
yield for September 2013 showed a 25 per-
cent increase year-over-year, which was largely
attributed to GOL’s evolving strategy to attract
high-value customers.
Other GOL financial results have exhibited
similar improvement.
In addition, the true impetus in the upward
trends is a direct result of strong corporate
commitment. GOL’s management team real-
ized the challenges it faced were largely related
to the carrier’s modest approaches to finding
solutions — approaches that seriously needed
to become more aggressive in areas including
those related specifically to data collection and
analysis to provide a firm foundation for better
decision-making.
Such fundamental changes do not happen
without management support. Therefore, the
company had to make a conscious, collec-
tive decision to move forward with new
systems and processes as well as renewed
enthusiasm.
Since making its more visible commitment
to lead the entire organization through a
ASCEND I PROFILE
information that is vitally important for mak-
ing critical decisions.
Sabre AirVision Market Intelligence has
also enabled GOL to monitor market seg-
ments and specific markets to identify and
measure the effects of competitors’ actions,
as well as pinpoint agencies and markets
deemed “underperforming,” as defined by
the revenue-generation needs and objectives
set forth by the airline’s leadership.
In addition, the software provides thorough
Photos: GOL
insight into competitors’ service offerings and
traffic flow, providing GOL with the capability
to quantify and analyze competitive market
share and react effectively based on the
information.
Financial Upswing GOL, Brazil’s second-largest airline by market share and fleet size, implemented GOL now operates more than 900 flights
Sabre AirVision Market Intelligence to help strengthen its business in key areas such as labor costs, daily to more than 60 destinations in 13 coun-
aircraft allocation and customer amenities through more accurate decision making. The airline is on a tries. And with major seasonal events such
financial upswing as a result. For instance, it achieved a 21 percent increase in net passenger revenue per as World Cup soccer competitions at a dozen
available seat-kilometer during the third quarter last year, a 14 percent growth for the year. Brazilian cities this year, GOL executives
know that a winning performance requires
highly positive cycle of change, GOL has noticeably network, better information was also needed application of the best information available.
evolved as a company. to help identify new market opportunities. “We’re confident that Sabre AirVision
With regard to aircraft seating, for exam- And GOL has acted vigorously to identify Market Intelligence is the most comprehen-
ple, GOL devised a formula to expand the and properly utilize that information. sive solution for our needs, delivering precise
room between seats in some rows from 31 In addition, the airline has established information on the competitive landscape,
to 34 inches and in other rows from 31 to fundamental, defined procedures that appeal with passenger traffic, airline schedules and
32 inches. Passenger comfort, therefore, more directly to business travelers, including fares,” said Claudio Neves Borges, GOL’s
played a large part in GOL’s decision to streamlining the boarding process, improv- director of schedule planning. “Accurate
set the parameters for its revised aircraft- ing on-time performance, becoming more data is critical to the success of our com-
seating arrangement, called GOL+. visible with a high-profile, attractive airport mercial planning. It enables us to efficiently
Increasing space between rows of seats, presence and developing more efficient, respond to market dynamics both tactically
of course, reduces the overall number of convenient schedules not only within GOL’s and strategically.”
seats on an aircraft, which also aligns with own route network but through codeshare In other words, GOL is once again soaring.
GOL’s objective to fly fuller aircraft on a partnerships as well. And its greatly improved information
greater percentage of its flights. These definitive moves by GOL’s man- resources can be counted among the biggest
Considering the continually increasing agement team have been aided by the contributors to the carrier’s positive perfor-
competition with regard to GOL’s basic pool carrier’s adoption of Sabre AirVision Market mance. a
of potential passengers and the destina- Intelligence, which is designed specifically to
tions GOL serves within its expansive route help airlines gather timelier, more accurate
Simone Silveira is executive partner
for Brazil, Argentina, Chile, Paraguay
and Uruguay for Sabre Airline
Solutions. She can be contacted
at simone.silveira@sabre.com.
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 By Peter Kostiuk, PhD, Robust Analytics I Ascend Contributor

Modern Skies
NASA’s SMART NAS Will Modernize
The U.S. National Airspace System
NASA’s new research project — SMART NAS — aims to accelerate transformation of the U.S. National Airspace
System (The NAS). The objective is to create an open-architecture simulator of The NAS, enabling stakeholders —
such as airlines, researchers, technology companies and aviation organizations — to connect to the simulator and
evaluate new technologies and/or policies with the goal of increasing the capacity, safety and efficiency of the system.
 ASCEND I INDUSTRY

T
he Next Generation Air focus it on issues of greater interest in NextGen planning and implementation
Tr a n s p o r t a t i o n System to their operations. With their encour- activities, including information sharing,
(NextGen) is the U.S. Federal agement, the U.S. Joint Planning and collaborative decision making and TBO. It
Av i a t i o n A d m i n i s t r a t i o n ’s Development Office (JPDO) sponsored also recommended that the FAA conduct
(FAA’s) program for modernizing a joint government-industry study of the collaborative experiments with FOCs to
the U.S. air traffic manage- role of FOCs in NextGen. evaluate data sharing, new capabilities and
ment system. NextGen aims to increase The group that conducted the JPDO methods to ration limited NAS resources.
capacity, reduce flight delays and provide FOC study — including Airlines for Results from the JPDO FOC study
airlines with greater flexibility, as well as America, American Airlines, Delta Air were released in July 2012, and those
improved safety and security. Lines, FedEx, IATA, JetBlue, Sabre Airline who conducted the study continue to
However, many industry stakeholders Solutions ® and UPS — recommended that encourage the FAA to implement their
are disappointed by the slow pace at which the FAA increase the involvement of FOCs recommendations. However, Sabre Airline
new capabilities are deployed into The
NAS. Airline representatives who reviewed
NextGen plans also expressed concerns
that airline priorities and capabilities were
inadequately addressed in the FAA pro-
grams. Some of their specific reservations
pertained to the FAA’s simplistic focus on
flight planning to the neglect of the other
responsibilities and capabilities of flight
operations centers (FOCs).
The concept of trajectory-based opera-
tions (TBO) offers a good example of
the potential for missed opportunity for
more rapid deployment at lower cost and
risk. Under TBO, airlines and the FAA will
negotiate four-dimensional gate-to-gate
flight trajectories. The underlying assump-
tion is that technology exists for the
flight planning and dispatching in this TBO
environment. While this may be a safe
assumption, many airlines are concerned
about the risk of missing opportunities for
broader system improvements by limiting
NextGen/FOC interaction to the world of
flight planning and dispatching individual
flights.
Flight planning is just one of an FOC’s
functions that comes under flight man-
agement, which along with schedule
management and network management,
are the three major categories of airline
operational control responsibility.
Other industry concerns about NextGen
pertain to lack of clear guidance on data
and information sharing, little acknowl-
edgement of the lessons learned from two
decades of collaborative decision making
and no clarity on the rationing of scarce
airport and airspace resources in the
NextGen environment. All of these issues
require investments by the U.S. govern-
ment and aviation industry, extensive
testing of new capabilities and procedures,
as well as assurances that data will be
Photos: NASA

safe and secure. Without agreement on

these issues and clear indications the U.S.
government will fully support its commit-
ments, the promise of NextGen will not be
achieved.

Airline And Industry Participation Airline Involvement In SMART NAS American Airlines and JetBlue are working closely with NASA and
Airlines saw a need to redirect some the rest of the SMART NAS research team, offering access to their operational systems and insight into
aspects of the NextGen program and the day-to-day challenges of flying aircraft in the NAS.

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 ASCEND I INDUSTRY
Solutions and participating airlines and
industry organizations are simply not
waiting for the FAA to accelerate the
pace of NextGen deployment. In recent
years, some airlines, including JetBlue
and American Airlines, have worked with
the U.S. National Aeronautics and Space
Administration (NASA) to develop air-traf-
fic management improvements, including
conducting live operational tests. Some
of the new technologies undergoing
testing include Automatic Dependent
Surveillance-Broadcast (ADS-B) and
improved re-routing around convective
weather.
SMART NAS
The Airspace Systems Program conducts
NASA’s basic research and development
for air traffic management. As the principal
research partner with the FAA in develop-
ing NextGen, the program develops new
concepts and evaluates them using a suite
of fast-time models and human-in-the-loop
simulation laboratories. For technologies
that show promise, NASA conducts opera-
tional evaluations using real data and airline
participation during normal operations.
A recent example is the Dynamic
Weather Routes (DWR) decision-support
tool tested by American Airlines, NASA
and the FAA’s Fort Worth Air Route Traffic
Control Center in Texas. The airline con-
tinues to operate DWR, as it generates
savings of several minutes per affected
flight.
The success of decision-support
tools, such as DWR, persuaded NASA to
develop other capabilities to improve NAS
performance. However, current operational
testing facilities are limited, typically able
to assess only one concept at a time,
with one airline and one FAA facility.
To demonstrate the technical feasibility
and operational benefits of many NextGen
concepts such as TBO, the aviation com-
munity must be able to conduct operational
evaluations on integrated systems across
The NAS.
To meet the need for more robust
operational testing, NASA initiated a new
research project, the Shadow Model
Assessment Using Realistic Technologies
for the National Airspace System, or
SMART NAS.
NASA released the solicitation in May
2013, and Sabre Airline Solutions joined
the proposal team led by Robust Analytics.
In December 2013, NASA awarded the
Robust Analytics team a two-year, US$1.9
million contract to design a system archi-
tecture for SMART NAS.
In addition to Sabre Airline Solutions,
the Robust Analytics team includes
ATAC, Flight Research Associates, IBM
20 ascend
Federal Systems, JVN Communications,
JetBlue and American Airlines. The Robust
Analytics team offers NASA a power-
ful combination of experience in building
enterprise architectures, air traffic model-
ing and simulation, airline planning and
operations, aviation data, and benefit-cost
assessments.
What will SMART NAS accomplish
for NASA, U.S. airlines and the aviation
community?
SMART NAS is an important new com-
ponent in NASA’s efforts to transform The
NAS. Under the transformational NextGen
concepts, new air traffic capabilities and
technologies need to be demonstrated in
an integrated fashion in a real-time envi-
ronment to gain confidence that they will
perform as expected. A “shadow-mode”
operational evaluation uses live data feeds
from The NAS and its inputs (such as
weather, flight plans, airport arrival rates,
system constraints, etc.) and runs the
entire system, or parts of it, with proposed
concepts, air-ground architectures and
technologies to test their performance and
validate that the assembled technologies
work together seamlessly.
This capability will allow integrated,
real-time and/or fast-time assessment
of gate-to-gate operations and their
Delta Air Lines’ Participation Delta Air Lines, in conjunction with Airlines for America, American Airlines,
FedEx, IATA, JetBlue, Sabre Airline Solutions and UPS, conducted the JPDO FOC study and made several
recommendations to the U.S. FAA, including that it involves airline FOCs in NextGen planning and imple-
mentation activities.
HIGHlight
SMART NAS
offers the aviation
community enhanced
capabilities to
evaluate improve-
ments to air traffic
management.
performance using real-world NAS inputs.
As envisioned, SMART NAS will allow for
plug-and-play of different technologies to
operate in combined real, virtual and con-
structive manners to support a wide range
of technology evaluations. NASA’s New Research Project NASA expects to speed up transformation of the U.S. National Airspace System (The NAS) through its new research project,
SMART NAS, to create an open-architecture simulator of The NAS. This will enable airlines, researchers, technology companies and aviation organizations to con-
nect to the simulator and evaluate new technologies and/or policies to help increase the capacity, safety and efficiency of the system.
SMART NAS offers the aviation com-
munity enhanced capabilities to evaluate
improvements to air traffic management.
Early applications will likely include TBO,
integrated arrival-departure management
and assimilation of unmanned aircraft into
The NAS. The goal is to accelerate the
deployment of aviation technologies for
the benefit of aircraft operators, the FAA
and the traveling public.
Each member of the Robust Analytics
team brings unique capabilities to the
SMART NAS partnership. Maryland-based
Robust Analytics offers decades of experi-
ence in air-traffic management research
and development, modeling of aircraft
operations and benefit-cost analysis.
IBM Federal Systems brings extensive
knowledge of enterprise-scale architec-
tures and data warehousing. ATAC has
worked more than 30 years with NASA and
the FAA, specializing in data processing
and analysis, as well as fast-time modeling
for aviation applications. Flight Research
Associates supports the NASA Ames
Research Center, conducting human-in-the-
loop simulation of pilots’ and controllers’
interactions with new technologies. JVN
Communications partners with the FAA’s
Technical Center in Atlantic City, New
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Jersey, to conduct operational testing and operational evaluation capability that will
evaluation on all air-traffic management support acceleration of the deployment of
systems before their deployment into The improvements to the U.S. air transportation
NAS. system. a
American Airlines and JetBlue offer
access to airline operational systems and
insight into the day-to-day challenges of
flying aircraft in the NAS.
Sabre Airline Solutions provides unparal-
leled expertise in airline operations, flight
planning and aircraft monitoring, as well as
AOC software and decision support.
The SMART NAS partners are tasked
under the contract with three primary
deliverables:
1. Designing an open-source system archi-
tecture for SMART NAS that can satisfy
a large set of required performance char-
acteristics, such as flexibility and modu-
larity, as well as evaluate a wide range of
current and future aviation technologies;
2. Conducting a benefits assessment for
NASA and the U.S. aviation community
as a whole of SMART NAS;
3. Estimating the 10-year cost of develop-
ing and maintaining SMART NAS.
The final deliverables are due in
December 2015. Until then, the SMART Peter Kostiuk is president of Robust
NAS team is working with NASA research- Analytics. He can be contacted at
ers and aviation partners to design an peter.kostiuk@robust-analytics.com.
ascend 21
 Swinging the
Profit PeNdulum
Repairing Maintenance and Fuel Costing
By Peter Berdy I Ascend Contributor

Compensating The Right Customers In The

Right Way Following Flight Disruptions

Most airlines allocate maintenance costs and fuel consumption on a per-hour

basis for route decision-making. This simple method understates or overstates
costs for very short or long segments, and it can lead to errors when calculating
route profitability. A better methodology for maintenance is to separate cycle-
related costs from hour-related costs, and for fuel to develop a formula based
on actual consumption. This improved methodology produces more accurate
results and can swing the profit pendulum.

w
hile maintenance engineers
utilize the latest tools and
technology to fix airplanes,
something else is in need of
repair. The current process of
allocating maintenance costs at
the corporate level, where route
analysis is performed and fleet allocation and
planning decisions are made, is outdated and,
at times, inaccurate.
Many corporate analysts do not under-
stand how maintenance is performed, nor
do they utilize the best method for distrib-
uting maintenance costs fairly across each
flight in the network.
Why is this important? After years of nega-
tive to slightly positive results, profit margins
are finally expected to recover. In fact, they
were in the 3 percent to 4 percent range
worldwide last year. With such razor-thin mar-
gins, mistakes can greatly impact the bottom
line. As a result, decisions, such as whether to
cancel a flight due to profit performance, must
be carefully made.
Unfortunately, these decisions can be
ill-advised when based on inappropriate alloca-
tion of costs. Maintenance and fuel are areas
where cost allocation can significantly swing
the profit pendulum of a route.
Maintenance Realities
Airlines follow a rigorous inspection and
maintenance program that must be approved
by an airworthiness authority such as the
U.S. Federal Aviation Administration or the
European Aviation Safety Agency. Under
the oversight of these authorities, each air-
line is required to prepare a Continuous
Airworthiness Maintenance Program covering
both routine and detailed inspections.
These maintenance programs have evolved
over time as more efficient and effective work
methods have been developed. Consider the
extensive number of scheduled tasks per-
formed when an airplane undergoes heavy
maintenance. Many years ago, these tasks
had to be completed simultaneously, which
removed an aircraft from service for periods
as long as several weeks.
However, using approved, modern
work methods, these tasks are stream-
lined. An efficient maintenance program
can minimize the time an airplane is out
of service, balance the maintenance work-
load and maximize use of maintenance
facilities.
Scheduled maintenance tasks are now
grouped into work packages. The concept
is called block maintenance or some-
times progressive maintenance. While the
maintenance-check letter series of A, B, C
and D are still used, checks have evolved
to combine work packages.
Activities performed under an airline’s
maintenance program include tasks that
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must be completed at varying intervals, These groupings can be a helpful guide
as specifically defined in the program. for developing a more accurate way to
Work intervals can be based on flying allocate maintenance costs.
hours, flight cycles, calendar time, and/
or a combination of these, depending Maintenance Cost Methodology
on the most appropriate parameter of The methodology commonly used by
the item maintained. Of the thousands most airlines for estimating maintenance
of components and numerous systems costs distributes expenses by block hour.
on an airplane, each one has a specific The reason for selecting block hours as
maintenance interval. The task of combin- the basis for cost allocation is related
ing these components and systems by to manufacturer recommendations for
the different intervals of hours, cycles airplane maintenance checks, many of
and time for cost allocation purposes can which are performed at specified flight-
indeed be overwhelming. hour-related intervals. Airline analysts use
Typically, maintenance costs are sepa- block hours as a proxy for flight hours
rated into direct and indirect expenses. since block hours are a more commonly
Direct costs are the expenses associ- available statistic than flight hours in most
ated with the labor and materials required airline databases. The difference between
to perform servicing, repair, modifica- the two is that block hours include aircraft
tion, restoration, inspection, testing and taxi time.
troubleshooting tasks. Indirect costs, or Allocating maintenance costs by block
overhead, include maintenance supervi- hour is a common practice among airlines
sion, training and planning; equipment for simplifying analysis. This approach
rental; and utilities. Overhead costs do is adequate when there is not a lot of
not include capital expenses for facilities, dispersion or standard deviation from the
spare parts, test equipment, maintenance average stage length (the average distance
tooling and ground-support equipment. flown calculated by dividing total aircraft
Direct maintenance costs can be broken miles by the total number of departures)
down into standard groupings with costs for a particular fleet type. Flights that
distributed approximately as follows: deviate significantly from the average
Engines (40 percent), stage length, especially short segments
Components (20 percent), such as tag-end flights and long-distance
Line (20 percent), segments, are where maintenance costing
Base maintenance (20 percent). issues may surface.
Nov 2013 Lufthansa Departures By Distance (KM)
Departures By Distance Many carriers operate a mix of long- and short-distance flights within a single
fleet type. The dispersion of Lufthansa’s Airbus A321 operations from November 2013 schedules
displays that at the extremes, the airline operates stage lengths as short as 156 kilometers (Frankfurt to
Stuttgart) and as long as 3,049 kilometers (Frankfurt to Amman, Jordan). The average stage length for
Lufthansa’s Airbus A321 operations is 999 kilometers.
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 ASCEND I INDUSTRY
Maintnenance Cost Using Cycles And Hours
Versus Average Cost Per Block Hour
Maintenance Allocation Best Practices Both hours and cycles should be considered in as part of a
best-practice methodology for maintenance allocation. A new formula for maintenance costs can be
calculated by figuring in cycle costs. Maintenance will still be allocated on a block-hour basis; however,
the correlation will be non-linear. This will result in a more accurate estimation of maintenance costs for
segments that are very short or long compared to a block hours-only allocation methodology.
When there is significant deviation
from the average stage length of a fleet
type, maintenance expenses for short-
distance segments are understated
using cost-per-block-hour allocation. On
the other hand, routes with long stage
lengths will have overstated maintenance
costs. This is because not all mainte-
nance costs can be measured in block
hours. The question, then, is, “How much
deviation from the average is significant
when calculating costs, impacting the
choice of methodology, etc.”?
If the standard deviation is great (i.e.,
there are a lot of segments that are not
close to a fleet’s average stage length), it
is a good idea to modify the maintenance
methodology utilized.
Cycle-Related Costs
Maintenance tasks, such as shop vis-
its, replacing or overhauling life-limited
parts, flaps, engine-thrust reversers, and
tires and brakes, are not related to block
hours. Rather, these items wear out
during cycles (take offs and landings)
or are required to be checked after a
certain number of cycles as specified
in an airline’s maintenance program. Of
course, many less-obvious items require
an understanding of maintenance pro-
cedures to identify whether their costs
should be allocated by hour, cycle or
time.
24 ascend
Fixing Maintenance Cost
Allocation
A best-practices methodology for
maintenance cost allocation takes into
consideration both hours and cycles.
There are two ways to do this. One is
to develop two unit costs, one for block
hour-related costs, and the other for cycle
related costs. The second is to develop a
formula per block hour that incorporates
cycle costs as well as block hour costs.
The result will be a more accurate
approximation of maintenance costs for
segments that are very short or long
compared with estimates generated by a
block-hours-only allocation methodology.
The challenge then is to determine which
costs are cycle related and which are hour
related.
The method for identifying cycle-related
and hour-related costs can range from
relative simplicity to performing a detailed
analysis. Most carriers’ accounting sys-
tems provide a breakdown of the major
maintenance elements, such as labor,
engine and airframe overhaul, and repair
costs.
To determine the unit driver of or basis
for these costs, analysts should coordi-
nate a review with a maintenance director
or maintenance analyst to identify which
costs are hour related and which are
cycle-related. With a bit of preparation
and analysis, these in-house maintenance
experts can educate airline management
about the fundamentals of cost allocation,
as well as provide insights on how main-
tenance is performed. Equipped with this
knowledge, airline analysts can develop an
appropriate basis for cost allocation.
One approach is to separate direct
labor from other maintenance costs. As
a rule of thumb, about one-third of all
direct labor, typically line maintenance,
involves preparing the plane for its next
flight, or cycle. The remaining two-thirds
of direct-labor costs are assumed to be
hour related.
After labor has been isolated, other
direct maintenance costs can be
addressed.
Hot Section
A substantial proportion of mainte-
nance expenses, approximately 40
percent, are related to engine perfor-
mance. The hot section is the chamber
in the engine where fuel is continu-
ously burned. When an engine powers
a short-distance flight, it produces a
disproportionate amount of heat to gen-
erate the required thrust compared with
the amount for an average, or longer,
flight. The heat wears down the engine
hot section sooner, thereby driving up
maintenance costs.
HIGHlight
A best-practice
methodolog y for
maintenance cost
allocation takes into
consideration both
hours and cycles.
Engine manufacturers have developed
formulas that calculate the engine derate
value for each flight to minimize “wear
and tear” and subsequently improve
engine life and reliability. With this infor-
mation, the derate value of any flight can
be compared with the average value for
a specified fleet type. From there, it is
easy to use the de-rate value for each
fleet type by block hour.
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Indirect Costs
A similar approach is used to allocate
indirect costs to cycles and block hours.
Direct Maintenance Costs By Category
Simply subtract the percentage of total
hour-related direct costs from the total
maintenance overhead. The remainder of
maintenance overhead is considered cycle
related.
Analysis Wrap-up
As a result of the analysis, three ele-
ments are now available for accurately
estimating maintenance costs: a rate per
hour, a rate per cycle and a formula for the
engine derate. The last step is to plot sev-
eral points based on different block times
to create a “cycle-adjusted” maintenance
cost per block hour.
The distribution of maintenance costs
between hours and cycles should remain
fairly constant over time. Therefore, a
detailed analysis of cost allocation is only
necessary periodically. Rather, mainte-
nance costs should be updated as needed
and the maintenance formula adjusted
accordingly. For example, if maintenance
costs increase by 5 percent versus the Direct Maintenance Costs The bulk of direct maintenance consists of engine costs at about 40 percent,
prior year, the maintenance curve is followed by components, line and base maintenance.
adjusted by five percent.
Most airlines allocate maintenance
costs on a per-hour basis. This simple the actual consumption is not known long- and short-distance segments. Why
method understates or overstates costs, or must be forecast such as for new is that? Airplanes burn far less fuel dur-
especially for very short or long segments routes. Similar to maintenance costs, this ing taxi compared with climb, cruise and
and can lead to incorrect conclusions approach is adequate provided the seg- descend. For example, for a flight of 45
about route profitability. Comparing the ment stage length is close to the average minutes, the proportion of fuel consumed
different methodologies for maintenance for that airplane type. during taxi is about 33 percent of the total
can produce significant differences in For networks with a lot of dispersion, fuel burned. For a flight of two-and-a-half
costs. Allocating maintenance using both this method will create distortions for hours, taxi fuel is about 10 percent of
cycles and block hours produces about
one-third more costs for very short seg-
ments compared to using a block-hour-only FUEL CONSUMPTION PER BLOCK HOUR
methodology. For very long segments,
total maintenance costs are nearly 10
percent lower.
By using a combination of hours and
cycles to develop a new maintenance
cost-allocation formula, this methodol-
ogy produces more accurate profitability
results compared with those generated
by utilizing a constant maintenance cost
per hour.
Obviously, maintenance expenses vary
widely based on fleet type, age and com-
plexity, as well as labor costs and use of
third-party MRO providers. Each airline’s
operation is unique, and its maintenance
cost-allocation methodology must be care-
fully reviewed and continually refined to
swing the profit pendulum in its favor.
Fuel
Many airlines allocate fuel costs by Allocating Fuel Costs To allocate fuel costs, an airline should use actual consumption for each segment
multiplying the average fuel consump- by aircraft type multiplied by the cost of fuel at the uplifted station. If that is not accessible, a more accu-
tion per block hour by the cost of fuel at rate formula should be created to show fuel consumption per block hour using recent historical data. It
each station. This is usually done when can then be used for any segment and multiplied by the appropriate cost of fuel at the uplifted station.
ascend 25
 ASCEND I INDUSTRY
the total consumed. Since taxi consumes
much less fuel than when the airplane is
flying, the cost per block hour is lower
than the average for very short segments
and will be higher for long segments.
The best approach to allocate fuel costs
is to use actual consumption for each
segment (such as from a flight plan) by air-
craft type multiplied by the cost of fuel at
the uplift station. If that is not available, a
more precise formula should be developed
to show fuel consumption per block hour
using recent historical data. This formula
can then be used for any segment and
then multiplied by the appropriate cost of
fuel at the uplift station.
A Better Method
Most airlines allocate maintenance
costs on a per-hour basis. This simple
method understates or overstates costs
when looking at very short or long
segments, and could lead to incorrect
conclusions on route profitability.
A better methodology is to separate
cycle-related costs from hour-related
costs. The reasons are that a significant
amount of costs are associated with
cycles. Using a combination of hours
and cycles can produce more accurate
profitability results compared to using a
constant maintenance cost per block hour.
For fuel, airlines that use the average
consumption per block hour overstate fuel
costs for short segments and understate
costs for long segments. A more accurate
method is to use actual fuel consumption
from a flight plan, or if that is not avail-
able, develop a formula of fuel burn based
on stage length using recent historical
data. a
Peter Berdy is a consultant for Sabre
Airline Solutions ®. He can be contacted
at peter.berdy@sabre.com.
26 ascend
Aircraft Maintenance Checks
The daily check is the lowest scheduled
Daily Check check. It is a cursory inspection of the
aircraft to look for obvious damage and
deterioration. It checks for “general condi-
tion and security” and reviews the aircraft
log for discrepancies and corrective action
for the airplane to remain airworthy.
The A Check is the next higher level of
A Check scheduled maintenance. It typically takes
place at a designated maintenance station
and includes the opening of access panels
to check and service certain items. Some
limited special tooling, servicing and test
equipment is required.
B Check Today’s maintenance programs do not use
a B Check interval. Tasks formerly defined
for this interval have now been distributed
between the A and C Checks.
C and D Checks are known as heavy
Heavy Checks checks. They typically take place at the
main maintenance base of the airline or
outsourced to third-party service providers
where specialized manpower, materials,
tooling and hangar facilities are available.
The C Check is an extensive check of
individual systems and components for ser-
viceability and function. It requires a thor-
ough visual inspection of specified areas,
components, systems, and operational or
functional checks.
The D Check is a structural check including
detailed visual and non-destructive test
inspections of the aircraft structure. It is an
intense examination of the structure for evi-
dence of corrosion, structural deformation,
cracking and other signs of deterioration.
It involves extensive disassembly to gain
access for inspection.
A typical Phase Check is a thorough visual
Variations – inspection of specified areas, components
Phase Checks and systems and also operational or func-
tional checks of specified components
and systems. Each check includes the
requirements of lower-check work items
and portions of C and D Checks at the
required task intervals. Check packages are
detailed, and there are many variations of
the concept.
System Failure
By Jeffrey Schuyler I Ascend Contributor

Diminishing The Impact Of An Airport

Technology Malfunction

Technology is necessary to help effectively move passengers

smoothly and efficiently through airports. Nevertheless, what
happens when an airline’s check-in system goes down at the
airport? Are airlines prepared to effectively process passengers
when technology is disrupted?
 ASCEND I INDUSTRY
O
n a recent business trip, I
experienced a situation where
the airline’s check-in system
malfunctioned and passengers
could not be processed. As
frustration grew within the
crowd standing in the airport lobby, I watched
the agents and saw a look of fear on their
faces. The question at hand was, “When will
the check-in system be back online?”
I stood in line with a Web check-in boarding
pass and a printed copy of my itinerary and
assumed I was ready to board. Even passen-
gers who arrived with the necessary paperwork
and only carry-on luggage discovered they
were not able to check in and proceed through
immigration and security.
After waiting an hour and 20 minutes, a
group of airline supervisors appeared with
Photos: Shutterstock
printed passenger name lists for each flight.
After a 10-minute briefing with the agents
at the counter, the check-in process began.
Passengers were placed in queues based on
flight departure times. Most flights experienced
lengthy delays, and in a hub-and-spoke opera-
tion, such delays ripple through the remainder
of the day’s operation.
Customer Satisfaction Irregular events, such as power outages, can have a devastating impact on an As a former airline employee, I spent sev-
airline and leave its customers unhappy and, sometimes, outraged. Yet, if handled the right way, the eral years working behind an airport check-in
airline can end up being the hero, boosting customer satisfaction to a new level. counter, handwriting boarding passes and bag
tags. So the solution was blatantly obvious
to me: the airline should process passengers
manually. Then I realized many years had
passed since I had worked behind the counter.
Today, agents are not trained to handwrite
bag tags and boarding passes. Therefore,
even though the agents were given passenger
name lists and briefed on how to proceed, I
could still see the panic on their faces as they
manually processed passengers through to
security.
As I stood with the crowd in the lobby,
supervisors continued to assure us we would
not miss our flights because they were pro-
cessing passengers in order of departure
times. Finally, a sense of calm came over us.
Still, I wondered what the airline could have
done to adequately prepare for this type of
disruption.
To prepare for similar situations in a way
that does not disrupt the entire operation, air-
lines should have a business plan that enables
them to shift from automated to manual mode
quickly and effectively. The process should
include:
Training airline agents how to handwrite bag
tags and boarding passes, as well as verify
the information from the passenger lists to
ensure it agrees with the passengers’ itin-
eraries.
Coordinating with the local immigration
offices and the security divisions to deter-
Proper Training Despite a passenger check-in system malfunction, getting customers through security mine which manually generated documenta-
and to their gates in a timely manner is quite possible when an airline’s check-in and gate agents have tion is acceptable for passengers to continue
been properly trained to effectively manage an adverse situation.
through the screening process.
28 ascend
Designing a mutually agreeable validation
stamp agents would access when such a
situation arises. The validation stamp com-
municates to immigration and security that
all necessary checks and passenger infor-
mation have been verified and allows the
passenger flow to continue with minimal
disruption to the operation.
In addition, an emergency communications
strategy is necessary to ensure airline employ-
ees and passengers are routinely updated
about the situation and the actions the airline
is taking to resolve the issue.
In my situation, airline supervisors con-
tinued to make announcements advising
that the check-in system was down, and
Ripple Effect A business plan whereby an airline can quickly shift from automated to manual mode can
prevent serious delays that will ultimately ripple through the remainder of the day’s operations.
no information was available about when it
would be back online. However, after hearing
this announcement three times, I became
frustrated. We knew the system was down,
but what we really wanted to know was how
the airline planned to manage this problem,
so we could board our planes and get to our
destinations.
Had a process been in place, the supervi-
sors could have announced that they were
switching to a manual mode and arrang-
ing passengers by destination in designated
queues, which would require approximately
10 to 20 minutes to prepare. This type of pro-
active communication would have informed
customers that an alternative process was
ASCEND I INDUSTRY
already in place and check-in would resume in
a few minutes.
These actions allow the airline to com-
municate to customers that the technology
issue has been identified and, while it is not
expected to be fixed in the immediate future,
a plan is in place for such an event.
Another serious issue was the operational
delay resulting from the 90 minutes it took for
airline personnel to determine how to proceed.
Had a plan been in place, the delay might have
been reduced to the mere 10 to 20 minutes
required to activate the alternate plan. The first
few flights may have experienced a 20-minute
delay, but the remainder of flights could have
departed as scheduled.
A hub operation relies on aircraft to depart
and return on time to maintain the structure
and integrity of an airline’s operation. An
alternate plan, even a simple one, can avoid
disruptions, maintain customer satisfaction
and, ultimately, save operational costs.
Therefore, airlines should consider which
processes are currently in place and design
and implement a back-up process to keep the
operation on track in the event of a system
outage. The manual process presents one
solution. However, smartphones and tablets
could also be used, providing a more-automat-
ed solution. Network-enabled tablets would
allow agents to continue the check-in process
if local Internet connectivity was an issue. The
tablets could then print boarding passes to a
mobile printer carried by the agents as well.
Use of the tablet as a normal check-in process
provides mobility for the agents as well as
a technology back up in the event of a local
network failure.
Clearly, airlines should have a business plan
in place to operate effectively and efficiently
when conditions are less than ideal. Their abil-
ity to execute proactive decisions and
communicate alternate plans to customers
enables them to recover from the events with
minimal impact to operations and associated
costs while ensuring a positive experience for
customers. a
Jeffrey Schuyler is a senior
management consultant for Sabre
Airline Solutions ®. He can be contacted
at jeffrey.schuyler@sabre.com.
ascend 29
Flight Numbering
Alternatives
Alternative Options For
Numbering Flights
Have Become
A Necessity

By Peter Newell I Ascend Contributor

Because airlines are only allotted

four-digit flight numbers in their
flight-numbering scheme, some
airlines are challenged with finding
creative ways to number their flights
as they near the 9,999 flight-number
cap. Adding a fifth digit appears to
be a quick fix; however, the asso-
ciated costs in doing so outweigh
the benefits. Therefore, alternative
options have been identified for
resolving the issue without enor-
mous capital outlay.

A
ssigning numbers to flights may not
be viewed as one of the more excit-
ing or significant airline activities. It
is not as scientific as fuel-tankering
or block-time analysis. It lacks the
mathematical complexity of fare-class align-
ment or fuel hedging. It does not carry the
important safety implications flight-operations
or line-maintenance processes do. It may
not be as inherently interesting as marketing
research or as highly anticipated as network
planning.
That said, flight numbering is much more
than a random process, and it is important.
Many airlines put much consideration and
effort into their flight-numbering processes. In
doing so, they generally follow certain required
rules and optional guidelines when assigning
flight numbers. While flight numbering is an
ongoing process, most of the work is done
biannually and is driven by IATA’s designated
summer and winter seasonal dates.
IATA’s two schedule seasons corre-
spond to when Daylight Savings Time is or
is not observed in European Union nations.
Therefore, summer season begins on the last
Sunday in March, while Winter season com-
mences on the last Sunday in October.
While there are some airlines that develop
specific schedules for as much as four sea-
sons — and some do not have any seasonal
differences — the majority of airlines around
the world design specific schedules for at
least the two IATA seasons. It is during these
major schedule change periods where airlines
typically make flight number modifications.
Numbering Requirements
When designing a flight numbering scheme,
airlines must comply with two basic rules
instated by IATA:
1. An airline cannot repeat a flight number
departing from the same station on the
same date.
2. Flight numbers can have no more than four
numeric digits.
For example, a carrier may assign a single
flight number, such as 0100, to a “through”
routing of AAA-BBB-CCC-BBB-AAA. However,
it cannot assign a single number to a routing
of AAA-BBB-AAA-CCC because the routing
involves two departures from AAA.
Airlines select their own flight numbers
subject to these basic rules. However,
air traffic management agencies, such as
EUROCONTROL and the U.S. Federal Aviation
Administration (FAA), may advise airlines to
change flight numbers to avoid:
Multiple flights with the same number by
the same carrier in the air simultaneously,
Multiple flights with the same or similar
number (even if the carriers are different)
that are scheduled to arrive at the same
airport when the timing is expected to be
close enough to potentially cause confusion,
Multiple flights with the same or similar
number (even if the carriers are different)
that would share proximate airspace during
a similar time of day.
For example, assume American Airlines
assigns flight number 0621 to a DFW-JFK
route with a scheduled arrival of 11:25 a.m.
Delta Air Lines then schedules a new ATL-LGA
flight to arrive at 11:40 a.m. and assigns a flight
designator of DL1621.
In this instance, the FAA would likely
require Delta Air Lines to change its number to
prevent confusion with the existing American
Airlines flight that occupies proximate air
space. Because airlines rarely anticipate such
scenarios, they simply comply with change
requests as received.
Historical Practices
In addition to compliance requirements,
airlines also follow a set of internal optional
guidelines designed to promote organizational
consistency when assigning flight numbers.
These guidelines vary by region and/or carrier,
but commonly include:
Even numbers for northbound and east-
bound flights and odd numbers for south-
bound and westbound flights,
Odd numbers for outbound flights depart-
ing from hubs and even numbers for flights
returning to hubs,
Flight numbers that increase in sequence
throughout the day in multiple-frequency
markets,
Ranges by regional or other grouping (for
example, international flights 0-199, domes-
tic flights 200-999)
Ranges by connection carrier (such as 3000-
3999 for the first regional carrier, 4000-4999
for the second regional carrier, etc.)
Ranges by codeshare partner (5000-5999 for
one partner, 6000-6999 for another partner).
Keep in mind:
Some codeshare agreements mandate
use of a specified number range for certain
partners.
Often marketing flight numbers add
a multiple of 1000 (e.g., +3000 or +6000)
to the corresponding operating flight num-
ber. For example, if AeroMexico codes
on DL611, it might use the flight number
AM*2611 (with the asterisk indicating that it
is a codeshare).
Ranges by service type (for example, 8000-
8999 for charters, 9000-9899 for freighters,
9900-9999 for ferry flights, etc.). In some
cases, airlines designate specific ranges for
peripheral or related services such as bus or
train routes.
Retiring flight numbers involved in past inci-
dents,
Avoiding numbers with cultural or symbolic
connections, such as 13, 666, 1313, etc.,
Assigning numbers to specific routes with
historical or symbolic significance, including
ASCEND I INDUSTRY
8, which has symbolic positive meaning in
the Far East for Asian flights; 711, which
represents luck for Las Vegas flights; and
1776, representing the year of America’s
Declaration of Independence, etc.
Reserving flight No. 1 for an airline’s “flag-
ship” flight.
By utilizing a consistent, predictable
flight-number pattern, both airline employ-
ees and experienced passengers can more
quickly and easily identify flight routes,
types and departure terminals.
For example, a 3000-series flight num-
ber may indicate to interested parties that
the flight is on a regional carrier and will,
therefore, depart from a specific terminal
or concourse.
However, changes to traditional number-
ing practices are taking place at some
larger airlines. Optional fight-numbering
practices routinely used by most airlines
in past years are being modified or, in
some cases, discarded as the industry
evolves with the expansion of alliances and
mega-mergers.
Trends And Obstacles
Many planning, operations and commer-
cial systems currently used by airlines are
based on IT infrastructure designed 30 or
more years ago. Even though the systems
and the technology have evolved, the logic
behind these systems comes from a time
when the industry environment was far
different.
When these systems were developed,
few codeshare agreements existed, and it
was widely believed throughout the airline
industry that four digits would be more
than sufficient to cover any carriers’ flight-
number needs. Even the largest airlines of
the era operated fewer than 2,000 flights
per day, and most in the industry could not
have predicted that airlines would one day
need more than 9,999 flight numbers.
Therefore, industry database and soft-
ware designers built the infrastructure and
subsequent technology with a hard-coded
limit of four digits. Only in recent years has
the four-digit flight-number limit become
an issue due to the upsurge of codeshare
flying driven by the expansion of alli-
ances. In addition, recent mega-mergers of
large airlines have resulted in consolidated
networks with flights close to the 9,999
maximum.
Problem Resolution
To address the issue of insufficient flight
numbers, some airlines have modified their
flight numbering practices to “save” num-
bers, including:
Discarding the odd/even approach and
assigning the same flight number to
outbound and return flights (for example,
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 ASCEND I INDUSTRY
AA2239 for ORD-DFW-ORD or DL1910
for ATL-DFW-ATL),
Applying “through” numbers to circuitous
continuous routings (for example, same
flight number for LAX-DFW-SFO),
Condensing flight-number ranges and limit-
ing unused numbers within a range,
Abandoning the practice of adding a multiple
of 1000 to partner operating flight numbers
and simply assigning marketing flight num-
bers based on the first-available number to
keep ranges smaller,
Routinely reviewing and modifying existing
codeshare-partner flight-number ranges,
Discontinuing “blanket codeshares” in
which an airline places its code on all its
partners’ flights, in favor of selective coding
on partner flights.
Unlike some of the more drastic changes
recently adopted by the airline industry, such
as charging fees for checked baggage or
moving to paperless ticketing, flight-number
modifications will have minimal impact on
travelers.
However, these modifications are only
“stop-gap” measures. As airlines continue
to add alliance and codeshare partners and
participate in mergers and acquisitions, some
will soon reach the 9,999 flight-number ceil-
ing, even with these measures in place. In
all likelihood, a more fundamental change to
the aviation industry regarding how flights are
numbered is necessary.
Future Possibilities
Imagine a scenario in which SkyTeam and
oneworld merge into a single alliance with all
partners wanting to blanket code on all other
According to ATAG, livelihoods of
1.5 million
people in Africa depend on trade in air-
freighted fruit, vegetables and flowers
to the United Kingdom alone.
32 ascend
partners and not be limited to only coding on a
limited number of selected flights. Or, suppose
large network carriers such as Delta Air Lines
and United Airlines merge. What then? “Stop-
gap” measures will no longer be sufficient
to allow mega-carriers to remain below the
maximum flight-number ceiling. In fact, that
limitation will likely be reached even before
these potential scenarios become reality.
So what is the next step for the airline
industry?
On the surface, the easiest solution is
to expand flight numbers to five digits. The
idea was proposed several years ago by
some major airlines during the biannual IATA
Schedules Information Standards Committee
meeting. IT providers were asked to analyze
the impact of expanding to five digits. They
examined the process necessary to recode
and reformat commercial and operational sys-
tems, as well as update related infrastructure,
and determined that the effort to implement
such changes would be larger in scale than
the Y2K transition had been for airlines, and
the costs would be in the hundreds of millions
of dollars with the potential to exceed US$1
billion.
While five-digit numeric flight numbers
may not be the answer considering the
excessive investment required, there are a
few viable alternatives:
Add a letter to the four-digit flight numbers
(e.g., UA1001X, BA950B, etc.); however,
adding a non-numeric character is con-
sidered an operational suffix, and some
commercial systems do not treat the opera-
tional suffix as part of the flight number,
and some cannot even accept it.
While air transport carries approximately
0.5 percent
of the volume of world trade shipments, it
is over 35 percent by value, according to
ATAG. This means that goods shipped by
air are very high-value commodities, often
times perishable or time-sensitive.
Adding a letter to the four digits is an issue
for some reservations systems (although
it may be allowed in some operations sys-
tems). So this could be as difficult as adding
a fifth numeric digit.
Provide larger carriers with additional airline
codes for use on codeshare flights.
Allow smaller carriers to sell ranges of flight
numbers with their flight-designator codes
to larger airlines that no longer have enough
numbers on their own designator codes.
Allow airlines to have multiple designator
codes.
Leverage technology, such as Sabre ®
AirVision™ Codeshare Manager, that maxi-
mizes the use of flight numbers (especially
codeshare flight numbers) to ensure num-
bers are not under used or wasted.
Such alternatives are more cost effective
than moving to five-digit flight numbers, but
they also require some investment and effort
from both airlines and systems providers.
Therefore, a thorough analysis of all options
should be conducted to determine the best
medium- and long-term approach.
Although additional alternatives are likely to
be introduced and evaluated, it is becoming
increasingly clear that a change in flight num-
bering is inevitable. However, in the interim,
using tools to get the maximum usage of cur-
rent flight number ranges is the best short-term
alternative. a
Peter Newell is a principal consultant
for Sabre Airline Solutions ®. He can be
contacted at peter.newell@sabre.com.
Count
it up
Interesting facts and
figures in the airline
industry.
 Landmark Moment: Happy 100th Anniversary Commercial Aviation!

years to follow, the airline industry has made phenomenal advancements.

FOUNDATION
FOR AIRCRAFT
SELECTION
Technical, Operational And
Financial Analyses
Choosing the right aircraft requires a complete evalua-
tion of technical, operational and financial perspectives.
While newer Airbus and Boeing aircraft, for example, have
evolved to be much more cost effective in areas such as
fuel burn and maintenance, each aircraft type also offers
unique benefits depending on an airline’s business model.
For example, analysis shows that the Airbus A319 oper-
ates more efficiently for low-cost carriers (LCCs), while the
Boeing 737-300 is better suited for network carriers.

By Prof. Bijan Vasigh, College of Business Embry-Riddle Aeronautical University I Ascend Contributor
 ASCEND I INDUSTRY
C
ontinued expansion of trade and
tourism in emerging markets
has strengthened the need for
commercial aircraft. With global
passenger-traffic growth project-
ed to reach 6 percent this year, Boeing expects
jet sales to rise by 7.7 percent to US$112 billion.
For the first time, the airline industry passed
the 3-billion-passenger milestone in 2013,
according to Avolon’s 2014 New Year Outlook,
which was released in January. Boeing plans to
deliver 35,280 new aircraft, valued at more than
US$4.8 trillion, between now and 2032.
According to an Airbus projection, air traffic
will grow at 4.7 percent annually, requiring
more than 29,220 new passenger aircraft and
freighters at a value of nearly US$4.4 trillion.
Demand for commercial aircraft is also
driven by resilient markets in Brazil, China,
India and the Middle East, as well as continued
moderate growth from developed markets
in Europe and the United States. In fact, the
number of passengers in China should more
than triple, and the country’s airline fleets
will double in size by 2020. Similarly, India
is expected to buy more than 900 new pas-
senger planes worth US$86 billion by 2027.
Air transport liberalization and stronger
economic interdependence among nations
require airlines to acquire more aircraft to
replace aging fleets and meet future pas-
senger growth. Airbus received an industry
peak of 1,619 new airplane orders in 2013, a
new record of aircraft backlog, according to
Euronews.
With so many new and diverse aircraft
types now available, the question arises as
to how a prospective buyer can accurately
evaluate the options offered.
First, when selecting aircraft, airlines
should examine aircraft efficiency from three
perspectives:
Technical — Technical efficiencies are
directly related to an aircraft’s physical char-
acteristics, including average airspeed, fuel
burn and available seats.
Operational — Operational efficiencies are
those an airline can fully or partially control
during the course of normal operations,
such as aircraft utilization and average stage
length.
Financial — Financial characteristics are
represented as the monetary impact of an
aircraft’s technical and operational efficien-
cies on an airline and are often expressed
as fuel cost per block hour and fuel cost per
ASM.
In addition, maintenance and depreciation
factors are determined by the aircraft model
and expressed in the form of maintenance and
depreciation costs.
To illustrate these characteristics and effi-
ciencies, competing narrow-body, wide-body
and regional jet aircraft models from the major
manufacturers were selected and analyzed
36 ascend
ASCEND I INDUSTRY
Operational Characteristics Of Narrow-body Aircraft
(Traditional Network Carriers) Cost Of Available Seat-miles (Network Carriers)
Historical and Current Evaluation
Determining a single price for a specific used CASM
Load factor, % 81 78 aircraft type is difficult at best. Aircraft valuation
author of Back Aviation and selection is a complex process. The price author of Back Aviation 10.00
Form 41 of an aircraft depends on many factors such as: Form 41
Utilization (revenue hours/BH), %
83 86 Aircraft age, 8.00 737-700
Flight hours,
6.00
Seats per aircraft 123 124 Noise level, A319
Flight cycles, 4.00
Speed, miles per block hour (BH) 359 390 Size,
2.00
Seat capacity,
Fuel efficiency. 0.00
Fuel, gallons per BH 730 703 In general, aircraft values depreciate over
time as aging structures require an increasing
Average flight stage, miles 912 1,287 amount of maintenance and face the likelihood CASM excluding
of obsolescence. Unfortunately, the rate at
Fuel
737-700 A319 which maintenance costs increase is typically Fuel per ASM
higher than the rate at which non-operating
costs increase. (Non-operating costs are related
Narrow-body Comparison For Network Carriers There are numerous similarities between Boeing CASM For Network Carriers Cost per Available Seat Mile (CASM) is significantly less for network car-
to financial activities of an airline that are not
737-700 and Airbus A319 operations and a few significant differences. The aircraft, with similar seat riers that operate the Boeing 737-700. With greater fuel efficiency and longer average stage lengths,
related to the core operations, such as interest
numbers and utilization per day, have significantly different average flight stage lengths. Network carri- the aircraft has a CASM of US8.18 cents while the Airbus A319 costs US9.39 cents per seat mile. After
ers that use the Boeing 737-700 compared to the Airbus A319 use it on a stage length that is 375 miles expenses, charges on obsolescence of inven- factoring out fuel costs, the Boeing 737-700 still has a cost advantage over the Airbus A319. CASM,
longer. When examining these aircraft from an operational and financial standpoint, it is important to tory and the cost of disposing assets.) However, after excluding fuel costs per average seat mile, is US$3.55 and US$4.21 for the Boeing 737-700 and
realize that many of the cost differences are dependent on the airline. increasing operating costs will at some point Airbus A319, respectively.
exceed an aircraft’s revenue-generating ability
using various operational, financial and techni- current examples provided guidance for the and, thereby, terminate its economic life. regulations restricting the use of older aircraft more fuel efficient than 40 years ago, and 20
cal metrics. selection and operation of new aircraft. For a Moreover, the aircraft price also depends on and/or higher fuel prices also depress the value percent more fuel efficient than 10 years ago.
Each aircraft type was examined to prospective buyer to accurately evaluate the exogenous forces such as fuel costs, financial of older, less-fuel-efficient aircraft. The Boeing 737 MAX jetliner is expected
determine how they have been used in available options, it is necessary to evaluate crises, economic cycles, demand volatility, envi- On the positive side, the industry is expe- to deliver 14 percent more fuel efficiency than
the marketplace by airlines that have oper- these examples and the costs associated ronmental regulations, aircraft safety and other riencing a discernible reduction in aircraft the Boeing 737-800 NG. Undoubtedly, this will
ated a mix of aircraft. Individual historical and with them. factors affecting demand. operating costs through the contribution of negatively impact the market values of Boeing
Recently, increasing fuel costs have prompt- advanced technologies such as improvements 737 NGs and other classic aircraft.
ed airlines to withdraw larger, older aircraft from in aerodynamic characteristics and advance- As well, the Airbus A320neo is expected to
active service and, on some occasions, smaller ment in engine design. The application of provide an increase in range of approximately
planes such as regional jets as well. The global advanced composite materials to various air- 500 nautical miles, in addition to an 8 percent
Average Block-Hour Cost Comparison financial crisis of 2008, assumed by some to craft structures, such as the Boeing 787 and reduction in operating costs, diminished noise
be the worst since the Great Depression of Airbus A350, enhance performance and reduce production and 15 percent less fuel consumption
(Traditional Network Carriers) the 1930s, according to Reuters, forced many weight. As a result, aircraft today are 70 percent than earlier models.
airlines to furlough employees as the price
Other Costs $36 $206 of fuel skyrocketed and consumer demand
author of Back Aviation plummeted.
Aircraft Rent $417 $350 Form 41 Because fuel prices remained high during Narrow-body Block Hour Cost Comparison (LCCs)
the first half of 2008, many carriers worldwide
Depreciation $124 $156 replaced their older fleets with new, more fuel-
efficient aircraft. More airlines went bankrupt Other $108 $162 author of Back Aviation
in 2008 than in the aftermath of Sept. 11, Form 41
Flight Crew $587 $526 2001, resulting in another significant drop in Aircraft Rent $58 $609
the value of older aircraft. For example, Delta
Maintenance $552 $616 Air Lines retired more than 350 aircraft from its Depreciation $242 $52
fleet, while adding more economically efficient
Fuel $2,242 $2,286 aircraft.
Flight Crew
Exogenous forces such as terrorism, air- $555 $383
traffic liberalization and competitive-pricing
Photos: Shutterstock
Total $3,958 $4,140 practices by startups and LCCs can also sig- Maintenance $296 $276
nificantly alter the demand for aircraft and,
737-700 A319 US Dollars therefore, change estimated values. Fuel $1,721 $2,237
The Sept. 11 attacks caused a decline in the
market value of most commercial aircraft. Share
Boeing 737-700 Advantages The Boeing 737-700 offers several advantages to network carriers in prices of airlines and aircraft transactions plum- Total $2,981 $3,720
comparison to its competitor, the Airbus A319. The Boeing 737-700 presents cost savings on all the meted, and many older planes were retired to
measured metrics. One of the most significant cost differences is in the flight crew costs of each the desert. According to Reuters, just a week 737-700 A319 US Dollars
aircraft. The Boeing 737-700 flight crew costs a significant US$160.98 less per block hour than the after the tragedy, Boeing announced plans to
Airbus A319. The Boeing 737-700 also is more fuel efficient for network carriers with a cost of cut 30,000 jobs over the next two years. Block-hour Comparison The Boeing 737-700 costs significantly more for LCCs when it comes to crew
approximately US$65 less per block hour. When taking fleet sizes and numbers of hours network costs; US$172 more than the Airbus A319 per block hour. This is directly related to Southwest Airlines’
Technological progress that reduces the
carriers fly, this quickly translates into substantial savings. higher crew compensation when compared to other LCCs.
operating costs of new aircraft, environmental
ascend 37
 ASCEND I INDUSTRY
By all accounts, newer aircraft models pro-
vide more efficient fuel consumption and lower
operating costs. However, for some airlines,
obtaining new aircraft is not always an option.
Therefore, they may opt for a lower purchase
price or lease option for older aircraft.
The remainder of this article provides a
detailed analysis of the most popular narrow-
body aircraft currently in operation. The first
section compares the operating block-hour costs
of a Boeing 737 with the Airbus A319 and A320
for traditional network carriers only. The second
section makes the same comparison for LCCs
only. The third and final section provides an over-
all comparison of traditional airlines and LCCs
based on total costs for the aircraft.
Airlines And Their Aircraft
Several single-factor ratios are outlined
to benchmark financial and operational
performance for three narrow-body aircraft
— Boeing 737-700, Airbus A319 and Airbus
A320. These ratios can be used to compare
and contrast different types of aircraft and lay
the foundation for fleet planning and aircraft
selection.
The Boeing 737 series is the best-selling
jetliner in the history of the airline industry.
More than 7,700 Boeing 737s have been pro-
duced and 3,467 orders are yet to be delivered
as of January. On average, 1,250 Boeing 737
aircraft are in flight at any given time, with 24
departing or landing somewhere in the world
every minute. The Boeing 737-700, 737-800
and 737-900 compete directly with the Airbus
A319, A320 and A321 in the narrow-body,
short- to medium-haul commercial aircraft
market. As of February, approximately 5,924
Airbus A320 family (comprising the A318,
A319, A320 and A321) aircraft have been
delivered, of which 5,723 are in active service.
These two families of aircraft are popular
with LCCs. Southwest Airlines, WestJet, Virgin
Blue and Ryanair use the Boeing 737 NG,
while JetBlue, Virgin America and Air Asia
utilize the Airbus A320 family, and easyJet flies
both. These aircraft are also employed by net-
work carriers. United Airlines, Delta Air Lines
and American Airlines use the Boeing 737 NG
family. United Airlines and Delta Air Lines also
operate aircraft in the Airbus A320 family.
Regardless of the geographical location,
fleet planning must be based on five funda-
mental factors:
Financial viability,
Which aircraft best suits the network,
When they are needed,
How many are required,
Replacement or net addition.
US Airways is currently the only U.S.-based
network carrier that flies Airbus A320 aircraft
but does not operate any Boeing 737 NG air-
craft. Other Airbus A320 family users include
Frontier Airlines and Spirit Airlines, both with
more than 25 Airbus A319s in their fleet.
38 ascend
ASCEND I INDUSTRY
A-319 Block-Hour Cost Comparison Operational Characteristics Of Narrow-body Aircraft (LCCs)
Aircraft Comparison For Network
Carriers
Other $206 $87 When comparing the operational character- author of Back Aviation
author of Back Aviation istics of Boeing 737-700 and Airbus A319 for 381 359 Form 41
Speed, miles per block hour (BH)
Aircraft rent $350 $192 Form 41 network carriers, one of the most significant
differences is flight crew costs. The Boeing 737-
Fuel, gallons per BH
Depreciation $156 $239 700 flight crew costs US$160.98 less per block 703 694
hour than the Airbus A319. The Boeing 737-700
Flight Crew $526 also is more efficient for network carriers in terms Average flight stage, miles 1,234 743
$457 of fuel burn, with a cost of approximately US$65
Photos: Shutterstock
Photos: Shutterstock
less per block hour than Airbus. This number Seats per aircraft 1,251 1,224
Maintenance $616 $271 quickly translates into real savings when fleet
sizes and numbers of hours flown are taken
Fuel Load factor, %
$2,286 $2,330 into account. When an airline decides to add an 82 73
aircraft to its fleet, the effect of the operational
Total $4,140 $3,576 characteristics must be taken into account. Utilization (revenue hours/BH), % 87 86
Cost per available seat mile (CASM) is sig-
Network LCC US Dollars nificantly less for network carriers operating the A319 737-700
Boeing 737-700. With greater fuel efficiency and
longer average stage lengths, the aircraft has a Operational Characteristics For LCCs Load factors are 9 percent less on the Boeing 737-700, which,
CASM of US8.18 cents, while the Airbus A319 on average, has three fewer seats than the Airbus A319 when utilized by low-cost carriers. LCCs can
Boeing 737-700 Block-Hour Cost Comparison costs US9.39 cents per seat mile. Even when realize a lower CASM with these aircraft by increasing daily utilization. They can maximize the number
fuel costs are not considered, the Boeing 737- of daily block hours, thereby increasing aircraft utilization, by serving smaller, uncongested airports and
$108 700 still has an advantage over the Airbus A319. focusing on point-to-point flights. However, this could negatively affect profitability if the aircraft are
Other $36
After excluding fuel costs per average seat mile deployed on routes to underpopulated local airports with only a competitive yield.
(CASM ex-fuel) is US$3.55 and US$4.21 for the
Aircraft rent $417 $58 Boeing 737-700 and Airbus A319, respectively. adversely affected if these aircraft are deployed of aircraft versus owning, and subsequently
on routes to sparsely populated local airports, depreciating their planes.
Depreciation $124 $242 LCC Average Block-Hour Comparison with not enough revenue. Fuel-purchasing plans may contribute to the
For LCCs, the Boeing 737-700 crew costs lower CASM of LCCs operating the Boeing 737-
Flight Crew $587 are US$172 more per block hour than the Airbus Network Versus LCC Block-Hour Costs 700. Southwest Airlines paid a lower price per
$555 A319, which can be attributed to Southwest Generally, the costs incurred by LCCs are gallon of fuel (US$1.70 compared with more than
Photos: Shutterstock
Airlines’ higher crew compensation compared lower than those of network carriers on a block- US$2 for the other carriers), achieving lower fuel
Maintenance
$552 $296 with other LCCs. hour basis. These cost advantages enable LCCs costs per available seat mile (ASM) and a lower
LCCS clearly show diverse trends in opera- to compete on the basis of price in a highly similar total CASM.
Fuel $2,242 $1,721 tional characteristics compared with those of market, giving them a significant competitive AirTran Airways, now part of Southwest
network carriers. The Boeing 737-700 is flown on advantage. Commonly, LCC enters an uncon- Airlines, was able to achieve a low CASM of
Total $3,958 $2,981 significantly shorter stage lengths with the aver- gested secondary airport, instead of entering US5.2 cents, due, in part, to its low crew costs
age being 491 miles less than the Airbus A319. a congested major airport, reducing the taxi of US0.65 cents per ASM. Even after removing
Network LCC US Dollars Airlines using the Airbus A319 use the aircraft on time and fuel consumption. LCC fuel costs are fuel costs, the CASM achieved by LCC carriers
longer stage lengths to compensate for the high US$1,721 compared with US$2,242 for network is US2.52 cents compared to US3.55 cents for
Block-hour Cost Comparison: Network Versus LCC When conducting a block-hour cost comparison fuel burns. carriers due, in part, to successful fuel-hedging network carriers.
between the Boeing 737-700 and the Airbus A319, there are similar cost structures but notable individ- The Boeing 737-700 operates an average of practices by Southwest Airlines. Overall, network carriers flying the Airbus
ual differences. For both network airlines and LCCs, the biggest cost was fuel, which accounted for 57 11.7 block hours per day while the Airbus A319 Another way of interpreting cost comparisons A319 pay US$564 more per block hour than
percent and 58 percent of costs, respectively. For network carriers, 14 percent of total costs are attrib- performs for approximately 11.9 block hours a is to identify the aircraft cost structure in terms LCCs. On the other hand, network carriers spend,
utable to maintenance costs, while they were only 10 percent for LCCs. However, LCCs had a higher
day. Frontier Airlines, Spirit Airlines and United of percentages for network carriers and LCCs, on average, US$44 less on fuel per block hour
percentage of flight-crew costs partially due to the relatively highly-compensated Southwest Airlines
Airlines operate their aircraft for more than 11 which is represented as a breakdown of the and US$83 less on depreciation costs.
flight crews. There is also a higher percentage of costs (8 percent compared to 3 percent) for LCCs in
hours a day, while Delta Air Lines and US Airways Boeing 737-700 cost structure. They have similar Clearly, there is not a “one-size-fits-all”
terms of aircraft depreciation. However, network carriers are confronted with significantly higher aircraft
use the same aircraft for less than 10 hours a cost structures, but each business model has approach to aircraft selection. Each aircraft serves
rental costs.
day. Because an airline cannot make money with notable individual differences. a specific purpose for individual business models.
Operational Characteristics However, some costs are relatively invariant to its aircraft sitting on the ground, US Airways and For both network airlines and LCCs, the big- So when airlines make adjustments to their fleets
The block-hour costs for each aircraft model airline operations. Delta Air Lines would likely need to increase gest cost is fuel, which accounts for 57 percent and conduct the proper analyses, it becomes
are compared for both network carriers and For example, India-based low-cost GoAir utilization of the Airbus A319 to become more and 58 percent, respectively. Network carriers evident which aircraft is better suited for particu-
LCCs. Then each aircraft’s costs and the associ- announced that it will only hire female profitable. attribute 14 percent of total costs to mainte- lar business models. These types of large
ated benefits and savings are analyzed. cabin crew in the future to save £330,000 Load factors are 9 percent less on the Boeing nance, while LCCs attribute 10 percent for the investments require a certain methodology to
When comparing these aircraft from an (US$538,974) a year on fuel because all-female 737-700, which, on average, has three fewer same factor. However, LCCs show a higher ensure the most financially sound outcome. And
operational and financial standpoint, it becomes crews weigh 33 pounds to 44 pounds less on seats than the Airbus A319 when utilized by percentage of flight crew costs, as mentioned it goes back to the basics of examining aircraft
clear that many of the cost differences, such as average than mixed cabin crews. However, LCCs. By increasing daily aircraft utilization, LCCs previously. efficiency from operational, technical and financial
fuel costs, maintenance costs, labor costs and other costs, including crew salaries, aircraft achieve a lower CASM. (Daily aircraft utilization Aircraft depreciation is a higher percentage perspectives. a
airport charges, are dependent on the airline. depreciation, and aircraft and airport leases, as is the ratio of aircraft hours flown divided by the of costs for LCCs, 8 percent compared with 3
Fuel burn, for instance, is invariant, although well as soft costs, such as high aircraft utiliza- aircraft days available.) percent for network carriers. However, network
it is indirectly affected by stage length, aircraft tion, higher-density seating, efficiency through By serving smaller, uncongested airports and carriers face a significantly higher percentage of Prof. Bijan Vasigh is co-author of “Aircraft
age and flight procedures. Nonetheless, air- simple structures, and lean and productive focusing on point-to-point flights, LCCs maximize aircraft rental costs. This differential reflects the Financing: Strategies for Managing Capital
lines consistently search for ways to conserve personnel, are highly dependent on airline’s the number of daily block hours and, thus, aircraft lease versus buy decision, which is made when Costs in a Turbulent Industry.” He can
jet fuel and thereby lower their fuel costs. unique operational characteristics. utilization. On the other hand, profitability may be carriers choose to work with operating lessors be contacted at vasighb@erau.edu.
ascend 39
 SPECIAL SECTION

44 Voice Of The Customer 56 A System View

More airlines today are using
Net Promoter Score® (NPS®)
to measure their customers’
satisfaction levels and identify
where to make improvements.
Companies with the highest
NPS average about two-and-a-
half times the revenue growth
than that of the competition.
47 Proactive Over Reactive
Stop Human
Change is 59 Creating,
Traffickers
inevitable. How
change is managed differenti-
ates leaders from followers.
Many airline industry leaders are
taking a more proactive man-
agement approach that is built
around short- and long-term
strategies. Transitioning from
a reactive state is not an easy
task. Therefore, many airlines
rely on external consultants to
help develop strategies and
drive the transformation.
Keep Your Eyes Open
50 Partnering For Success
Careful due-diligence and analy-
sis is a prerequisite in partner-
ing for success when planning
codeshares, acquisitions, joint
ventures, alliances or mergers.
Operational groups perform the
work to keep an airline’s fleet
functioning and, as such, they
perform extremely valuable
services that allow a carrier to
operate safely and efficiently. But
operations must also be viewed
strategically. And their strategic
contribution to the bottom line —
Passport Toand
if fully understood Freedom
appreciated
— can be quite significant.
Communicating
And Connecting
An airline’s pricing and revenue
management strategy is depen-
dent on a plan that enables the
department’s leaders to consis-
tently focus on daily operations
while also focusing on long-term
objectives. There is a formula to
building and executing the plan
that ensures optimal results.

54 Codeshare Alerts
Airlines can improve their
revenue management efforts
by systematically monitoring
codeshare partner pricing and
inventory availability through
recent Big Data developments.
As part of a larger Big Data
research effort, Sabre Airline
Solutions® has invested in
infrastructure that permits col-
lection and processing of vast
amounts of airline shopping
data.
 ASCEND I SPECIAL SECTION
Introduction
Alessandro Ciancimino,
Vice President of Consulting, Sabre Airline Solutions
Sanjay Nanda,
Senior Vice President of Delivery, Care and Consulting, Sabre Airline Solutions
I
n today’s volatile economic and
environmental conditions, every
organization is compelled to trans-
form itself amidst rising pressure
from competition, advancements in
technology, access to information,
changing consumer behavior and increasingly
complex patterns of customer demand.
Research firm Forrester recently inter-
viewed a number of executives across
multiple industries on the topic of leveraging
consulting help in business transformation
projects. Their findings indicated that:
Most executives plan to use outside con-
sultants to gain domain knowledge. They
want deep expertise in their particular pro-
cesses and their industry, as well as access
to more resources than are available inter-
nally.
External advice, to complement internal
strength, is the order of the day. When
asked what kind of services they want the
consultants to provide, executives said
they want both high-level advice and opera-
tional/tactical advice, and a significant por-
tion want consultants to perform hands-on
implementation activities.
Mentoring not replacing. They do not want
consultants to produce out-of-the-shelf
documentation or to completely takeover
42 ascend
projects. Instead, companies look to con-
sultants to act as advisors. Specifically
customers want:
Validation — Executives most often
know what their business problems are and
have ideas of how to solve them. However,
they want an objective third party to vali-
date assumptions and help create an action
plan for implementation.
Mentoring — Leaders want consul-
tants to act as coaches or change agents
and teach them how to do their own strate-
gic and tactical work. Consultants need to
help customers build their domain knowl-
edge, which is necessary to make process
changes and operate the new process after
the engagement is completed so they don’t
revert to their old ways once consultants
leave.
Tactical assistance in the implemen-
tation phase — Businesses need consul-
tants to help them implement the recom-
mendations as well as measure perfor-
mance results and benefits derived from the
consulting projects.
At Sabre Airline Solutions® , our consultants
help airlines gain domain knowledge through
deep industry expertise and comprehensive
industry data. We provide both strategic and
tactical recommendations and further assist in
Alessandro Ciancimino Sanjay Nanda
implementing recommendations together with
the airline, validating its ideas and mentoring as
change agents.
Our basic rule is that our projects must
bring both tactical improvements and strategic
changes in business practices. Tactical improve-
ments are crucial since they generate quick
results that create positive momentum around
the project and provide quick returns on invest-
ment. Strategic changes in business practices
are key to ensure long-term and structural busi-
ness improvements.
The early roots of our consulting practice
were in the support of business processes and
best-practice execution around the implementa-
tion of our software solutions. Over time, we
realized that our experience with a very large
set of airlines around the world puts us in a
unique position to help customers with busi-
ness problems around their own economics
and the best leverage of technology to generate
maximum value.
Additionally, our exposure to forward-thinking
airlines, next-generation business models/ideas
and our own innovations in technology has
helped us accelerate results for our consulting
customers.
Our consulting services address specific
business challenges, opportunities and/or per-
formance issues facing airlines. Additionally, we
aim to help airlines perform strategic initiatives
with the overall objective of improving their
commercial performance, operational efficiency
and brand differentiation to ultimately improve
their customers’ experience.
Such services range from specific business
initiatives in specific areas, such as network
and fleet management, pricing and revenue
management, alliances and partnerships, sales
and distribution, e-commerce and merchandis-
ing, business intelligence and analytics, and
operations management to more strategic initia-
tives like long-term business planning, merger
and acquisition planning, and start-up business
planning.
Consulting services are also provided as part
of the implementation of our technology solu-
tions, with the goal of fast tracking the adoption
of the solution within the specific airline’s busi-
ness environment through business process
changes. This ensures rapid realization of the
business benefits associated with that particular
solution. This is an innovative way of deploying
“solutions” that incorporate a business per-
spective together with the IT perspective. And
it maximizes customer satisfaction by providing
a measurable, quick and substantial return on
investment.
We also offer operations research consult-
ing services. We leverage new operations
research-based ideas on topics of high value for
airlines; these ideas and models allow airlines
to maximize actions even as business models
in the industry evolve.
For example, standard revenue management
principles and actions have become widespread
in the industry and have narrowed competitive
advantage. By taking advantage of cutting-edge
ideas in the same space, our airline custom-
ers can differentiate themselves and generate
further revenue lifts.
Other examples include having developed
methodologies to leverage Big Data, such as
shopping data, to model customer choice in a
competitive environment or to create fare alerts
when an airline’s fare availability in a certain
market at a certain point in time is uncompeti-
tive. Many other applications in this area have
been developed to address specific customer
needs with customized modelling techniques.
We understand that the dynamics in the
airline industry are constantly changing and
presenting new challenges in the market in
addition to the growing competition in the
industry. To manage these and successfully
grow, airlines have to balance strategic plans
and actions with a need for tactical, quick-return
execution. Airlines have their own growth and
business goals, and the consequence of not
keeping up with the pace is significant.
We pride ourselves on being a consulting prac-
tice that addresses strategic matters through
tactical action plans. In fact, the strength of our
consulting team spans multiple dimensions.
Exclusive Focus On The Airline
Industry
We have been exclusively serving the airline
industry for more than 30 years, working in
every functional area within the airline business
and in all regions of the world. We specialize in
solving end-to-end business challenges, from
startups, operational performance and network
planning to partnerships and consolidations.
Our business consultants have significant
industry experience on a worldwide scale. Our
functional experts specialize in areas such as
e-commerce and merchandizing. We’ve been
there and know the challenges and opportuni-
ties airlines face.
Holistic And Collaborative Approach
When we partner with airlines, we bring
a holistic perspective to identify opportuni-
ties that will drive value and result in a
positive change. We’re in it for the long
term, working with airlines to move from
ideas to actions that will equip them to
develop and realize the vision they have for
their business. Our holistic perspective and
cross-functional expertise within the airline
business allows us to diagnose airlines’
ASCEND I SPECIAL SECTION
unique challenges, customize a solution and put
it into action.
Leveraging Decision-Support
Solutions And Comprehensive
Industry Data
We use our industry-leading decision-support
and optimization solutions during the consulting
engagement to provide accurate recommenda-
tions. Our data analysis is supported by the
highly qualified operations research team to
support industry data that might not otherwise
be readily available. We have comprehensive
and accurate industry data ranging from GDS
data, market data, shopping data and revenue
data. Such data is extensively leveraged dur-
ing the engagements through our proprietary
models and procedures to manage and process
Big Data.
Whether the business challenge is limited to
a single functional area or spans across the air-
line’s organization, we help airlines identify the
key levers to improve business performance,
increase brand presence and achieve their
vision. And most importantly, we take pride in
the many instances where we have demon-
strated our competencies with tangible results
to an airline’s bottom line.
The articles in this special section were writ-
ten by our consulting leaders and provide a
sampling of our strategic consulting methodolo-
gies and the benefits realized by our customers
who have implemented these recommenda-
tions. We look forward to visiting with you
about how we can partner together to bring
greater efficiencies to your airline and help you
achieve your long-term goals. a
Alessandro Ciancimino can be contacted
at alessandro.ciancimino@sabre.com
and Sanjay Nanda can be contacted
at sanjay.nanda@sabre.com.
ascend 43
 Jonathan P. Ewbank and Jayme B. Porkolab I Ascend Contributors

®
 ASCEND I SPECIAL SECTION

C
ommercial and marketing easy to understand, quantify and benchmark. 0.89, with 1 being a perfect linear correlation.
departments constantly talk It represents a single score derived from a In other words, the statistical strength of the
about the importance of single question: On a scale of 0 to 10, with 0 relationship is very high.
customer service, customer representing “not at all likely” and 10 being Clearly, higher customer loyalty trans-
experience and customer “extremely likely,” how likely is it that you lates to steady, increased passenger revenue,
journey. But do they really would recommend the company, in this case because the airline is retaining current custom-
affect an airline’s bottom “the airline,” to a friend or colleague? ers while attracting new ones. In fact, a recent
line? Absolutely. Respondents that give responses from 0 study conducted by the Temkin Group showed
While research shows the No. 1 influence to 6 are classified as “detractors,” 7 to 8 that 81 percent of promoters were likely to
in a passenger’s choice of airline is price, are “passives” and 9 to 10 are “promoters.” repurchase from their preferred airline com-
retaining existing customers and attracting Subtracting the total number of detractors pared with only 16 percent of detractors. Yet,
new ones through word of mouth boils down from the total number of promoters provides the economics behind NPS go beyond reten-
to service delivery and customer experience. the company’s NPS. The NPS range is -100 tion rates and into both the characteristics of
And that, no doubt, impacts a carrier’s bottom to 100; with the latter being a perfect score, promoters and detractors and the secondary
line. meaning all respondents identified themselves affect resulting from word of mouth.
Prior to the global financial crisis, many as company promoters. The financial impact of word of mouth
companies outside of the airline industry Despite widespread success of NPS, the is significantly greater than most company
began to assess their ability to create cus- airline industry has been slow to adopt the executives realize. To begin with, word of
tomer loyalty through the use of a new metric metric. No doubt, this is a byproduct of airlines’ mouth is a company’s best, cheapest and
called Net Promoter Score (NPS), created and focus on cost reductions at the expense of most-effective advertising channel. In fact, 80
owned by Satmetrix Systems, Inc.; Bain & investments in customer loyalty in order to percent of consumers trust word of mouth
Company, Inc.; and Fred Reichheld (Bain & survive the recent global financial climate. over any other source of product information
Company’s loyalty guru). However, at least one outside research com- or advertising, according to Forrester Research
The popularity of NPS has been fueled pany — Satmetrix — has tracked NPS for U.S. and the Nielsen Company.
by the discovery that the metric is predic- airlines during the past decade. Moreover, word of mouth is nine times
tive of revenue growth. In fact, according to When NPSs are depicted with revenue more effective than traditional advertising in
Reichheld, companies holding the highest growth, using a scatter plot, it becomes appar- converting unfavorable or neutral dispositions
NPS within their respective industries aver- ent that an airline’s effectiveness in maintaining into positive attitudes. In addition, avenues for
age revenue growth that is approximately customer loyalty is highly predictive of sus- spreading positive and negative word of mouth
two-and-a-half times greater than that of the tained success. have never been more open and fluid than they
competition. For more than 10 years, airlines that have are today with the advent of social media sites
NPS measures a company’s customer-sat- successfully differentiated themselves with such as blogs, Facebook, Twitter and LinkedIn.
isfaction level, identifies “detractors” who are higher NPSs have enjoyed year-over-year rev- Among the three categories of customers,
diminishing its brand reputation and shows the enue growth three to five times greater than research shows that more than 80 percent of
percentage of customers working on behalf of the competition. The correlation coefficient positive referrals come from promoters and
the company to promote the business. NPS is between historical revenue growth and NPS is more than 80 percent of negative word of
mouth comes from detractors. Interestingly,
the ability of either the promoter or the detrac-
On a scale of 1-10, how likely is it that you would tor to convert the audience varies between
recommend (the airline) to a friend or colleague? the two.
According to Satmetrix, promoters tend to
Not at all Extremely talk to more people, but conversion rates are
Likely Likely relatively low. In contrast, detractors typically
talk to less people, but conversions rates are
higher as this category tends to seek out will-
ing listeners or those more likely to act upon
the information given.
Previous consulting work by Bain &
Company also found that the variable business
cost of servicing detractors tends to be higher
than promoters, because detractors are more
likely to contact call centers and demand
complaint resolution and less likely to utilize
self-service tools such as airport kiosks. Thus,
customer loss resulting from negative word
Detractors Passives Promoters of mouth, combined with increased service
costs, naturally translates to a decrease in
revenue and profits.
Net Promoter Score = (% of Promoters)-(% of Detractors) When promoters are successful in attracting
a new customer, the new customer is more
Determining Net Promoter Score NPS measures customer loyalty through the determination of likely to become a promoter as well. Retention
which passengers are advocates of the company, those who are relatively passive and those who are rates are higher for promoters. Therefore,
the likeliest to diminish brand reputation to prospective consumers through negative word of mouth. they have a longer customer lifetime during
A company’s NPS is determined by subtracting the percentage of detractors from the percentage of which companies can generate more sales
promoters. and spread out acquisition costs. In addition,

ascend 45
 ASCEND I SPECIAL SECTION
promoters tend to complain less, are more
forgiving of a company’s transgressions (64
percent will forgive according to the Temkin
Group) and are typically less sensitive to pric-
ing changes. In fact, on average, promoters
spend more than average annual spend rates
and detractors spend less.
When considering promoter and detractor
characteristics and calculating total customer
worth between the categories, it should come
as no surprise that there is a significant gap
between promoters’ value to a company and
that of detractors. In terms of word of mouth,
total customer worth equals:
Buyer economics + referral economics
where:
Buyer economics = annual spend for a
category
Referral economics = net customers
gained or lost x average annual spend
Net customers gained or lost = number
of persons talked to x conversion rate
This year, the consulting team for Sabre
Airline Solutions® provided an international air
carrier a complete analysis of its NPS and the
specific economics related to the score. The
analysis revealed that the difference in annual
total customer worth was approximately 50
percent between passives and detractors/pro-
moters. Not only did promoters have a higher
average annual spend, but their total customer
worth was nearly three times that of detrac-
tors when factoring in referral economics.
Consider two things:
1. Given the relatively low margins from which
airlines must squeeze profits, it is likely that
every detractor created and sustained is
costing the company a significant amount of
money.
2. In the example above, every detractor shift-
ed to neutral status (passive) represented a
100 percent increase in total worth to the
airline; moving a customer from detractor
to promoter status increased his/her total
worth by almost 300 percent.
Airlines around the world have taken notice
and are becoming much more engaged in
tracking their NPS while looking for ways to
increase it.
“NPS is core to how we make decisions,”
said Robin Hayes, JetBlue’s chief commercial
officer.
So how does an airline use NPS to make
decisions? An airline must first find ways to
retain existing promoters and swing passives
and detractors to a more positive position.
Doing so requires an airline to know — from
the customer’s perspective — what it is doing
right and wrong, or where service-level gaps
exist. Of course, passengers are the source of
this information, and collecting that data can
be difficult.
The most popular method of tracking cus-
tomer experience is through continuous survey
deployment. Several airlines have increased the
46 ascend
number of surveys they send out. However, an
airline needs to use caution to ensure it does
not provoke its customer base.
Continually surveying customers tends to
irritate them and actually risks creating detrac-
tors. For the company’s part, the process
requires ongoing analytics and manpower to
sustain a practice that is extremely objective
depending on the respondent’s mood, the time
of day, the most recent experience, etc.
To maintain untainted responses, surveys
should never be created and deployed by the
airline itself. Analysis of survey responses
shows that when respondents are aware a
particular airline is the source of a survey, they
tend to respond favorably toward the airline
and not necessarily with the truth.
The answer to this dilemma is to contract
a third-party surveyor, but this requires ongo-
ing costs, which are generally based on the
number of deployments. Therefore, the higher
the quality of data, the higher the cost of the
survey to an airline.
Airlines may experience greater benefits
using a holistic approach that begins with
NPS analytics but also includes the voice
of the customer. Airlines continually gather
voice-of-the-customer data with customer
relationship management (CRM) software,
complaint tracking, frequent flyer programs,
etc. In other words, data is collected every
day in customer service areas but is often
not mined for customer insights.
The consulting team at Sabre Airline
Solutions® has developed a holistic approach
that includes NPS tracking and uses custom-
er data to create continuous feedback loops
to drive Lean Six Sigma principles throughout
the organization. The end result is actionable
data that propels revenue growth.
Working with an airline, Sabre Airline
Solutions will deploy NPS surveys and
provide Net Promoter Scores, along with
benchmark data from its competitors, using
responses from the survey and an internal
database created from previously deployed
surveys.
Sabre Airline Solutions has the only
consulting team actively tracking NPS for
both domestic and international carriers.
Moreover, the accuracy of the technology
company’s NPS data is superior to any other
reports currently available, with margin
errors between +/- 1 to 5 points (95 percent
confidence level)compared with other indus-
try surveys that have only been able to attain
around +/- 13 to 15 points.
However, the value of NPS surveys should
extend beyond individual scores themselves
by identifying specific ways to increase
these scores, thereby capturing possibili-
ties for resultant revenue gains. To do this,
survey respondents are asked to rate how
important and how satisfied they are with
different attributes and features of the airline
related to brand, customer effort, customer
service and in-flight experience.
The data is analyzed and benchmarked
against key competitors. Then the airline is
given an overview of the results along with gap
analysis that identifies the difference between
how important the feature or attribute is to
promoters and detractors and their actual
satisfaction levels.
Importance levels are integral to the analy-
sis. Of course, customer experience focuses
on the guest journey from one touch point to
the next, but it also includes setting expecta-
tions and meeting those expectations. It is
impossible to please everyone, but it is pos-
sible to understand customer segmentation
and deliver an experience that satisfies the
targeted segment.
Last year, for example, Nordstrom, Target
and Kohl’s each had a high Net Promoter
Score. However, according to Satmetrix’s 2012
Net Promoter Industry Benchmarks survey,
promoters’ comments revealed different rea-
sons for their satisfaction level: Nordstrom
NPS was tied to service, Target to breadth of
products and Kohl’s to low prices.
In addition, high customer-satisfaction
levels in categories with low importance high-
light areas where internal efforts may be too
heavily focused and should be shifted toward
other, more pressing customer needs. This
information is crucial in identifying how to retain
promoters and locate specific areas where
customer-satisfaction levels are low and gaps
are high among detractors.
Unfortunately, identifying customer-service
issues and service-level gaps does not always
compel airline management to address root
causes as any identified resolution costs will
often times outweigh perceived benefits. The
consultants will, therefore, complete the NPS
analysis by matching revenue data with respon-
dent data. They will identify the drivers of an
airline’s NPS as well as show expected financial
benefits of addressing gaps in service. In doing
so, they will help an airline develop a solid NPS
strategy for sustained, customer-centered profit
growth.
Sabre Airline Solutions’ consulting practice
is not only committed to providing quality data,
but also to the analysis of “smart” data to pro-
vide guidance for the future as well as a
framework for continuous improvement, includ-
ing the development of an action plan for
airlines to increase NPS. a
Jonathan P. Ewbank is a principal
consultant and Jayme B. Porkolab
is director of SabreSonic ® Customer
Sales & Service consulting for Sabre
Airline Solutions. They can be contacted
at Jonathan.Ewbank@Sabre.com
and Jayme.Porkolab@sabre.com.
 ASCEND I SPECIAL SECTION
W
hether an airline enlists the
services of a consulting firm or
develops its own proactive man-
agement plan, the investment
and time spent to convert from
a reactive to a proactive operation are well
worth the efforts and can have a profound
impact on every department across an airline.
In the areas of pricing and revenue manage-
ment, for example, leading carriers are adapting
a competitive pricing strategy based on utiliz-
ing real-time data for their markets. Through
enhanced technology and the creation of new
business processes, the result is “active” fares
management, where pricing is adjusted in
reaction to competitor pricing within the same
market. Recent trends indicate that carriers are
investing in Big Data to create real-time pricing
models, which allow them to react quicker to
market changes. Insights gained from the data
result in the ability to formulate a longer-term
strategy based on current market trends.
From a profitability perspective, leading-edge
technologies enable airlines to examine their
current network and identify underserved desti-
nations that could allow for potential expansion.
A market evaluation is another important ele-
ment, which allows airlines to closely monitor
market demand, capacity, flight frequency and
type of schedule. The data collected during a
market evaluation allows for forward thinking
and how to best position for revenue growth.
Operations, in its nature, is a reactive depart-
ment, but the use of proactive processes
and communications increases efficiency and
benefits travelers. According to masFlight, an
aviation consulting and data analysis group,
since January, flight delays and cancellations
within the United States affected more than
47 million passengers. Many of these delays
or cancellations can be attributed to inclement
weather. These weather events, both routine
and extreme, serve as an excellent example
of how different departments must have the
necessary proactive communications channels
to successfully function.
For example, ground operations and sched-
uling must work closely together to ensure
that delays are minimized and quickly resolved
while communicating with customer service
so customers can be promptly notified. Having
the correct proactive communication channels
in place as well as a well-defined irregular
operations strategy minimizes the effect on an
airline’s operations and its customers.
Keeping the pulse on the customer is critical
to any business, and with the advent of social
media; it is imperative that airlines understand
what their customers think and actively monitor
how they are meeting customers’ expectations.
In doing so, airlines often seek assistance
from independent resources, such as business
consultants, to conduct a baseline assessment
of individual customers, which includes mea-
suring their Net Promoter Score (see related
48 ascend
Net Promoter Score, in addition to measuring
the attributes that influence an airline’s score,
consultants can quantify and show not only
how the airline can soar above its competitors,
but the benefits it will gain from having a short-
and long-term plan.
Going from a reactive to proactive setting may
look like a daunting task, but it is achievable and
requires a firm structure. Because an airline’s
leaders and employees are heavily involved with
the day-to-day challenges; fixated on solving
problems as they arise, they often reach out to
an objective, outside resource, such as a consul-
tant, to help manage the transition through some
direct steps:
1. Plan and Prioritize. One of the first critical
steps is taking advantage of time and creating
a prioritized scheduled, which gives airlines
the ability to anticipate problems. Consultants
can help an airline plan through having first-
hand experience of dealing with large and
complex carriers. They know the main issues
airlines face, industry best practices and the
necessary solutions that need to be adapted.
2. Define Processes. One of the most impor-
tant parts of a proactive setting is clearly
defined processes, which help ensure that all
Big Data For Quicker Reaction Times Many airlines around the world are leveraging Big Data to
develop real-time pricing models in an effort to react much quicker to market changes.
article: Voice Of The Customer on page 44). As
part of this process, in-depth research, analytics
customers’ expectations and satisfaction levels.
This provides a holistic view of customers and
and business consulting should be conducted helps identify the key areas where customer
to benchmark the airline and understand its experience efforts should be focused. Using the According to ATAG
US$2.2 trillion
of global economic activity is supported
by aviation, making up 3.5 percent of
the world gross domestic product.
Photo: Shutterstock
Globally, according to ATAG, the average
occupancy of aircraft is around
79 percent
greater than other forms of
Proactive Communications Channels During the first quarter, more than 47 million passengers in the
United States were affected by flight delays and cancelations. Regardless of the cause of these sched- transportation.
ule interruptions, it’s critical for an airline to implement proactive communications channels across vari-
ous departments, such as ground operations and scheduling.
departments are aligned and run efficiently.
Well-documented processes provide more
structure and reduce the potential for prob-
lems. A consultant understands that no two
airlines are alike, therefore, he or she can tailor
processes to fit an airline’s specific needs to
achieve maximum efficiency.
3. Manage Risks. Despite having robust pro-
cesses in place, carriers will still face certain
issues that require more attention than others.
Planning activities and highlighting the areas
where risk is involved helps avoid problems
and determine what departments will be
impacted through the changes. A consultant
will be able to develop a plan for all of an air-
line’s departments to efficiently manage risk
from high to low probability levels.
4. Employees are Key. Morale must be high for
any company to achieve long-term success,
otherwise employee turnover may be high and
it will be difficult to attract professionals who
can help strengthen and grow the business.
In a reactive management setting, morale can
be low from the large amount of high pressure
situations. Providing encouragement and pro-
moting a positive work atmosphere will help
transition to a proactive environment.
According to Air Transport Action Group
by
1.5 percent
will be
50 percent
to ATAG.
ASCEND I SPECIAL SECTION
5. Continuous Improvement. One of the key
factors for any company is to constantly
evolve; creating an environment for continu-
ous improvement. It is essential to encourage
employees to look for ways to innovate and
improve their areas of the business.
6. Reporting. Reporting will identify root causes
of problems that need to be addressed as
well as identify opportunities. This informa-
tion should be shared across the organization.
Consulting can assist with the development
of reports and continuous feedback loops to
drive Six Sigma/Lean Initiatives.
Carriers must approach the future with a pro-
active standpoint, which can range from
long-term flight scheduling to evaluating addi-
tional markets to serve. A proactive management
style will help lessen the amount of stress within
the company and encourage employees to be
innovators. a
Grant Perry is a senior consultant and
Megan Nieves is a practice management
analyst for Sabre Airline Solutions. They
can be contacted at grant.perry@sabre.
com and megan.nieves@sabre.com.
Count
it up
Interesting facts and
figures in the airline
industry.
ascend 49
Partnering For Success
By Peter Berdy I Ascend Contributor

a focus on the entire operation.

 ASCEND I SPECIAL SECTION

F
or decades, airlines have been look- by rival carrier Etihad. Meanwhile, one- There are many groups and holding com-
ing for the best path to sustain their world member airberlin is in codeshare panies managing portfolios of airlines
business and increase shareholder discussions with SkyTeam member Air ranging from full to partial ownership.
value in the face of stiff competition France. A few examples include IAG, Lufthansa
and uncertain economic environ- Terminating codeshares between alli- Group, Etihad Aviation Group, Hainan
ments. When organic growth options require ance members. Within Star Alliance, Group, Irelandia Aviation and Indigo
taking on higher risk, or barriers to entry exist Lufthansa ended its codeshare agree- Partners. The central goal is to leverage
(such as bilateral limitations), partnerships with ments with Turkish Airlines. The specu- purchasing power, coordinate planning
other airlines become increasingly attractive. lation was that the relationship ended and expand network reach, as well as to
There are a host of options used by due to the strong growth by Turkish realize synergy benefits overall.
airlines to form partnerships, including and its presence in secondary cities in Changing rules of the playing field, such
mergers, acquisitions, joint ventures, Germany. as recent pre-clearance of U.S. Customs
codeshares and alliances. They are used Low-cost carriers are being included in at Abu Dhabi. Similar to preclearance
as instruments to: the mix. Airlines are looking into form- facilities in Canada, Mexico and the
Gain competitive advantage or serve as ing links that were unthinkable a few Caribbean, pre-clearance at Abu Dhabi
defense mechanisms; years ago as traditional network airlines’ will help passengers avoid long U.S.
Enter markets and break down barriers service offerings have blurred and some Customs lines when they arrive in the
to entry; LCCs have moved to hybrid models. United States by instead clearing cus-
Expand network coverage; In some instances, working with LCCs toms at the new facility in Abu Dhabi.
Lower costs as airlines proceed along may be the only viable option when The benefit is that passengers may be
paths to globalization, consolidation and competition is limited (such as West Air lured to fly direct from Abu Dhabi on
sustainability. in Canada) or where other airlines are Etihad Airways. Etihad happens to be
Airline partnerships have shaped the already involved in other partnerships the only nonstop service to the United
landscape, with global alliances playing the and the only dance partner is an LCC. States from Abu Dhabi. The airline is
dominant role. Approximately 58 percent LCC subsidiaries of full-service carri- likely to reduce passenger connect times
of all capacity is operated by airlines in ers are becoming more common. There to further take advantage of pre-clear-
one of the big three alliances — oneworld, should be 20 alliance members with LCC ance. Following Abu Dhabi’s lead, Qatar
Star Alliance or SkyTeam. Some carriers subsidiaries or affiliates by the end of has also applied for U.S. Customs pre-
prefer to stay out of alliances and opt 2014. These subsidiaries are likely to fill clearance.
instead for expanded codeshare agree- gaps in markets assigned by the parent Joint ventures to form new airlines.
ments. For example, Etihad and Emirates companies. Singapore Airlines and Tata of India, for
list codeshare agreements with 33 and 12
airlines, respectively, and Alaska Airlines
has agreements with 13 airlines.
However, many of the fundamental
tenets of alliances are now being chal-
Traditional Network Carriers’ Domestic Capacity Share
lenged and new alliance approaches are
being tested. Airlines are looking to greater
flexibility and exploring options in develop-
ing business relationships.
Recent partnership trends among carri-
ers include:
Looking beyond their alliance to fill
gaps. As recognition that alliances do
not offer everything, members are turn-
ing to other places outside their alliance
to fill gaps in their network as they
grow or look for new opportunities. IAG
Chief Executive Officer Willy Walsh said
oneworld is relaxed about its members
looking beyond the alliance. Some exam-
ples prove this point: oneworld found-
ing member Qantas signed a five-year
partnership with Emirates to replace
Singapore for Dubai as a stopover point
for European services. All Qantas flights
to Europe will operate through Dubai
under a comprehensive partnership
Photos: Shutterstock

to coordinate pricing, sales and flight

scheduling. There will also be a profit-
sharing agreement on flights between
Australia and the United Kingdom. The
partnership will help Emirates reach
into the lucrative corporate market in
Australia, which is also being targeted
E.U. Domestic
U.S. And E.U. Domestic Capacity Share The United States is characterized by high concentration due
to mergers: American Airlines, Delta Air Lines and United Airlines control 63 percent of U.S. domestic
capacity, measured by ASKs. In Europe, IAG, Air France/KLM and Lufthansa Group control only 23 per-
cent of E.U. domestic capacity, with the remainder spread between LCCs and smaller national carriers.

ascend 51
 ASCEND I SPECIAL SECTION
example, have joined forces to launch
a new airline in India and have funded
it with an initial investment of US$100
million. SIA expects commercial syner-
gies by expanding in the important Indian
market, while Tata Group will continue to
build its aviation-related businesses such
as catering, ground handling and engi-
neering.
Due to government restrictions on
domestic ownership and control, the battle
ground for alliances continues to focus on
access to emerging international markets.
In the United States, the big three
network airlines, American Airlines, Delta
Air Lines and United Airlines, control nearly
60 percent of U.S. domestic capacity. In
Europe, the big three groups, Lufthansa
Group, IAG and Air France/KLM, control
only 20 percent of E.U. domestic capacity
with the bulk controlled by LCCs such as
RyanAir and easyJet.
Economies in Brazil, China, India and
Asia have made mergers and acquisitions
and new business models (example: long-
range LCCs) more pronounced in the global
market to gain market share and stimulate
new business. The result of these trends
and activities are the breaking and forma-
tion of new partnership models.
Alliance Share by Capacity April, 2014 ASKs
Star; 22%
Others; 32%
LCCs; 10%
SkyTeam; 19%
Successful Partnership Models Fifty-eight percent of capacity, measured by ASKs, is controlled by the
three global alliances oneworld, SkyTeam and Star Alliance. Despite their dominance, other successful
partnership models have evolved including holding companies, LCCs and joint ventures.
52 ascend
Reasons To Partner
One of the fundamental reasons that air-
lines engage in partnerships is to address
competition. Airlines have found that
consolidation will allow them a stronger
market presence and power to claim a
position of dominance.
With intense pressure on airlines to cut
costs and earn profits, acquisitions offer
a channel to increase scale and leverage
the sheer size of the resulting partnership.
Carriers have resorted to acquisition to
reduce costs, increase loads and improve
profitability. Strategic alliances also allow
companies to leverage each other’s core
competencies.
Mergers and acquisitions are usually
resorted to either for increasing scale or
cutting costs, while alliances are often
used as a way to enter new markets. Some
markets may have high barriers to entry
such as regulatory constraints, established
competitors or highly volatile markets that
do not justify initial entry investments.
In such cases, alliances are the pre-
ferred option because they allow airlines
to leverage their existing knowledge and
resources through collaboration. On the
other hand, where barriers to entry are
low, airlines can gain a very strong foot
oneworld, 17%
hold in the market either through merger
or through acquisition.
Synergies And Resources
Along with the previous factors, syner-
gies and resources are equally important
in deciding among the options available to
airlines. Mergers and alliances between
companies have been proven to work
efficiently if there is a high level of syn-
ergy between companies. Synergies can
be found in corporate culture, product
portfolio, strategic goals, and supply chain
or logistic systems. When such synergies
exist, companies can productively imple-
ment a merger or form an alliance.
Similarly, for an acquisition option,
an important factor is the availability of
financial resources and appetite for risk.
Acquisitions of money-losing airlines can
take considerable time and resources to
turn around their financial performance,
and results are not guaranteed. Acquiring
companies typically possess considerable
resources and perform extensive due
diligence prior to taking on a high-risk
acquisition venture.
“Alliances don’t guarantee success,”
IAG’s Willy Walsh said. “You need to have
a robust, profitable business in its own
right.”
Analyzing Partnerships
Key components to evaluating partner-
ships include addressing several “how
to’s,” specifically, how to assess the
partner fit, how to access an expanded
passenger base, and how to realize effi-
ciencies and economies of scale.
Depending on the type of partnership,
there is a range of levers that can be
pulled to realize synergies — network
rationalization as well as airport and
other facility consolidation — removing
duplicate overhead, fuel purchasing and
engineering savings, and working capital
and balance-sheet restructuring, such as
renegotiating aircraft leases.
To evaluate and measure the benefits
of potential partnerships, there are steps
in analysis that are typically performed.
Codeshares
The value of codeshares can be mea-
sured by simulating traffic that would
move over flights with codeshares and
comparing results to a baseline prior to
adding the codeshare flights. To perform
this simulation requires a suite of tools
and data.
A scheduling tool, such as Sabre ®
AirVision ™ Schedule Manager, is used to
modify the baseline schedule to place
the partner’s code on the operating air-
line’s flights. A forecasting tool, such as
Sabre ® AirVision ™ Profit Manager, is used
to forecast traffic, revenue costs and
profits. Databases containing schedules,
market sizes and fares as well as costs are
needed. Sabre Airline Solutions ® develops
inputs such as market sizes, fares and
schedules using a variety of data sources
including its own airport data intelligence,
which contains global O&D and MIDT-
adjusted data, and schedules.
To analyze results, two forecasts are
made: a baseline forecast representing
the state prior to the codeshare, and a
future forecast to measure the codeshare
flights. Comparing results of the two
forecasts will reveal the increased traffic,
revenues and profits related to adding the
HIGHlight
Mergers and acquisi-
tions are usually resorted
to either for increasing
scale or cutting costs,
while alliances are often
used as a way to enter new
markets.
codeshare flights. Detailed analysis of the
results will indicate where the benefits
occur.
Alliances, Joint Ventures, Mergers,
Acquisitions
Complex analysis for alliances, joint
ventures, mergers and acquisitions include
examining ways to unleash value to obtain
the greatest benefit from these types of
partnerships. Similar to codeshares, a
“before-and-after” evaluation takes place.
For alliances, the application of codeshare
flights is extensive. In the case of mergers,
acquisitions and joint ventures, analysis will
typically examine the value of using a single
code instead of separate codes.
Furthermore, these types of partnerships
may incorporate significant network adjust-
ments to further enhance alliance value,
such as:
ASCEND I SPECIAL SECTION
Retiming and adding flights in overlapping tions that can be measured and operationally
markets to get better and more complete implemented.
time-of-day coverage, Consultants use a full portfolio of inte-
Re-assigning fleet to optimize aircraft uti- grated decision-support tools to perform
lization, partnership projects.
Synchronization of bank timings between The data analysis is supported by an
hubs to optimize traffic feed between operations research team that collects
partners, and analyzes industry data that might not
Adding new flights to accommodate spill otherwise be readily available.
that results from converting interline traf- The consulting team consists of experts
fic to online, who have mastered scheduling and
Testing the addition of new markets to planning, gained from working for air-
take advantage of a stronger network, lines around the world, and applied their
Partnership studies may include identi- expertise to help airlines successfully
fying the “S” curve effect, the benefit evaluate partnerships.
associated with partnerships offering a A standardized delivery methodology
more complete range of services, thereby ensures consistency and value measure-
resulting in improved airline preference ment.
by consumers. Training and knowledge transfer ensures
In addition to scheduling and forecasting sustained, long-term success for airlines.
tools, an optimization tool, such as Sabre ® There’s some art and some science in
AirVision ™ Fleet Manager, may be used determining which airlines make better
to maximize the value and deployment of partners and what types of partnerships
fleet assets and for fleet planning. For com- are most suitable for specific airlines. The
plex networks, Sabre ® AirVision ™ Network process is anything but simple; however,
Manager is used to minimize passenger with the right tools and expertise, airlines
misconnections, ensure optimization of pas- can build a successful strategy around
senger connections and determine new current and future partnerships that will
market timings. support today’s objectives as well as those
of the future. a
Transparency And War Games
The correct use of methodology, tools
and data enable transparency and the
evaluation of results for all players. Each
company within a partnership will be able to
identify the benefits it can expect from the
partnership as well as the benefits it offers
its partners.
The same tools and data that have
the capability to perform analysis of scale
and scope for the partnership can also be
applied to competitors. As a result, differ-
ent scenarios can be conducted such as
measuring the impact a partnership will
have on principal competitors, or evaluating
the effect of carriers switching alliances
or forming joint ventures. These tools can
also be used to simulate results of potential
competitive responses.
Conducting these “war-games” scenarios
can reveal insights to strengths and weak-
nesses of different competitive strategies.
Independent Analysis
Sabre Airline Solutions offers consult-
ing services that cover the full range of
partnership analysis to assist airlines and
investors independently test scenarios,
perform analysis and recommend solutions.
The consulting services provide several
benefits to airlines, including:
Leveraging deep airline knowledge and
extensive experience in performing part- Peter Berdy is a consultant for
nership projects. The consulting practice Sabre Airline Solutions ®. He can be
develops detailed, practical recommenda- contacted at peter.berdy@sabre.com.
ascend 53
By Angela Lombardi, Joshua Hirschheimer and Joakim Kalvenes I Ascend Contributors

Monitoring Codeshare
Partner Pricing And
Inventory Availability
Airlines can improve their revenue management
efforts by systematically monitoring codeshare
partner pricing and inventory availability
through recent Big Data developments.
As part of a larger Big Data research effort,
Sabre Airline Solutions has invested in
®

infrastructure that permits collection

and processing of vast amounts of
airline shopping data.
 ASCEND I SPECIAL SECTION

irlines can improve their rev- assist the airline in monitoring competitor and,
enue management efforts in this case, codeshare partner pricing activity.
by systematically monitoring Codeshare Alerts will monitor the fares
codeshare partner pricing and of a host carrier’s partners that are available
inventory availability through in the market on the same metal. Shopping
recent Big Data developments. data helps determine whether passengers are
As part of a larger Big Data research effort, coming across shopping returns for the same
Sabre Airline Solutions® has invested in infra- itinerary marketed by both the host carrier and
structure that permits collection and processing its partners with significant fare deviation.
of vast amounts of airline shopping data. Should this be true, it would indicate that the
When an airline enters into a partnership fares are out of compliance for metal-neutral
with another, clearly, it aims to expand its carriers and might indicate that a codeshare
network and increase its revenue potential. partner is diluting revenues by placing overly
However, entering into this relationship should aggressive fares on marketed codeshare flights,
not be taken lightly, as putting an airline code thus having a negative revenue impact on the
on another airline’s metal (or vice versa) can host carrier. Provided that the host carrier and
have several different impacts on an airline’s its partners have full anti-trust immunity, they
strategy. can then work together to bring pricing and
In competitive markets, an airline’s pricing inventory levels back into alignment.
department must be totally in tune with current To further illustrate how the alerts are con-
fares, promotions and market trends. This, too, structed, how they should be interpreted and
can become increasingly difficult when working what corrective actions might be taken, con-
with a codeshare partner to mutually maximize sider the following practical example.
revenue potentials. Two airlines have entered into a codeshare
The operations research consulting team agreement and are jointly serving the LHR-SYD
for Sabre Airline Solutions has initiated an market. Robotic shops could be generated to
airline shopping data research and develop- mimic potential economy passengers searching
ment program with a strategic airline partner. online for a LHR-SYD departure leaving Jan.
The focus of the first project in the series, 11 and returning on Feb. 5. Codeshare Alerts
Codeshare Alerts, is to optimize the use of search through the shopping returns for com-
shopping data for the purpose of monitoring the parable itineraries marketed solely by the host
airline’s competitiveness and pricing position in carrier or the partner carrier.
the market. The expected output will provide Shopping returns are considered to be com-
valuable insights from daily shopping data and parable if the point of sale, booking channel, trip
Shopping Return: Marketing Carrier Is The Host Airline
V Q Q L
Trip Type: RT
LHR XXX SYD SYD XXX LHR
O&D: LHRSYD
Deptdate: 11/10/2013
Outbound Inbound Returndate: 05/11/2013
Seg 1 Seg 2 Seg 3 Seg 4 Shopdate: 30/08/2013
Op: XX YY Op: YY XX POS: GB
MKT: XX* XX* MKT: XX* XX* BookingChan: TN
Fare_LHRSYD_OB = $750 Fare_SYDLHR_IB = $905 fare_O&D_RT = $1,655
Shopping Return: Marketing Carrier Is The Partner
V Q Q L
Trip Type: RT
LHR XXX SYD SYD XXX LHR
O&D: LHRSYD
Deptdate: 11/10/2013
Outbound Inbound Returndate: 05/11/2013
type, cabin, departure and return date/time, and
operating flight numbers are equivalent. An alert
will be issued if the codeshare partner’s fares
deviate from the host carrier’s fares by more
than a specified fare tolerance. From a practical
point of view, this fare tolerance ensures that
focus is placed on fare differences that warrant
the effort associated with the fare correction.
The resulting Codeshare Alerts are streamed
by magnitude of fare deviation and occurrence
to facilitate the quick conversion of data into
actionable targeted inventory or pricing actions.
Alerts filters allow the selection of the operating
carrier type, where all flights in an itinerary are
operated by the host carrier or all flights are
operated by a partner or flights are operated by
both the host carrier and the partner.
Furthermore, business-rule filters allow the
host carrier to implement a rich feature set such
as tolerance levels by partner, tolerance by fixed
amount or percentage of total fare, partner-
specific and market-specific rules, reporting by
ATI and non-ATI markets (to ensure compliance
with anti-trust regulations), etc.
In contrast with standard fare comparison
tools, Codeshare Alerts has a built-in fare pars-
ing logic that accurately parses return fares
by trip (outbound/inbound). This functionality
enables the alerts to trigger at a lower level
of granularity. Booking classes for both host
marketed shopping returns as well as the code-
share mapped classes for the partner marketed
returns are provided, indicating whether a pric-
ing or inventory action needs to be performed.
The reporting engine facilitates the produc-
tion of longitudinal reports to spot systematic
partner bias in the pricing structure, as well as
compares fare bias by the host carrier’s partners
over an extended range of departure dates.
Codeshare Alerts provides the insight
required to effectively monitor partner pricing
and facilitates quick and targetted corrective
actions. Considering the depth of analysis,
strategies and effort that goes into successful
airline revenue management, it is hard to con-
ceive how the tangible impacts of codeshare
agreements could be overlooked.
Codeshare Alerts is offered as a consulting-
supported data service. In a typical engagement,
consultants will work with an airline to identify
the appropriate markets and codeshare partners
to monitor. Further, they will build the business-
rule engine and graphical user interface. Delivery
of the data is available as either a hosted service
or a daily file transfer. a

Seg 1 Seg 2 Seg 3 Seg 4 Shopdate: 30/08/2013

Op: XX YY Op: YY XX POS: GB Angela Lombardi and Joshua Hirschheimer
MKT: YY* YY* MKT: YY* YY* BookingChan: TN are senior consultants and Joakim Kalvenes
Fare_LHRSYD_OB = $678 Fare_SYDLHR_IB = $920 fare_O&D_RT = $11,598 is vice president of operations research
consulting for Sabre Airline Solutions. They
Actions To Avoid Dilution Comparable shopping returns marketed by both the host carrier and its can be contacted at angela.lombardictr@
codeshare partner trigger codeshare alerts on the outbound, whereby corrective inventory or pricing sabre.com, joshua.hirschheimer@sabre.
actions may be taken to avoid dilution. com and joakim.kalvenes@sabre.com.

ascend 55
A SYSTEM VIEW
By Manolo Centeno, Ascend Contributor

The Strategic Value Of Operations

-

A
nyone who has been part of an
operational group in the airline
industry knows that an operat-
ing group’s sole fundamental
duty is to run the specific activi-
ties within the group’s own operational
purview right up to aircraft departure for its
intended destination.
In fact, it can all be summed up fairly sim-
ply. Prof. David M. Upton of Oxford University
Saïd Business School has defined operations
as “all the activities a firm conducts in order
to deliver value to its customers. It’s the set of
processes that transforms either materials or
information into a product or service.”
Typically, other groups such as network
planning, sales, revenue management and
marketing are perceived to be more glamor-
ous — and more strategically focused — than
their operational counterparts.
But there are concepts that can be applied
to bring out a major opportunity to realize
a considerable strategic value of operations
within the airline industry. Some airlines under-
stand these concepts much more clearly than
their competitors — and those carriers tend
to develop strategic advantages based on the
real value their operations produce for them
and, of course, for their customers, as well.
The Basics
In the operations field, there are two highly
relevant topics for airlines: customer satisfac-
tion and competitiveness. And customers have
their own ways to assess the value provided
by airlines (besides the act of simply transport-
ing those customers from Point A to Point B).
One of the most important values that
airlines provide (after, of course, the “given”
of safety) is reliability or consistency in the
product they deliver to their customers.
Reliability — or quality — covers aspects
from punctuality and the number of cancel-
lations an airline accumulates to whether
passengers arrive at the destination with their
bags.
On the competitive side, airlines are gener-
ally motivated by following different strategies.
It is well known that airlines try to compete
using different models — generally defined
as the low-cost-carrier model, the ultra-low-
cost-carrier model, the full-service model or a
hybrid of these.
In an industry in which pricing is very com-
petitive and the product is less-differentiated,
operating efficiently can result in a competitive
advantage if an airline can achieve lofty levels
of customer service through a high level of
reliability.
Many carriers today are laser focused on
the passenger journey, or trying to be cus-
tomer centric. However, every airline — by
definition — should be customer centric, since
all airlines provide a service. But customer
centricity ends as soon as the airline does not
ASCEND I SPECIAL SECTION
provide an acceptable and constant level of In the case of an airline, the planning
reliability. process is the proxy for the operations system
In addition, an airline that operates effi- (because operations takes inputs and trans-
ciently can provide a high level of customer forms them into outputs) before the airline
service and lower the costs of that service. operates its schedule.
Airlines with high levels of punctuality, for So if planning processes only consider
example, will have lower costs — which, in some aspects and not others, it is likely that
turn, will increase their operating margins. the airline will produce a low-quality product,
So in a nutshell, operations should be meaning a product in which passengers are
focused on increasing productivity and improv- delayed and cancellations run at a higher num-
ing quality. ber than the industry standard. It also means
the airline will have to use more resources to
The System View overcome the low quality that the service is
Operations must be viewed as a system. producing, which, in turn, increases costs and
And airlines without a good understanding of reduces productivity.
this system create suboptimal processes that
drive low quality and low productivity. Things Gone Wrong
Airlines — like any other organization — What are the aspects airlines are miss-
take inputs (airplanes, fuel, pilots, crews, cash, ing? And which drive low quality and low
etc.) and transform them into outputs. In the productivity?
case of the airline industry, the output is a set The most common cause of low quality
of services, such as transporting passengers and low productivity is not considering all the
and their bags from Point A to Point B safely constraints or operational needs to operate a
and reliably. particular schedule — driven by a belief that
So how can an airline come to a realistic certain planning groups “own” the planning in
understanding as to whether its operations a given time, and that other groups should not
system is good, not to say performing to a be enabled to have much influence.
measurable degree of excellence? Answering Any person working in operations at an airline
this question requires analysis of how the realizes that creating a schedule that is not opera-
planning process for an airline is configured. tionally feasible will result in a degraded operation.
Relationship Between On-Time Performance And Profitability
U.S. Industry — 2013
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
70% 75% 80% 85% 90% 95%
Driving Revenue Levels Data indicates that on-time performance is correlated with higher operating
margins. Having an efficient operation can help airlines reduce costs on several items such as
customer-service recovery, misconnected/lost bags, staffing disruptions/overtime, maintenance sched-
ule disruptions and flight interruption manifests (FIMs) to other airlines. Having an efficient operation
can help airlines increase customer satisfaction and, therefore, increase or maintain its revenue levels.
ascend 57
 ASCEND I SPECIAL SECTION
This can happen, for example, when the network
planning group plans a schedule only taking into
consideration the airline’s heavy maintenance
requirements and leaving out the assignment
of weekly and daily checks to the maintenance
planning group and the operations control center.
From a functional point of view, this makes
total sense. But from a system-transformation
point of view, it makes little or no sense.
The network planning team does not have
all the information available — or perhaps the
manpower — to properly perform this activity.
From a system-transformation point of view,
this is not the right way to address the system.
In other words, it may be optimal for one busi-
ness unit or subsystem, but it is effectively
creating a big problem for other divisions and/or
subsystems.
In the operational-management world, this is
called sub-optimization.
Since the planning horizon keeps shifting as
the timeframe moves closer to departure, the
planned transformation system is flawed from
its very inception. So a very logical solution to
this problem would be enhanced collaboration
between the maintenance planning and network
planning teams.
Since the network planning team manages
and controls the entire schedule, other operational
groups should be included and consulted to assure
schedule validity. Airlines that are very collab-
orative between planning groups and operations
groups will have a better transformation system in
place, which will translate into a robust schedule.
A way to avoid the negative factors of sub-opti-
mization is to establish a collaborative framework
throughout all the planning phases.
Some airlines implement different models to
encourage such collaboration, thus improving
the transformation system. One North American
airline, for example, has an operations planning
group that works with the different operational
groups as well as the network planning group.
It functions in similar fashion to any other busi-
ness-unit organization such as finance or human
resources.
Other airlines have less-formal organizational
structures, but may have well-defined timelines
and feedback processes to significantly improve
the planning. However, the only way to make
this happen is in a circumstance in which the
executive team understands these concepts and
embraces collaboration.
The Beer Game
One way to demonstrate these concepts to
a broad base of executives is through the Beer
Game.
The primary objective of the Beer Game,
which was originally conceived several decades
ago by a professor at MIT, is to show the players
the value of collaboration and information flow.
Players tend to get excited because they believe
beer will be involved, but “beer” itself is actually
not part of the game, it’s simply a catchy name.
58 ascend
And despite being an inventory-focused
exercise, the Beer Game’s concepts highlight
the value of collaboration in the transformation
system.
Typically, the Beer Game is executed in two
rounds.
In the first session, all the players are directed
to minimize the cost of their specific assigned
business unit (in this case, a warehouse or fac-
tory). Players are notified that the unit with the
lowest cost will win the game, and they are also
instructed not to talk to any other group on the
supply chain (they need to conjure up their own
decisions).
Generally, all the players become engrossed in
working diligently to fulfill the given objective. At
the end, somebody wins (the lower-cost business
unit). As part of the game, the total cost (the sum
of all the subsystems) is also tallied and recorded.
On the second round, players are allowed
to interact, and a new objective is defined.
Now the objective is to minimize the total
cost of the supply chain. Typically, when the
game is over there is no winner, but the total
cost is always significantly lower (sometimes
by as much as 50 percent) than the previous
run.
At the bottom line, the difference in cost is
essentially the cost of lack of coordination or
collaboration.
That’s a high price to pay simply due to a
business unit being optimized locally instead
of globally. This situation is not unique to the
revenue-generation units — it could also be
happening in the cost/operating units.
So the next logical point is to quantify
how the executive team can establish the
proper framework to embrace collaboration
and track statistics showing that the organiza-
tion is achieving a high level of efficiency
that provides value to its customers (which,
incidentally, leads into a whole different topic,
beyond the realm of this article but one that
will be covered in a future issue of Ascend).
Impact On The Transformation
System And Environment
It’s extremely important to understand
that every operations-transformation system
works within an environment, such as compe-
tition, regulations and new technologies. And
the transformation system has an impact on
this environment. The environment, in turn,
has an impact on the transformation system.
Managers typically argue that they cannot
control the environment, and in the majority
of cases this is true.
What’s important from an operations-
management point of view is to define where
this environment starts and ends. In other
words, what is the boundary between the
transformation system and the environment?
Understanding the environment will then
allow the managers to define what they can
or cannot control.
Some managers understand that they can
influence the environment, as well as how
they interact with their transformation system.
Furthermore, they understand clearly that the
current environment might not be the same in
the future. And this is important because these
managers can realign the transformation system
to minimize the environment’s impact, or they
may be able to reposition it for the future.
In addition, simulation provides value in analyz-
ing and trying to understand whether an airline
will have enough future airport capacity. And a
strong argument can be made that not having
enough gates, airspace or terminal space is out
of the control of the manager. But it can also be
quite logically argued that different alternatives
can be analyzed to deal with the current issues,
and strategies can be concurrently developed to
avoid the impact in the transformation system in
the future.
Can the airline, for example, influence the
addition of gates or the construction of a new
terminal? If not, should a new city be considered
that might provide the much-needed capacity?
Can the current facility be better exploited — in
other words, is the current facility being used to
its maximum capacity? Or are the right processes
in place?
Can the schedule be altered to operate larger
airplanes? Do “peak” or “de-peak” factors enter
the equation?
Simply accepting a hypothesis that the environ-
ment can’t be changed could turn out to be a very
bad assumption. And successful airline managers
regularly analyze and basically understand all
these factors.
So it’s misleading to assume that operations
only involves boarding, checking in passengers,
efficient flight-planning, dealing with irregular
operations or having all the flights covered with
legal crews.
Today, in fact, such a limited perspective actu-
ally represents a myopic and isolated view of
operations.
In the airline industry — or any other industry
for that matter — operations is a transforma-
tion system to provide value to customers and
shareholders alike.
So having very collaborative integrated plan-
ning in place and understanding the environment
can definitely help an airline provide significant
value to its passengers, thus also helping the car-
rier gain a competitive advantage in the
marketplace. a
Manolo Centeno is senior principal
and practice leader for the operations
consulting group at Sabre Airline
Solutions. He can be contacted at
manolo.centeno@sabre.com.
Creating, Communicating
And Connecting

leaders to consistently focus on daily operations

There is a formula to building and executing

the plan that ensures optimal results.

By Terry McClintock I Ascend Contributor

Creating

Communicating

Connecting
 ASCEND I SPECIAL SECTION
A
sk any leader within a pricing and
revenue management department
about strategic planning and you’ll
quickly hear things like, “achieving
if not exceeding plan,” or more
succinctly, “consistently improving financial
results with the tools available — that’s what
matters around here.” Yet, best-practice stra-
tegic planning in the pricing and revenue
management context is much more than
simply exceeding financial results for a given
period.
Ask these same leaders how much time in
a given week is dedicated to the critical task
of strategic planning. If the answer is “never
enough” or perhaps “none at all,” he or she
is not alone as the typically hectic daily pace
of pricing and revenue management creates
an environment where simply getting the core
job done takes precedence.
Most airlines communicate boldly about
annual (and beyond) strategic plans. The plans
generally emanate from a series of annual
meetings with senior leadership, and then
they often get put into presentations where
they are quickly broadcast through the ranks
and quickly supplanted by the “crisis of the
day.”
Aside from the daily business conflicts that
often tend to act against successfully execut-
ing on strategic plans, modern-day pricing
and revenue management leadership faces
Mission
Formulate
Analysis
Examine
External
Issues
Six-step Planning Framework Building an effective pricing and revenue management plan requires a
six-step framework that includes proposing a mission, defining goals, examining internal issues, exam-
ining external issues, creating SWOT analysis and formulating a strategy. Once these steps have been
taken, an airline is ready to implement the plan.
60 ascend
practical issues that can be placed into three
categories:
The staffing or people element of the equa-
tion in generating upward confidence that
they have the skillsets and active thinking
required to meet the plan,
General business volatility scaled against the
network size and geography and can be both
internally and externally driven,
The ever-increasing trend within the rev-
enue management space to perform “over-
the-shoulder” post-performance scoping
reviews that validate performance in a near-
term framework, hence causing more reac-
tionary approaches.
How is a pricing and revenue management
leader to transcend this cycle and create more
meaningful and pertinent strategic plans such
that leaders and their teams demonstrate
full buy-in and the department collectively
marches toward targets?
Against the likely scenario that disconnects
occur between managerial outputs from stra-
tegic planning and frontline employees, airlines
may reach out to pricing and revenue manage-
ment consultants who offer broad experience
to remedy this situation. Consultants should
support airline leaders in effectively translating
strategic plans into daily, weekly, monthly and
quarterly tasks and processes to help ensure
the plan is adopted throughout the pricing and
revenue management organization.
Define
Goals
Examine
Internal
Issues
Key Plan Aspects
What do airlines consider in terms of strate-
gic planning idea creation and ensuring they are
being complete in the process?
Corporate goals naturally set the pace in
terms of topline financial objectives where
pricing and revenue management get assigned
performance expectations. Given the operating
characteristics and that the core functionality
of this group is to enhance revenues, it is
imperative that the department come away
from the strategic planning exercise with a
clear understanding of how the daily actions are
going to drive the corporate goals.
The operating environment faced by
carriers varies significantly across the globe
and, depending on network size, can truly
be multi-faceted in nature. From monitoring
explosive growth of low-cost carriers (LCCs) in
Asia to effectively considering ancillary strategy
changes from traditional network carriers in
Europe, the industry is replete with change and
often implies that outside support from consult-
ing guarantees a more exhaustive consideration
when planning.
Economic environments can change quickly,
and for a pricing and revenue management
operation that is global in nature, it is vital to
consistently remain aware of and continually
hedge risk around an airline’s network. From
addressing directional travel imbalances to
understanding currency fluctuations, full consid-
eration of the economic environments faced in
the near future is required.
Understanding the socio-political environ-
ment in which an airline operates drives
another key facet as part of planning. While top-
ics such as civil unrest are a less savory point
of discussion, politics aside, they are part of the
uniqueness of the airline industry and must be
actively considered and effectively planned for
as best possible.
Market dynamics and their changing nature
largely drive what airlines do in the pricing and
revenue management space. As such, having
input from key stakeholders at levels within the
organization that can effectively distill onward
expectations at the regional level are often the
lynchpin to “connecting the dots” of high-level
strategic plans to frontline employees.
Internal needs must be considered as it
relates to high-performance pricing and revenue
management teams. Pricing is the “fuel” to
an effective revenue management operation
across both technology systems and business
processes. Neither can be successful long
term by operating in silos or a vacuum and,
as such, integrated discussions, activities and
commitments must be well aligned as part of
the planning process.
Building The Plan
Various frameworks for strategic planning
permeate the industry and are effective for
creating and maintaining — if not growing — a
pricing and revenue management department.
The following six-step framework can be used
to build an effective plan.
Step 1: Propose A Mission
The mission of the strategic plan should
include a penetrating, relevant and purpose-
driven set of statements easily relatable to the
daily activities performed within the depart-
ment, such as:
Driving consistent quarterly revenue improve-
ments by offering creative and impactful
generative thought leadership in conjunction
with all commercial areas,
Championing both the proactive and reactive
activities necessary to run a best-of-breed
pricing and revenue management team.
Step 2: Definine Goals
Defining goals comprises a well-thought-out
series of achievable tenets best created with
significant involvement of frontline managers to
affirm precision and applicability to the current
operating framework, including:
Achieving and maintaining a daily standard of
completing a network review of competitor
fares, rules and footnotes on a daily basis (pric-
ing),
Reaching a seasonally adjusted ~10 percent
revenue improvement in a given originating
region (revenue management).
Step 3: Examine Internal Issues
Identify and examine an exhaustive culling of
known challenges within the respective pricing
and revenue management areas that merit focus
in the coming year, such as:
Staffing challenges at the analyst level have
led to less-than-desired consistency and reli-
ability in performance, requiring more hands-
on managerial time to rectify,
Group-related traffic permeates significant por-
tions of the network and the sales team is
incessant regarding inventory obligations dur-
ing peak seasons, threatening overall yield,
Scheduling and network restrictions dictate
from an operational perspective flying aircraft
on a given route that has too many seats ver-
sus typical market demand, driving poor load
factors and financial performance.
Step 4: Examine External Issues
Examining external issues requires a
broad review of the operating environment(s)
faced that portrays clear points of focus
that not only should be addressed, but that
likely permeate much of the decision-making
within pricing and revenue management,
including:
How to manage fares and demand optimi-
zation when operating from a high-volume
region with a cut-throat competitor that
perennially under-cuts the market,
Slot restrictions at a preferred but alter-
nate airport lead the airline to have a
less-than desirable schedule to suit business-
oriented, high-yield day trips.
Step 5: Create A SWOT Analysis
The SWOT analysis encompasses a long-valued
framework within consulting focused on identifying
strengths, weaknesses, opportunities and threats
but one especially customizable to the particular
problems typically faced in pricing and revenue
management. It enables the creation of a most
direct portrayal of the various pluses and minuses
in a commercial context, and it is used to:
Highlight business challenges from top to bot-
tom in pricing and revenue management con-
text at the network, regional, country and market
levels,
Pinpoint direct, effective ties to frontline employ-
ees in terms of both the typical daily activities as
well as recommended onward ad hoc analyses
and actions.
Step 6: Formulate Strategy
At the high level, the strategy is a roadmap
upon which to execute the content that bears a
directly relatable path from top to bottom within
the department, which should be:
The most effective tool used by director- and
manager-level staff in cementing the corporate
strategic plan to a daily action plan for analysts
while also representing the general level of
expectation within the department,
Viewed as a changeable at the micro-level
against the ever-present likelihood of change.
A pricing and revenue management leader’s
team is likely well experienced in completing the
annual planning cycle. But how successful is the
leader at influencing his or her organization to
achieve the desired results?
Executing The Plan
To properly execute on the six-step strategic
planning cycle, effective channeling is required
to assimilate the strategic plan throughout the
pricing and revenue management organization.
Creating an environment of accountability, con-
sistency and rigor is an activity often fortified by
outside consulting as it can represent significant
cultural shift in an organization. If the recom-
mended approach is used to synthesize and build
the plan properly, the outcome is more efficiently
and broadly used, making execution a natural
consequence.
Adherence: Walk The Talk
An inherent part of leadership is engaging
subordinates and validating through daily activities
and interactions that the goals and activities
are directly relatable to theirs. In the context of
strategic planning for pricing, active leadership
participation and visibility in activities (such as
daily pricing briefings) validates the process, sets
expectations and inspires the organization while
enabling mutually assured confidence that the
relevant elements from the strategic plan are “in
action.”
ASCEND I SPECIAL SECTION
From a revenue management perspective, con-
sistent regional reviews of overbooking levels and
yields pinpoint shortfalls and successes and set the
overall theme of “find, synthesize, act” that sum-
marizes sound revenue management practices.
Prioritization Of Review
Leaders should acknowledge industry volatil-
ity and commitment to the strategic plan by
consistently abiding by monthly and quarterly
reviews within the department. They should
determine if their directors and managers are
conversant to the agreed contents of the stra-
tegic plan, how it directly ties to their job
function and if their people are doing the same.
Not intended to be a time-consuming effort
once underway, proper prioritization makes a
bold commitment statement to the team while
enabling the occasional course correction.
Team Effort
Given the key intersection that pricing and
revenue management occupies in the com-
mercial organization of an airline, it’s important to
remember that the secret to revenue successes
often lies in establishing and maintaining active
and honest dialogue across key departments
including but not limited to sales, marketing,
operations, network, scheduling and distribution.
Though it is often said in jest that the job of
revenue management is to say “no” — a refer-
ence to the core function of setting inventory
availability — in actuality, this could be restated
such that the desired function of revenue man-
agement is to give a “qualified yes” to any given
seat request.
The bottom line is that any goal within an
airline’s annual strategic plan is subject to myriad
impacts — many unanticipated — and this is
especially true in the pricing and revenue man-
agement context. Being able to effectively lean
on minor scheduling tweaks, equipment swaps,
partner relationship changes or distribution
adjustments can, in the end, make or break a
given pricing or revenue management initiative,
goal or the overall plan.
Confidence from leadership in the strategic
planning context becomes contagious to the
masses when properly executed. This affirmed
sense of buy-in to a strategic planning process
gives everyone a crystal clear, daily framework
under which to complete tasks, yet still have
time to think big and aggressively experiment in
their daily work. In this way, the strategic is
closely bonded to the practical, and best efforts
ensue on agreed upon paths to revenue growth
within the pricing and revenue management
area. a
Terry McClintock is a manager in pricing
and revenue management consulting
for Sabre Airline Solutions. He can be
contacted at terrell.mcclintock@sabre.com.
ascend 61
 ASCEND I COMPANY

By Jay Jain I Ascend Contributor

Knowledge
Is Power
An Airline’s Edge In Maximizing
Return On Technology Investment
A result of customer input and feedback, the
Continuous Learning Series provides SabreSonic®
Customer Sales & Service (CSS) clients the best
in education and updated product training, en-
abling them to realize maximum return on their
technological investments.
 ASCEND I COMPANY ASCEND I COMPANY

I
nvesting in advanced updates — an invaluable service that would thorough understanding of the technology
technology is among enable airlines to get the most from their so they can achieve optimum results. Class Topic Who Should Attend? What Will You Learn? When
the smartest moves investments. “Through the Continuous Learning And Where?
companies can Continuous Learning Series sessions are Series sessions, we have learned new
make, especially scheduled at regular intervals at key global techniques for automated exchanges and
in the fast-moving locations including Sabre Airline Solutions’ refunds and irregular operations technol- Schedule Change Control This class is for CRC and schedule change Topics covered will include: June 2-6 Kraków,
With O&D Reaccommoda- personnel as well as others wishing to learn s4HEDIFFERENCESBETWEENDEMANDANDDYNAMICSCHEDULE Poland
21st-century world headquarters in Southlake, Texas, as well ogy,” said Napastanaporn Kaewwongwan,
tion the start-to-finish processes for establishing change modes
of aviation and as its offices in London and Bangalore. reservations and ticketing manager for basic flight schedules and those who need a s"UILDINGMODIFYINGmIGHTS Oct. 6-11 Dallas/
global transportation. The objective is to provide the best Bangkok Airways. “We also learned new refresher. s"UILDINGCODESHAREmIGHTS Fort Worth,
However, it is also critical to make full documentation and training experience and EMD functionality. It was great to meet s0OPULATINGSCHEDULECHANGETABLES Texas
and proper use of that advanced technol- ensure the folks at the SabreSonic CSS help desk, Some schedule change background is recom- s2UNNINGREACCOMMODATIONn/$ANDLEG
BASED
ogy — from a competitive standpoint, as
well as the financial realities encountered
in the day-to-day operations of a thriving
business.
SELLCODESHARE Poland
Sabre Airline Solutions ® established the
Continuous Learning Series on this funda-
mental basis. Free of charge to SabreSonic
CSS customers, the sessions enable them
all users have current and correct knowl-
edge their airline can leverage to enhance
the passenger experience and simplify
the complexities of the business. It also
gives airlines the opportunity to visit Sabre
Airline Solutions’ offices, meet some of the
experts behind the technology and experi-
ence some “behind-the-scenes” activities
as well as the development team at the mended but not required. s"UILDINGCHARTERSEXTRASECTIONSANDmAGSTOPS
Bangalore office. The class was fun and
wonderful, and we hope to join it again.”
This class is for CRC, schedule change, Topics covered will include : June 9-13 Kraków,
Codeshare Automation Inventory and other personnel responsible for s$IFFERENCEBETWEENBLOCKSPACEANDFREE
The Vision And Dynamic Schedules updating/maintaining codeshare tables as well agreement
The vision behind the Continuous as those who deal with flight displays in City s-ARKETINGANDOPERATINGTABLES
Learning Series is the creation of a learning Pair Availability. s7HICHmIGHTSAREDISPLAYEDANDINWHATORDERDYNAMIC
organization that cost effectively shares schedules)
to reap maximum benefits from their tech-
AIRPORTCITIESANDPOINTOFSALE
nology investments via regular training
sessions with the greater airline commu-
nity where vast knowledge is shared by all.
This empowers participants to understand
the technology and use it to its maximum
potential.
“The session was really good and
informative, and we enjoyed the inter-
action with other airline partners,” said
Mai Hoang Chi, reservations manager for
Vietnam Airlines. “And the information
shared is going to help us further improve
our processes. We’re looking forward
to implementing more EMDs [Electronic
Miscellaneous Documents].”
In addition to educating airline agents
about the technology they use, the ses-
sions were also designed to address any
system issues and fine tune business
processes.
“The session was very informative, and
we were able to identify various issues and
the resolutions,” said Chantell Ausmeier,
operations business support analyst for
Kulula. “We had a lot of discussions about
the correct steps on various things like
Exchanges and EMDs, and now we feel
confident about the teachings.”
“The content was very informative, and
we really liked the pace and the way the
entire session was conducted,” agreed
Patricia Minihold, Kulula operations busi-
ness support analyst.
Because aviation technology tends to
that are relevant to the technology they
use.
“The classes were very informative for
us,” said Hani Nurlena Binti Mohammed,
contact center representative for Malindo
Airways, a Lion Air Group subsidiary. “It
was a great opportunity for us to see the
Sabre Airline Solutions office and meet the
different teams that work with us everyday
and get any issues resolved for us. The
class was fun, and the trainer was superb.”
Another critical goal is to present the
most complex solutions and share common
best practices across the greater airline
community. This gives airline users a more
information across the globe. And that s#ONNECTPOINTSMULTI
vision has come to fruition.
When the Continuous Learning Series This class is for carriers new to the SabreSonic Topics covered will include : Sept. 8-12 Bangalore,
was launched more than a decade ago, Sabre Sonic Check-in Check-in system. We will cover the new look s"OARDINGPROCESS India
the primary challenge was to determine Conversion and feel of familiar processes such as check- s/PERATIONS
appropriate topics and develop a full in. s$ATABASETABLES
agenda. Still relevant today, topics for the
Existing SabreSonic Check-in carriers are
first sessions included schedule change, welcome to join as well.
codeshare, inventory, reservations and
ticketing. Through the years, the sessions
have evolved to include advanced courses
that address topics such as Electronic
Miscellaneous Documents, schedule
change control, dynamic schedules,
automated exchanges and refunds, The Continuous Learning Series goes
as well as SabreSonic ® Check-In and beyond learning, however. The Participants
codeshares. are encouraged to bring open service
“The training sessions gave me new requests to the sessions, so they can work
insights into how we can better utilize directly with members of the help desk to
the automated exchanges and refunds resolve issues as well as provide feedback
tool in line with our business needs,” Four Primary Goals and improve processes.
said Yonaten Bekele, an application ana- There are four fundamental goals that Clearly, technology is only as good as
lyst for Ethiopian Airlines. “The training is continue to guide the content of Continuous those utilizing and applying it. Ensuring
very interactive and insightful.” Learning Series sessions: that airline professionals receive the nec-
As a learning organization, the trans- Provide robust and cost-effective train- essary training and education concerning
fer of knowledge spans well beyond ing sessions globally, the applications they use yields optimum
the Continuous Learning Series. Sabre Build a community of “super users” results for airlines that have made these
Airline University ®, an online portal that within each airline able to share their valuable technological investments. a
houses documentation of all SabreSonic knowledge across the entire organiza-
CSS solutions, enables users of the tion,
technology to download documentation Create and nurture an open environment
anywhere in the world … anytime. for super users to learn and share best
Airlines representatives can log onto practices to better utilize the systems,
Photos: Sabre Corp.

advance with almost breathtaking speed Sabre Airline University and register for Provide a clear product scope and direc-
Photos: Shutterstock

and regularity, training in each increment
of technological development is not just
desirable, it is imperative.
Therefore, the Continuous Learning
Series was initiated based largely upon
the strong recommendations of numer-
ous SabreSonic CSS customers who felt
a certain urgency to not only acquire
broader and deeper product training, but
also to provide additional input on product
Continuous Learning Series sessions.
Airlines can send two representatives
(super users) for training to any of the
three locations. Those representatives
can then use the information to educate
other colleagues.
In addition, Sabre Airline University
Optimizing ROI Broadened Each year, several airline representatives from around the world attend the is a virtual learning institute that offers
Continuous Learning Series to gain insight into the systems they use as well as network with the greater essential advanced airline education to
airline community to learn about best industry practices. SabreSonic CSS customers.
tion so airlines can better understand
and anticipate the patterns of industry
development over time.
To ensure the Continuous Learning
Series provides the information and train-
ing that airline super users need and
expect, feedback is gathered regularly so Jay Jain is a SabreSonic CSS
adjustments can be made, if necessary, training principal for Sabre Airline
and best practices can be incorporated into Solutions. He may be contacted
class agendas. at jayant.jain@sabre.com.

64 ascend ascend 65
 Real-Time By Harjot Grewal and Halldor Gylfason
Ascend Contributors

Revenue Reporting
Keep An Eye On Revenue Realization
For Every Seat Sold
Airlines can track key revenue-centric metrics in real time and
acquire an accurate picture of their performance across different
data slices.

Data-integration
platform
Flexible proration
library

Drill-down
capabilities

Independent Triggers
infrastructure

W
ithout real-time access
to revenue reports,
a carrier’s ability to
proactively track and
act on revenue dis-
crepancies against
actual targets is limited. Unfortunately,
airlines typically experience long lead
times before they are able to access
revenue-accounting reports that paint an
accurate picture of how much revenue
they make on their own flights. The time
lag to obtain this valuable information
may be as short as a few days, in the
ideal case, or as long as a month, even
for some sophisticated network carriers.
Of course, many business areas within
an airline would undoubtedly benefit from
technology that provides revenue-realiza-
tion information as bookings are ticketed,
with the accuracy of revenue-accounting
systems. As a result:
Interline and codeshare performance
could be analyzed in real time to capture
any dilution effects a partner’s inven-
tory may have on the host airline.
Inventory and revenue-management
analysts could exercise greater control
on specific booking classes to maximize
effectiveness of an airline’s revenue-
management strategies.
Sales and distribution channels could
check revenue performance in real time
and by point of sale to identify possible
channels of abuse.
Better Control Over Seats Sold Sabre Airline Solutions’ real-time revenue reporting application gives
analysts a single source for comparing historical data with current trends as bookings occur rather than
waiting for batch updates at the end of the day. This gives airlines better control of every seat they sell.
ASCEND I SOLUTIONS
HIGHlight Ideally, airlines need a real-time, flex-
ible proration engine that accommodates
different Special Prorate Agreements
The ability to view (SPAs) between airlines, along with add-
on reporting capabilities, to drill-down
and identify sources of gaps in revenue
revenue at varying lev- realization. In addition, they should be
able to calculate key metrics such as
load factors, yields and real-time booking
els of detail empowers counts to provide a single snapshot of
their performance, from the network to
specific regions and down to an individual
revenue-management flight.
To provide airlines with the most up-
to-date view of key performance metrics,
analysts to make edu- especially revenue contributions from dif-
ferent partner or agency agreements on
ticketed bookings, Sabre Airline Solutions ®
cated inventory-control has developed a real-time revenue-report-
ing application that plays a key role in an
airline’s business intelligence capabilities.
decisions ... Developed in the technology company’s
new innovation lab, the real-time revenue
reporting solution leverages Sabre Airline
Solutions’ data-integration platform to
Receiving real-time revenue reports dur- build sophisticated, customizable logic
ing the flight booking cycle allows airlines that acts on happenings across an airline
to proactively track and resolve discrepan- in real time.
cies against actual revenue targets. The The platform enables airlines to fully
ability to view revenue at varying levels leverage their data to make precise busi-
of detail empowers revenue-management ness decisions. It integrates operational
analysts to make educated inventory-con- and customer data from multiple isolated
trol decisions that minimize uncertainties systems onto a single platform, enabling
about the effectiveness of the airline’s data to be analyzed in real time. This
revenue management strategies. allows airlines to create rules unique to
their business processes and use them to
drive increased revenue, personalize the
customer experience and better manage
their IT costs.
The real-time revenue reporting solution
supports airlines with numerous robust
features such as:
Flexible proration library — The most
sophisticated piece of the applica-
tion’s functionality, the proration library
enables revenue-realization reporting
and accommodates standard proration
logic and numerous proration method-
ologies and agreements in a central
repository. For SPAs specific to an
airline, the solution provides extensive
configurability to maximize the level of
accuracy in prorating incoming tickets.
Photos: Shutterstock
A powerful rules engine also supports
complex SPAs and overrides values
from basic proration, all enabled through
a comprehensible graphical user inter-
face.
Data-integration platform — The solu-
tion’s proration capabilities are often
needed by other systems in an airline’s
IT enterprise, including marketing, oper-
ations planning, inventory and pricing
for applications ranging from bid-price
availability evaluations to evaluating
ascend 67
 ASCEND I SOLUTIONS

platform allows the solution to function

independently of other airline systems.
Additional capabilities will be incorpo-
rated into the solution later this year,
including:
“What-if” analysis capabilities — By
leveraging the solution’s what-if analysis
engine, airlines can pre-empt SPAs that
dilute their revenue stream through the
convenience and transparency of a simu-
lation capability made possible by the
flexible proration library.
Building predictive modeling capabilities
— As part of the commercial planning
suite, the real-time revenue-reporting
solution will gradually support forecast-
ing capabilities on revenue, yield and
other metrics through complete integra-
tion with revenue-management systems.
Analysts will have a single source in
which to view historical performance
Agent Notification Timatic AutoCheck automatically checks passengers’ travel documents to ensure against current trends and act as book-
they meet all travel requirements. If a passenger does not have the necessary documentation for his or ings occur, instead of waiting for end-of-
her trip, check-in will be restricted and the airline agent will be notified of specific documentation and day batch updates on the day’s perfor-
visa requirements.
mance. This provides better control over
every seat an airline sells.
Real-time revenue reporting gives air-
lines the ability to view revenue contribution
at varying levels of detail, so they can make
proactive decisions that minimize uncer-
tainties and maximize effectiveness of
their revenue-realization capabilities. a

Personalized Customer Experience The data-integration platform combines operational and customer
data from various isolated systems onto a single platform so data to be analyzed in real time. This
enables airlines to create rules specific to their business processes and use them to personalize the
customer experience as well as increase revenue and effectively manage IT costs.

codeshare agreements. The data-integra- airline the most complete performance

tion platform gives airlines the ability to
make this data available to downstream
third-party systems via standard Java API,
Web services, message queues and files.
Drill-down capabilities — The data-inte-
gration platform’s flexible architecture
allows the tool to graphically display
several dimensions of revenue analysis,
including revenue contributions by point
of sale and by booking class at network,
region and flight levels. In addition, com-
bining derived key performance indicators
such as yield and load factors give an
picture.
Triggers — The platform’s integrated
rules engine enables the tool to pro-
vide real-time alerts and interval-based
reporting that notify end users when
predefined conditions have been met,
such as when booking volumes or actual
revenue fall below set targets. This real- Harjot Grewal is solution manager and
time notification supports analysts and Halldor Gylfason is solution architect
managers with proactive decision mak- of the Sabre Data Integration Platform
ing. for Sabre Airline Solutions. They can
Independent infrastructure — The cre- be contacted at harjot.grewal@sabre.
ation of the reporting tool on top of the com and halldor.gylfason@sabre.com.

68 ascend
THE ART OF
Calibration
Unleashing The Power Of
Network Planning

By Gautam Pradhan I Ascend Contributor

Calibration can help airlines plan better through more

accurate and thorough scenario-evaluation processes.
To assist airlines in achieving optimal calibration re-
sults, Sabre Airline Solutions® offers an experienced
team of operations-research practitioners dedicated
to sharing their knowledge and expertise with airlines
around the world.
 ASCEND I SOLUTIONS
i
n all successful businesses, plan-
ning is critical. Because entire
departmental functions often
revolve around it, business planning
must be timely and accurate.
Particularly in the airline industry, a
compelling argument can be made that busi-
ness planning based on accurate and robust
analyses can have a significant impact on a
carrier’s bottom line.
Thorough airline business planning directly
affects the performance of every organization-
al function — and it involves many diverse
elements of airline activity.
The network-planning process, for example,
helps airlines define and execute their long-
term planning initiatives around key decisions
on salient factors including fleet composition,
product offerings, identification of growing
markets, hub design, fleeting frequency and
departure-time optimization.
To systematically support these initiatives,
airlines need technological capabilities encom-
passing activities such as schedule creation
and management, demand forecasting,
profitability evaluation, and fleet and timing
optimization under constraints.
Fortunately, highly sophisticated tools are
available to help airlines deal with all these
factors. These tools require calibration from
time to time to maintain accurate and robust
forecasting.
What Is Calibration?
Calibration is the process by which a robust
set of parameters is created — using known
information — so a model can generate what
can be confidently characterized as an accept-
able forecast.
By definition, parameter creation requires
historical data collection and validation, sta-
tistical-parameter estimation methods, and
forecast-quality measurement.
Among the tools in the marketplace, Sabre®
AirVision™ Planning and Scheduling supports
these decision-guiding requirements using
Sabre® AirVision™ Profit Manager as the core
forecasting and evaluation engine. In addition,
Sabre® AirVision™ Global Demand Data serves
as a primary historical market-data source for
calibration, providing key inputs such as overall
market sizes, historical market shares and
passenger flows.
Industry-Leading Forecasting
Capabilities
Profit Manager is a forecasting solution
that supports complex scenario evaluations
such as:
New market viability;
Frequency and timing changes;
Codeshare, joint venture and alliance mod-
eling;
Impact of competitor schedule changes;
New hub structures.
70 ascend
The forecasting process consists of a pas-
senger-connection builder, a customer-choice
model that emulates passenger behavior when
choosing connections, and a “spill-and-recap-
ture” model to estimate traffic when demand
cannot be served by available capacity.
Profit Manager enables airlines to con-
trol several different parameters to model
observed behavior, as well as fine-tune the
forecasting results.
To maximize productivity when using
the system for decision support, airlines
must generate accurate forecasts. For
larger airlines, this may equate to tens of
thousands of market forecasts. Therefore,
parameter setup and tuning are of para-
mount importance.
Profit Manager requires calibration to
ensure quality output throughout its prod-
uct lifecycle. Calibration for Profit Manager
is an iterative process by which system
parameters are estimated and validated
using various market and internal airline
data sources.
Typical tasks that need to be performed
when calibrating the system include:
Defining the network — Analyzing a
larger network allows new market sce-
narios to be modeled more effectively;
however, it inflates the run time and
Robust Forecasting Process
Connection
Builder Market Share
Host Airline
Market Share
and OAL
Model
Schedule
Forecast
Connection Market Share
Builder
by Itinerary
1 3
Connection
Building Revenues
Rules
Revenue Allocation
System Accuracy Sabre AirVision Profit Manager contains a modular forecasting process with several
inputs that need to be calibrated to ensure system accuracy.
ASCEND I SOLUTIONS
may add unnecessary bulk to stable Global Demand Data solves this problem
scenarios. In addition, an airline needs Iterative Calibration Process by:
to obtain data for all the markets consid- Combining and cross referencing
ered in the system. more than 50 data sources, including book-
Estimating economic data such as mar- Data Network ings from major global distribution systems
ket demands, segmentations and fares. Calibrate (GDSs) such as the Sabre ® GDS, fare data
Preperation Definition
Estimating parameters for itinerary gen- from the Sabre GDS, and government and
eration to balance the construction of other agencies that report traffic at various
valid itineraries as opposed to itineraries levels.
that may never, in reality, be chosen and Applying algorithms to estimate demand
will dilute market share in the system. and fill gaps in areas with low GDS cover-
Estimating passenger-preference param- age.
eters for the customer-choice model. Algorithms used in Global Demand Data
Establishing parameters for spill and are continuously updated with enhance-
recapture — Revenue management ments and new data sources as they
practices are simulated by defining the Validate Forecast become available. Extensive validation
proper fares, load factors on closed ensures consistency of the data from one
flights, and the coefficient of variation period to another, and accuracy benchmarks
of demand. with airline-provided data are used to con-
Measuring system performance and tinuously assess and improve the approach
performing macro- and micro-level and process.
adjustments to fine tune the results. Forecasting And Validation Parameters are iteratively fine-tuned via forecasting and validation steps Additionally, Global Demand Data can be
that measure system accuracy of each newly updated parameter set. enriched with post-departure traffic data
Global Demand And Fare from an airline, as well as additional airline-
Estimation subscribed GDS data, to increase solution
As recently as a decade ago, estimating subscription — have been readily available travel, length of journey (short-haul versus accuracy.
market demand for historical periods was to airlines. long-haul), airline and market type (domestic Today, several airlines, aircraft manufac-
not a significant challenge since global With the growth of low-cost carriers and versus international). turers and airports use Global Demand Data
distribution systems (GDSs) captured most online bookings, the direct channel overall Thus, GDS data — while providing a certain to power their business intelligence and
bookings, and these data points — through is now comparable to the GDS channel in richness of detail — only generates what network planning functions.
terms of bookings. might be properly described as an “incom-
The relative booking proportions vary by plete” picture of total demand in a market. Importance Of Calibration
market segment, such as leisure or business Calibration is the foundation of good
decision making. A poorly calibrated sys-
tem will inevitably lead to suboptimal
decisions.
Spill And
Global Demand Data Estimation Process A recent study conducted by Sabre
Recapture Airline Solutions, which was presented
Adjustments to to the AGIFORS Scheduling & Strategic
fares and Market Planning study group, quantified the
Spill and Sizes are done
Market Sizes impact of a poorly calibrated system on
Recapture during the process
by cross-referencing decision making.
Models
of information The study utilized a benchmark-cali-
between the data brated parameter set and multiple “bad”
Sabre/Amadeus./ sources
parameter sets to create different fore-
Forecast Estimate Travelport MIDT
cast sets. These forecasts were used
Demand by Taffic by
to perform fleet- and hub-timing opti-
Itinerary Itinerry Data
mization to generate a new schedule.
World Wide Data Analysts O&D
4 Each schedule was then evaluated against
Adjustment Processing Market Sizes & Fares
the benchmark-parameter set to mea-
sure the reduction in forecasted revenue
Direct Cost opportunity.
Assign Assign Sabre GDS Fares Results for a mid-sized hub-and-spoke
Allocation
Revenues Costs
Rules Sabre personnel carrier showed that a 3 percent increase
takes steps to in leg-traffic error due to incorrect market
5 6 GDS fare cross-check, rec-
data for
All Other Data
oncile and adjust sizes led to a 0.5 percent loss in total rev-
Sources
Cost Allocation different the data accord- enue opportunity. The study also tracked
airlines ingly, giving the a 0.4 percent drop in revenue opportunity
best validation and
Display accuracy as reason- when the quality of connections built by
Results ably possible. the system dropped by 8 percent.
7 Data Sources And Calibration
Multiple Data Sources Automated processing and adjustments using more than 50 different data Methods
sources are followed by validation performed by Sabre Airline Solutions experts to ensure data integrity The data-collection and data-validation
and quality. processes represent important steps in
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 ASCEND I SOLUTIONS ASCEND I SOLUTIONS

Market-level problems may indicate a
pattern that affects a larger group of markets
Measuring The Revenue Impact Of Forecast Accuracy and should be thoroughly analyzed.
Key considerations in applying market-
level overrides include size and schedule
stability of the market, as well as the quality of
Uʘ«ÕÌ Decision UÊ"ÕÌ«ÕÌ data used to validate the market. Robustness
Schedule Support Schedule can be further established by testing Profit
urgent responsibilities that relegate cali-
bration tasks to a lower priority level within
an airline’s planning area.
Providing consistent high-quality calibra-
tion processes and outputs, including vali-
dating data quality and consistency among
various sources, ensuring regular industry
data updates, support for setting up user-
Support For In-House Calibrations
Several airlines currently using Profit
Manager have chosen to invest in their
own calibration processes and operations
research teams. Sabre Airline Solutions
supports these airlines in a variety of ways
such as:
Specialized customer care that address-
improvements and capabilities, such as
Global Demand Data.
These investments create the foundation
for decision-support systems that perform
advanced network optimizations focused on
improving airline schedules and unleashing
the power of network planning. a
UÊi“>˜` UÊ*ÀœwÌ>LˆˆÌÞ Manager with predetermined “what-if” defined inputs and evaluating final output es system issues and questions related
Good Good
Forecast
Calibration Calibration scenarios. parameters. to data sources and processes,
These scenarios may include the addi- Continuously adopting evolving calibration Standardized health checks to review the
tion of new markets, frequency changes, methodologies and common best prac- end-to-end calibration process,
codeshare and alliance partnerships, hub tices. Training and refresher training for current
redesign (using a solution such as Sabre® Airlines typically appoint one or two users and new users when enhancements to
AirVision™ Network Manager) or refleeting as liaisons between their larger user teams calibration modules are introduced,
(using a solution such as Sabre® AirVision™ and the Sabre Airline Solutions calibration Parameter updates for one or more sea-
Uʘ«ÕÌ Decision
UÊ"ÕÌ«ÕÌ
Fleet Manager). experts to ensure effective, full-operational sons incorporating the latest methodolo-
Schedule Support adoption and incorporation of customer feed- gies.
Schedule
Bad
UÊi“>˜`
Forecast
Calibration
System Parameters Decisions arrived at using a “good” and a “bad” parameter set were evaluated
using the “good” parameter set to measure the impact of having “bad” system parameters.
ensuring the success of the calibration
process.
Typical market-data sources include:
Passenger name record (PNR) data, also
known as Marketing Information Data
Tapes (MIDT), from GDSs help estimate
itinerary-level passenger preferences
and correctly establish connection-build-
er rules.
Population-adjusted overall-market-size
data, such as Global Demand Data, that
adjusts for direct-channel and low-cost-
carrier bookings are critical as airlines
push harder on their direct sales.
Industry data including airline sched-
ules, industry minimum connect time
(IMCT) data, aircraft seat configuration
and airport locations.
Market intelligence that encompasses
data from airports or government agen-
cies, competitive-fare information, etc.
Internal airline data such as ticket cou-
pon data from revenue accounting and
post departure traffic data from the
departure control system are critical to
compute origin-and-destination (O&D)
fares and yields, as well as validate
passenger loads and flows on the host
airline’s network.
Typically, calibration of data inputs
involves estimating parameter sets at
a market level — or for a logical group
of markets, referred to as an “entity”
— using various statistical and model-
estimation techniques such as linear and
logistic regression, clustering, maximum-
likelihood and demand based on sampling
techniques.
72 ascend
Bad
UÊ*ÀœwÌ>LˆˆÌÞ
Calibration
Extensive Validation Process
Two important factors determine the
usability of the calibrated parameters:
Robustness of the parameters during
schedule changes and network expansion,
Accuracy of the forecasted results when
compared to historical data.
However, be advised: Maintaining robust-
ness may lead to calibration of parameters at
high levels of aggregation — possibly at the
entity or system levels — that can reduce
accuracy for some individual markets.
On the other hand, calibrating all parame-
ters at a market level will be time consuming
and can lead to bias toward the current mar-
ket conditions and may not allow for optimal
performance under future schedule changes.
Accuracy of forecasted results is mea-
sured by comparing system performance to
historical data for the following attributes:
Connection-builder results validated
against historically observed connections
Market-share-model accuracy
Traffic estimates against post-departure
traffic data and passenger flows using
industry data (such as MIDT and internal
data such as revenue accounting).
Accuracy targets are specified for key
performance indicators (KPIs) defined for
each of the above attributes, and Profit
Manager is expected to conform to these
targets. During the calibration process, KPIs
must be reviewed continuously, and the rel-
evant parameters are adjusted interactively
to refine the calibration.
Accuracy is further improved by evaluating
and identifying markets requiring parameter
overrides and adjustments.
Achieving Optimal Results back in the calibration process.
The calibration service offered by Sabre Primary responsibilities of airline users Unleashing The Potential Of
Airline Solutions provides airlines with two include: Calibration
sets of calibrated parameters each year. Internal and external data collection and Consistent and accurate calibration is
Specific deliverables include market-demand transmission to Sabre Airline Solutions; an integral part of the planning process,
and fare data, as well as parameter sets for Attendance at meetings to discuss status, enabling airlines to produce robust, accu-
control of itinerary building, passenger-pref- progress and issues during the calibration rate schedule evaluations. Gautam Pradhan is the manager
erences modeling and spill-and-recapture process; To help airlines effectively com- of Sabre ® AirVision™ Operations
modeling. Receive and validate calibrated parameters pete in the marketplace, Sabre Airline Research for Sabre Airline
Assistance is also provided in extracting as well as assist user teams with param- Solutions continually invests in operations Solutions. He may be contacted at
schedule and industry information from data eter adoption. research expertise and calibration-process gautam.pradhan@sabre.com.
feeds subscribed to by individual airlines,
such as minimum connect times, aircraft
seat configurations and other relevant data,
for use in Profit Manager.
Forecast-quality measurement is an inte-
gral part of the process. Reports measuring
several KPIs at multiple levels of detail are
shared with individual airlines.
When Sabre Airline Solutions personnel
Count
perform calibration for an airline, results
are presented to the airline using standard
templates that can help identify problem
areas that must be addressed. These tem-
plates are reviewed with the airline, and
methodologies to address identified issues
80 percent
it up
are discussed and applied.
The technology company’s calibration
experts work closely with an airline’s plan- of aviation emissions are from flights over Interesting facts and
ning department to better understand the figures in the airline
airline’s network and data sources, which industry.
are key in the performance and delivery of
calibration.
56.6 million
Calibrations performed by Sabre Airline
Solutions benefit airlines by:
Eliminating the necessity for a dedicated
in-house calibration team. As a result, -
airline resources can be deployed in more
strategic areas such as network planning the industry. The rest are through the
and market development, and recruiting
can focus on hiring candidates with plan- made possible by aviation, according to
ning experience rather than operations ATAG.
research, statistics and other technical
areas specific to calibration processes.
Ensuring timely delivery of calibrated
parameters for each season. An in-house
calibration team may have other, more
ascend 73
 By Les Baker I Ascend Contributor

A Proven Method For Airlines To Grow Their

Contracted Corporate Business
Several airlines rely on Sales Information Server (Sis) to grow their corporate segment, build a
more effective and efficient sales team, and enhance their relationships with corporate customers.
The no-risk solution reaps significant benefits for airlines around the world.

T
he corporate traveler is essential
for the success of most airlines.
On average, 12 percent of an
airline’s travelers fly on a con-
tracted business fare. A 2013
PRISM study analyzing airline financial reports
revealed that corporate contracts contribute
twice an airline’s average profit. This is not
a misprint — corporate contracted sales are
essential to an airline’s strategy, success and
survival.
PRISM’s solution — Sales Information
Server (Sis) — which was acquired by Sabre
Airline Solutions® in 2012, helps grow a
company’s most profitable corporate busi-
ness. The system leverages alliance and joint
venture relationships to build an expanded
airline network. It helps an airline’s sales staff
become more effective and efficient and cre-
ates a true win/win relationship with corporate
customers.
The strategy is simple and is the reverse
of traditional yield management: fill from the
front of the plane to the back. By utilizing this
strategy and partnering with PRISM, airlines
have developed corporate contracting into the
most profitable segments of their businesses.
Sis is an integrated, turnkey, customizable
Software as a Service solution used by 40 air-
lines — including the largest carriers on each
continent, two alliances and most joint ventures.
More than 700 man years of programming have
been invested in this patented technology. The
Star Diagram Of Sis Components
An Integrated Contracting And Sales Management System The PRISM “Star” provides a complete,
integrated, customized solution for an airline’s contract management. All airlines have different contract-
ing processes, so the PRISM solution provides the flexibility to accommodate all airlines, regardless of
size, business model or geographical location..
solution’s user interface operates in nine
languages: Chinese, Japanese, German,
Russian, Spanish, Portuguese, French and
two styles of English.
Airline Challenges
Before PRISM’s solution, airlines could
not accurately measure corporate contract
performance, the revenue contribution of
the corporate business segment or the true
impact of their market strategies on these
customers. Rather than treating their portfo-
lios as investments, airline account managers
focused on relationships, hoping companies
would choose to book seats on their carriers
based on “warm” feelings about these rela-
tionships. As a result, airlines routinely offered
customer incentives without an ability to mea-
sure their effectiveness. It was not unusual
for a company to receive multiple conflicting
“preferred” deals on the same routes.
Airlines relied on revenue accounting data,
which left them unable to compare their
relative market positions or measure the total
potential value of the account.
Traditionally, some airline account managers
spent two-thirds of their time collecting data,
preparing spreadsheets, and analyzing and
negotiating contracts. In the end, 80 percent
of the deals failed to meet the agreed-upon
requirements, and the airline wasted mil-
lions in lost potential revenue and inefficient
account management.
ASCEND I SOLUTIONS
Overcoming The Challenges
PRISM’s Sis technology addresses all of
these issues, enabling airlines to build their
corporate segments, align their corporate
contracts with customers’ needs, realize the
revenue offered by corporate customers,
improve processes for more-efficient account
management, analyze and forecast terms effi-
ciently, and measure contract performance.
Data: The “Secret Ingredient”
PRISM data are completely different from
any other data in the airline industry, captur-
ing the complete corporate account picture.
Payment and personal data are omitted, and
competitor data are masked and aggregated.
As a trusted third-party data intermediary,
PRISM receives and processes more than 300
million tickets annually from travel agencies,
Internet portals and airline-direct bookings.
Data is normalized into an airline-defined origin-
and-destination format used to structure their
markets and networks.
Contracting Options
Airlines often use Sis for contracts with mar-
ket-share requirements. This is the optimum
type of contract since increased market share
funds the discount, or pays for itself. However,
the system manages all types of contracted
discounts and requirements including revenue-
based, net fares and back/front-end discounts.
Before PRISM, airlines could not measure
individual or aggregated contract performance.
PRISM’s system automates this monitoring
and provides decision support needed to opti-
mize contracts over their life cycles.
Corporate Account Strategy
An airline’s strategy for increasing corporate
business should include the following steps:
The corporate customer designates a pre-
ferred carrier and directs business to it.
The airline aligns the discount with the cor-
porate customer’s mix of cabin and quality of
revenue.
The airline targets markets for improved
sales.
Airline account managers and corporate cus-
tomers collaborate to improve performance
in these markets.
Non-cash amenities such as supplement
customer relationship management (CRM)
functions to support the contract.
Contracts are measured and adapted over
time as patterns change.
Automating Success
Before PRISM, airlines could not analyze or
forecast contract terms efficiently, nor could
they ensure contract fulfillment. Hindered by
inefficient processes, a contract proposal took
weeks or months for airlines to prepare and
cost an estimated US$10,000 to generate a
major deal offer. PRISM reduced the process
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 ASCEND I SOLUTIONS ASCEND I SOLUTIONS

company data to analyze and forecast the

proposal. We’re Making More Room For Our Business Travelers
2. Once data are obtained, the airline’s sales
analysis team prepares and analyzes the pro-
posal. Close attention is focused on cabin,
Criteria Agency Card MIDT Airline PRISM market requirements and the ability of the
corporation to direct business to the carrier.
The optimal customer is a premium-cabin
Provide All Carriers international company that can direct busi-
ness to the preferred carrier.
and Suppliers 3. The airline prepares and presents the cus-
tomer proposal. Although airlines have
somewhat different contracting practices,
Identify Corporate most contracts focus on bundling markets
into contract terms based on market char-
Customer acteristics, such as hub, hub-to-spoke and
spoke-to-spoke, and performance expecta-
tions. Airlines and corporate customers both
Reconcile Net desire realistic performance requirements.
Segment Count 4. As the airline and corporate customer
negotiate the proposal, some terms may
be adjusted. Once the proposal has been
agreed upon, a contract is generated by the
Provide Rich system for electronic approval. Fare filing
reports are used internally to help speed
Segment Data the implementation process. Documents
are archived in the system, and notes are
made in the CRM component so history is
preserved.
5. A prospect has become a customer. Monthly
Understanding Corporate Clients Before PRISM, an airline could not understand how its corporate
performance reports are sent automati-
account portfolio was preforming. Key is other airline data, which is masked and aggregated. Data is
cally to the corporate customer and airline
non-personal/financial so ATI and data privacy safeguards are ensured.
account manager. The account manager
and customer review the information on a across the internal airline teams that use the ing a three-year period from corporate- Fare filing template reports were prepared
scheduled basis to optimize performance. system, as well as the corporate customers contracted business. so input could be formatted more quickly.
If terms become unfavorable, they can be and their travel agencies who will be guided In the United States, by automating sales This process reduced the implementation
to days and, in some cases, hours using 1. An airline identifies a prospective corporate adjusted quickly. through the business processes that Sis processes and eliminating the work of the time so corporate customers could have
integration and automation. There are sev- customer and approaches it regarding a introduces. account manager to obtain data, a carrier access to their discounts more quickly after
eral best-practice steps for automating a deal deal. A data release authorization is issued Project Management was able to triple the number of accounts the contract was signed.
process: to request three to six months of historical An airline’s Sis project manager has a Success Stories assigned to each account manager. An airline analyzed its corporate portfolio to
crucial role in ensuring the successful imple- Several airlines have leveraged Sis to An airline based in Asia developed a mid- determine routes where it was not flying.
mentation of the solution within the airline. achieve significant results on their corpo- size corporate account portfolio to comple- Using this consolidated information, addi-
The project manager guides the gathering rate contracts, including: ment its global account strategy. Although tional flights were added to new destina-
PRISM Statistics and quality assurance of key data elements A U.S.-based airline went from an 89 per- these companies produced only 10 percent tions with a mini-hub established.
used to populate Sis with the airline’s corpo- cent contract failure rate to an 83 percent of the volume compared to that of a global
rate customers and customer contacts, as success rate by using Sis performance account, the portfolio of these accounts Why This Works
well as the corresponding airline staff mem- data and training account managers. grew to exceed that of the global accounts. Airline corporate contacts are foundational
Companies 8,323 ber assigned to each customer. The project The same airline saw corporate con- This was due to the strong commitment to an airline’s profit and success. The ability to
manager also researches and confirms key tracted revenue rise from 37 percent to the mid-size corporate customers made to measure, incent and service corporate busi-
customization components of the airline’s 50 percent over three years. direct business to the preferred carrier. ness leads to greater profits. As a result, an
Ticketing countries 163 Sis application, ensuring that it is uniquely Two carriers — one in Europe and the An incentive system was designed to airline can improve yield and revenue, and
suited to how the airline conducts business other in the United States — received reward account-manager performance for sales staff can focus on direct customer activi-
and deals with its customers. ATI indemnification for a joint venture increasing business. The same carrier “load ties rather than administrative tasks. Sis is
These components include online air- relationship. Joint contracts were estab- balanced” accounts to work was distributed self-funding and risk free, and it can be used in
Ticketing sources 1,763 ports, network hubs, geographic entities, lished to provide a single document to equitably. many creative ways to help airlines grow their
connection parameters used to construct a corporate customer, and revenue and One airline established a simple discount corporate segment. a
true O&D and fare-class-to-cabin transla- profits from the business were shared by program for customers that provided data.
Unique data formats 370 tions. Following the development and setup the two airlines. While any company could qualify, many
of the airline’s Sis environment, the proj- For the first time, European corporate companies were small- or medium-sized
ect manager works closely with PRISM’s customers received monthly perfor- companies that had never had access to a
implementation team to coordinate the mance reports, which enabled airline discount program before. Those showing
airline’s data acquisition processes, user- account managers to meet with their top the ability to direct business received addi-
Worldwide Data Virtually every major company on earth provides data to PRISM on behalf of its support functions, new user training and 100 accounts to develop strategies for tional performance-based discounts. The Les Baker is vice president of PRISM
corporate deal. Data comes in many formats and is audited and normalized using PRISM’s patented industry preparation. This work contributes improving performance. This resulted in airline doubled its overall contracted compa- for Sabre Airline Solutions ®. He can be
processes. to a streamlined and effective rollout of Sis US$100 million in additional revenue dur- nies. contacted at les.baker@sabre.com.

76 ascend ascend 77

MOrale
BOOst I
t is 8 a.m. at Los Angeles
International Airport. You are a
ramp agent and have been racing
through rush-hour traffic to get
to a small office on the tarmac to
bid on your work schedule for the next
six months. You have a small window of
By Jennifer Jennings and Derek Sutton I Ascend Contributors opportunity between 8:25 a.m. and 8:30
a.m. to choose which line on the schedul-
New Shift- And Vacation- ing roster you want.
You have been researching the new
Bidding Technology Improves schedules and penciling in your prefer-
ences ever since they were released
Employee Satisfaction Levels two weeks ago. While waiting for the
employee bus, you anxiously check your
watch. If you are late, you will lose your
time slot and probably not get the sched-
ule you desire.
Finally, you arrive at the terminal, pro-
ceed down stairs and into the office. You
search through 20 sheets of paper taped
to the wall for that perfect schedule.
Luckily, it is still open and you sign your
name on the line. You are finally done.
However, it is 8:30 a.m., and your shift
that day doesn’t start until 12:15 p.m.
You can either wait around for several
hours until your shift starts or drive all
the way home just to turn around and
come back to work in a couple of hours.
If this employee experience sounds
antiquated and inconvenient, it is.
Unfortunately, airline employees have
been repeating this exercise for decades
Rather than driving, and in some cases
flying, to a specific airport on a certain day at
a certain time to enter shift and vacation bids, airline,
airport and ground-handling employees can now enter their
bids remotely via Sabre® AirCentre™ Bid Connect. Among many
benefits to aviation companies, Bid Connect lowers employee-related
costs, increases employee efficiency and heightens employee satisfaction.
Powerful, Scalable Bidding Solution Bid Connect offers a centralized administrative solution that is
powerful and scalable to handle a wide range of workforces, from small to very large sizes. It gives
managers robust visibility into the bidding process and overall bid status while significantly reducing the
administrative man hours required to conduct a bid.
ASCEND I SOLUTIONS
as they prepare for shift and vacation
bids. Depending on company or union
rules, this might occur once a year,
biannually or even more frequently. With
modern-day technology that supports
online shopping and even provides the
ability to control home thermostats from
smartphones, airline employees are sure
to wonder why their shift- and vacation-
bid processes are decades behind.
Life Made Easier
Sabre Airline Solutions ® has made the
aforementioned scene one for the his-
tory books with the recent launch of Bid
Connect, which automates the bidding
process for employees and administrators
by shifting the entire range of activities
(such as conducting the bid and awarding
shifts and vacations) required in a bid to
an easy-to-use, Web-based portal.
A key objective of the automation
provided through Bid Connect focuses
on enhancing the employee experience
and overall satisfaction, which enables
employees at all levels to spend more time
on other, more critical work activities.
During the development of Bid
Connect, Sabre Airline Solutions worked
with thought leaders in the airline, airport
and ground-handling industries to ensure
the solution’s features and functionalities
are tailored to the needs of the market-
place. As a result, airlines using the
ascend 79
 ASCEND I SOLUTIONS

new technology can expect to achieve maxi-

mum return on investment through streamlined Designed For Mobile Devices
bid processing, improved employee satisfac-
tion, and reduction of errors and fines related
to manual bid administration.
Bid Connect is the only online solution
available to the travel industry that pro-
vides a truly configurable, user-controlled
platform for setting bidding policies, man-
aging the bid process and empowering
employees to better manage their bid
actions. Users have access anytime and
anywhere to a continuous, real-time solu-
tion. The ability to bid on schedules is
one of the most important benefits for
employees, so ensuring the process is fair
and accurate is crucial.
Inconsistent bidding policies cause
confusion, lead to inequities and impact
morale. Users of Bid Connect have a
configurable application that aligns to the
unique policies in place at their compa-
nies. The solution’s employee-bid portal
provides a gateway to a complete view
of the employee’s leave and shift options,
bids, and awards. Moreover, managers
have access to the complete history of the
development, execution and award of each
bid, while employees can view attributes Flexible And Convenient Bid Connect can be
of the award process as permitted by their accessed through a dedicated, responsive mobile
companies. website designed for an array of smartphones and tablet
devices. This adds additional flexibility and convenience
to the bidding process for airline, airport and ground
How Bid Connect Works
handler employees.
Some unique characteristics of the sys-
tem include:
The ability to see one’s selections in
terms of the number of positions or vaca-
tion slots available within a particular while employee information and criteria Email notifications and alerts.
roster line or block of vacation weeks, key for the bidding processes are con- The automation provided through Bid
Search mechanisms to find what other tinually updated. After the bidding process Connect is an essential step for airlines,
employees are bidding on, has concluded, rosters will be exported airports and ground handlers in their
A comprehensive filtering tool that facili- to Staff Admin, complete with employee efforts to reduce manual, intensive
tates submission of bids based on saved names attached to rosters and vacation processes while improving employee
employee preferences. days listed. At this point, an airline has a morale. a
By providing employees with schedule complete, assigned roster.
choices and allowing the system to assign Managing the schedule of employees
shifts in accordance with seniority or other on a daily basis is one of the most critical
ranking rules, Bid Connect removes any tasks for airlines. Therefore, the market
potentially questionable scheduling practic- demand for an automated bidding sys-
es while bringing consistency, transparency tem is significant. Bid Connect closes the
and fairness into the shift- and vacation- resource-planning loop and helps lower
assignment process. employee-related costs, improve employ-
For administrators, Bid Connect provides ee efficiency and increase employee
the bid manager with full control over the satisfaction.
configuration of the shift and vacation bids
to support local policy, seniority or other More Benefits To Come
award rules; vacation thresholds; vacation- Following the initial release of Bid
day balances; employee labor pools; bidding Connect, Sabre Airline Solutions will also
windows; and more. It can be utilized as invest in advanced solution features such
a stand-alone solution through Web ser- as:
vices; however, for existing users of Sabre® Access through a dedicated, responsive Jennifer Jennings and Derek Sutton
AirCentre™ Airport, it can be integrated mobile website designed for a variety of are solution managers for Sabre
with Sabre® AirCentre™ Staff Admin. smartphones and tablet devices, Airline Solutions. They can be
Published rosters can be extracted from Platforms for deployment in multiple lan- contacted at jennifer.jennings@sabre.
Staff Admin to active bids in Bid Connect, guages, com and derek.sutton@sabre.com.

80 ascend

Ta king your airline to new
2014 Issue No. 2
Editor in Chief
Stephani Hawkins
Art Direction/Design
Charles Urich
Associate Editor
Lauren Lovelady
Contributors
Tyler Anglim, Angela Berry, Fadi Fahes,
Katie Freeman, Tyra Jordan, Dana Knight,
Yusuf Mauladad, Lindsay Millward, Darren
Rickey, Sergey Shebalov, Simone Silveira,
Nancy St. Pierre, Lena von Peltzer,
George Wrigley
Publisher
Sabre Airline Solutions®
www.sabreairlinesolutions.com
Awards
APEX Awards for Publication Excellence:
2013, 2012, 2011, 2009, 2008, 2007, 2006,
2005, 2004
ECO Awards For Excellence In
Environmental Communications: 2009
Hermes Creative Awards: 2013, 2012, 2011,
2010, 2009, 2008
International Association of Business
Communicators Bronze Quill: 2011, 2009,
2008, 2007, 2006, 2005, 2004
International Association of Business
Communicators Gold Quill: 2006, 2005
International Association of Business
Communicators Silver Quill: 2008, 2006,
2005, 2004
Magnum Opus Awards: 2011
MarCom Platinum Award: 2013, 2010
The Communicator Award: 2013, 2012,
2011, 2010, 2008
making
height s
contact
To read the current issue of
Ascend and past issues in
digital format using your
personal computer, tablet or
smartphone, visit our website
at www.ascendforairlines.com.
Asia Pacific
Theo Panagiotoulias
Vice President & General Manager
Phone: +65 6215 9521
Email: theo.panagiotoulias@sabre.com
Europe, Middle East and Africa
Jeremy Sykes
Head of Sales
Phone: +44 (0)208 538 8637
E-mail: jeremy.sykes@sabre.com.
The Americas
Mike Douglass
Vice President & General Manager
Phone: +1 682 605 5349
E-mail: mike.douglass@sabre.com
For more information about products
and services featured in this issue of
Ascend, please visit our website at
www.sabreairlinesolutions.com
or contact one of the following
Sabre Airline Solutions regional
Freedom To
representatives:
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noted in italics in this publication are
trademarks and/or service marks of an
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owners. ©2013 Sabre Inc. All rights
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