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The Global Airline Industry (Aerospace Series (PEP)) PDF

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THE GLOBAL AIRLINE INDUSTRY The G lobal A i rline I ndustry E d i t e d B y P e t e r B e lobaba, Amedeo Odoni and Cynthia Barnhart © 2009 John Wiley & Sons, L td. ISBN: 978-0-470-74077-4 THE GLOBAL AIRLINE INDUSTRY Edited By Peter Belobaba DepartmentofAeronautics&Astronautics,MIT, USA Amedeo Odoni DepartmentsofAeronautics&AstronauticsandCivil&EnvironmentalEngineering,MIT, USA Cynthia Barnhart DepartmentofCivil&EnvironmentalEngineering,MIT, USA A John Wiley and Sons, Ltd., Publication Thiseditionfirstpublished2009 ©2009,JohnWiley&Sons,Ltd Registeredoffice JohnWiley&SonsLtd,TheAtrium,SouthernGate,Chichester,WestSussex,PO198SQ,UnitedKingdom For details of our global editorial offices, for customer services and for information about how to apply for permissiontoreusethecopyrightmaterialinthisbookpleaseseeourwebsiteatwww.wiley.com. The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright,DesignsandPatentsAct1988. Allrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmitted,in anyformorbyanymeans,electronic,mechanical,photocopying,recordingorotherwise,exceptaspermittedby theUKCopyright,DesignsandPatentsAct1988,withoutthepriorpermissionofthepublisher. Wileyalsopublishesitsbooks inavarietyofelectronic formats.Somecontentthatappearsinprintmaynotbe availableinelectronicbooks. Designations usedby companies todistinguish theirproducts are often claimedas trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of theirrespectiveowners.Thepublisherisnotassociatedwithanyproductorvendormentionedinthisbook.This publicationisdesignedtoprovideaccurateandauthoritativeinformationinregardtothesubjectmattercovered. Itissoldontheunderstandingthatthepublisherisnotengagedinrenderingprofessionalservices.Ifprofessional adviceorotherexpertassistanceisrequired,theservicesofacompetentprofessionalshouldbesought. LibraryofCongressCataloging-in-PublicationData Recordonfile AcataloguerecordforthisbookisavailablefromtheBritishLibrary. ISBN: 978-0-470-74077-4 Typesetin10/12TimesbyLaserwordsPrivateLimited,Chennai,India PrintedandboundinGreatBritainbyAntonyRoweLtd,Chippenham,Wiltshire Contents List of Contributors xiii Series Preface xv Notes on Contributors xvii Acknowledgements xxiii 1 Introduction and Overview 1 PeterP. Belobaba andAmedeoOdoni 1.1 Introduction: The Global Airline Industry 1 1.1.1 Deregulationand Liberalization Worldwide 5 1.1.2 RecentIndustry Evolution 6 1.1.3 LookingAhead: Industry Challenges 12 1.2 Overview of Chapters 13 References 17 2 The International Institutional and Regulatory Environment 19 AmedeoOdoni 2.1 Introduction 19 2.2 Background on the International Regulatory Environment 20 2.2.1 TheChicago Convention 20 2.2.2 “Freedomsof the Air” 21 2.3 Airline Privatization and International Economic Regulation 24 2.3.1 Airline Privatization 24 2.3.2 TypesandCritical Aspects of Air ServiceAgreements(ASAs) 25 2.3.3 TypicalContent ofBilateral and Multilateral ASAs 26 2.3.4 TheUnified EuropeanUnion Marketand OtherMajor Developments 30 2.4 Airports 32 2.4.1 Restrictions on Airport Access 33 2.4.2 Airport Ownership andManagement 36 2.5 Air Traffic Management 39 2.6 Key Organizations and Their Roles 40 vi Contents 2.6.1 International Organizations 41 2.6.2 Organizations in the USA 43 2.7 Summary and Conclusions 45 References 46 3 Overview of Airline Economics, Markets and Demand 47 PeterP. Belobaba 3.1 Airline Terminology and Definitions 47 3.1.1 Basic Airline Profit Equation 49 3.2 Air Transportation Markets 51 3.2.1 TypicalAir PassengerTrip 51 3.2.2 Spatial Definitions of Airline Markets 53 3.3 Origin–Destination Market Demand 55 3.3.1 Dichotomy of Airline Demandand Supply 56 3.3.2 Factors Affecting Volume of O-D Demand 57 3.3.3 Quality ofService Factors 58 3.3.4 Total TripTime andFrequency 59 3.4 Air Travel Demand Models 60 3.4.1 Elasticity of Air TravelDemand 61 3.4.2 Air TravelDemandSegments 62 3.4.3 O-DMarketDemandFunctions 65 3.5 Airline Competition and Market Share 67 3.5.1 MarketShare/FrequencyShare Model 68 3.5.2 S-curveModelFormulation 70 3.6 Chapter Summary 70 References 71 4 Fundamentals of Pricing and Revenue Management 73 PeterP. Belobaba 4.1 Airline Prices and O-D Markets 74 4.1.1 Regulatedvs. Liberalized Pricing 74 4.1.2 TheoreticalPricing Strategies 75 4.1.3 Price Discrimination vs. ProductDifferentiation 77 4.2 Airline Differential Pricing 78 4.2.1 MarketSegmentation 79 4.2.2 Fare ProductRestrictions 80 4.2.3 Traditional Airline FareStructures 82 4.2.4 RecentTrendsin Airline Pricing 84 4.3 Airline Revenue Management 88 4.3.1 ComputerizedRevenueManagementSystems 90 4.3.2 Flight Overbooking 93 4.3.3 EMSR Methodsfor Flight LegRevenueOptimization 98 4.3.4 NetworkRevenueManagement 101 4.3.5 RevenueManagementfor LessRestrictedFare Structures 108 References 111 Contents vii 5 Airline Operating Costs and Measures of Productivity 113 PeterP. Belobaba 5.1 Airline Cost Categorization 114 5.1.1 Administrative vs. Functional CostCategories 114 5.1.2 CostDrivers by Functional Category 119 5.2 Operating Expense Comparisons 119 5.2.1 PercentageBreakdownof Operating Expenses 120 5.2.2 Legacyvs.Low-CostAirlines 122 5.2.3 Flight Operating Cost Comparisons 132 5.3 Comparisons of Airline Unit Costs 136 5.3.1 Total Operating Costs vs. Unit Costs 136 5.3.2 Legacyvs.Low-CostAirline Unit Costs 138 5.3.3 Unit CostComparisons inEurope, Asia and Worldwide 142 5.4 Measures of Airline Productivity 146 5.4.1 Aircraft Productivity 146 5.4.2 LaborProductivity 148 References 150 6 The Airline Planning Process 153 PeterP. Belobaba 6.1 Fleet Planning 153 6.1.1 Airline FleetDecisions 154 6.1.2 FleetPlanning Methods 159 6.2 Route Planning 162 6.2.1 HubEconomicsand NetworkStructure 163 6.2.2 Route Planning andEvaluation 168 6.3 Airline Schedule Development 173 6.3.1 FrequencyPlanning 174 6.3.2 Timetable Development 175 6.3.3 FleetAssignment and Aircraft Rotations 178 6.4 The Future: Integrated Airline Planning 180 References 180 7 Airline Schedule Optimization 183 CynthiaBarnhart 7.1 Schedule Optimization Problems 184 7.2 Fleet Assignment 185 7.2.1 TheFleet Assignment Model 188 7.2.2 FleetAssignment Solutions/Impacts 192 7.2.3 ExtendingBasic FleetAssignment Models 192 7.3 Schedule Design Optimization 197 7.3.1 Modelingthe Optimization of Flight Retiming andFleet Assignment Problems 199 7.4 Crew Scheduling 201 7.4.1 TheCrewPairing Problem 202 7.4.2 CrewSchedulingProblem Solutions andImpacts 206 viii Contents 7.5 Aircraft Maintenance Routing and Crew Pairing Optimization 207 7.5.1 Modelingand Solving the EnhancedCrewPairing Problem 208 7.6 Future Directions for Schedule Optimization 210 References 210 8 Airline Flight Operations 213 Alan H.Midkiff, R. JohnHansman and Tom G. Reynolds 8.1 Introduction 213 8.2 Regulation and Scheduling 214 8.2.1 GeneralRegulatory Requirements 214 8.2.2 Flight CrewRegulation 214 8.2.3 Flight CrewScheduling 216 8.3 Flight Crew Activities During a Typical Flight 217 8.3.1 Flight CrewSign-in 217 8.3.2 Operations/Planning 218 8.3.3 Pre-flight 223 8.3.4 Pre-departure 230 8.3.5 Gate Departure 231 8.3.6 Taxi-out 233 8.3.7 Takeoff 233 8.3.8 Terminal AreaDeparture 234 8.3.9 Climb 236 8.3.10 Cruise 237 8.3.11 Descent 240 8.3.12 Terminal AreaArrival 242 8.3.13 Final Approach 243 8.3.14 Landingand Rollout 246 8.3.15 Taxi-in 246 8.3.16 Parking 247 8.3.17 Post-flight 248 8.4 Summary 249 8.5 Appendix: List of Acronyms 250 References 251 9 Irregular Operations: Schedule Recovery and Robustness 253 CynthiaBarnhart 9.1 Introduction 253 9.2 Irregular Operations 254 9.2.1 Managing IrregularOperations: Airline Operations Control Centers 256 9.2.2 Options for Schedule Recoveryfrom Irregular Operations 257 9.2.3 ScheduleRecoveryfrom IrregularOperations: Objectivesand Process 259 9.2.4 Evaluating the Costs of RecoveryOptions: TheChallenges Impartedby Uncertainty andDownstream Effects 268 Contents ix 9.3 Robust Airline Scheduling 269 9.3.1 Robust Schedule Design 270 9.3.2 Robust FleetAssignment 270 9.3.3 Robust Aircraft Routing 271 9.3.4 Robust CrewScheduling 272 9.4 Directions for Ongoing and Future Work on Schedule Recovery from Irregular Operations 273 References 274 10 Labor Relations and Human Resource Management in the Airline Industry 275 JodyHoffer Gittell, Andrew vonNordenflycht,ThomasA. Kochan, Robert McKersieand GregJ. Bamber 10.1 Alternative Strategies for the Employment Relationship 276 10.2 Labor Relations in the US Airline Industry 277 10.2.1 Regulatory Framework for USLabor Relations 278 10.2.2 USAirline Responses to CostPressuresPost-deregulation 281 10.2.3 USLabor Relations Post-9/11 285 10.3 Labor Relations in the Airline Industry in Other Countries 287 10.3.1 TheInternational Regulatory Frameworkfor LaborRelations 288 10.3.2 Summary of Airline Labor Relations Strategies: What Works? 296 10.4 Human Resource Management at Airlines 297 10.4.1 Hiring and Training for Relational Competence 301 10.4.2 Flexible Boundaries BetweenJobs 302 10.4.3 Supervisory Coachingand Feedback 302 10.4.4 Performance Measurementat the ProcessLevel 303 10.4.5 ConflictResolution 304 10.4.6 Boundary Spanning Roles 305 10.4.7 Partnering with OtherKeyPlayers 306 10.5 Conclusions 307 References 308 11 Aviation Safety and Security 313 Arnold Barnett 11.1 Safety 314 11.1.1 Measuring Air Safety: Some Hazards 314 11.1.2 TheQ-statistic 316 11.1.3 Some CalculatedQ-values 317 11.1.4 MoreCalculated Q-statistics 318 11.1.5 Are Some Airlines Safer ThanOthers? 319 11.1.6 A Collision Risk Assessment 321 11.1.7 Midair Collision Risk 324 11.2 Security 325 11.2.1 September11in Context 325 11.2.2 Some Costs ofAviation Security 326 11.2.3 Some Security Procedures 327 x Contents 11.2.4 IsItWorth It? 332 11.2.5 TwoEconomic Paradigms 332 11.2.6 A EuropeanDilemma 334 11.2.7 MoreSecurity Dilemmas 336 11.2.8 Final Remarks 340 References 341 12 Airports 343 AmedeoOdoni 12.1 Introduction 343 12.2 General Background 345 12.3 Physical Characteristics 349 12.3.1 Airside DesignStandards 349 12.3.2 GeometricConfiguration on Airside 352 12.3.3 Typology of PassengerBuildings 355 12.3.4 Assessing PassengerBuilding Concepts 357 12.3.5 GroundAccess 358 12.4 Capacity, Delays and Demand Management 360 12.4.1 Airside Capacity 360 12.4.2 Airside Delaysand Mitigation 362 12.4.3 Landside Capacity and Levelof Service 364 12.5 Institutional, Organizational and Economic Characteristics 367 12.5.1 Airport Ownership andManagement 367 12.5.2 Airport User Charges 368 12.5.3 Economic Regulation, Single Tilland Dual Till 372 12.5.4 Financing Capital Projects 374 References 375 13 Air Traffic Control 377 R. JohnHansman andAmedeoOdoni 13.1 Introduction 377 13.2 The Generic Elements of an ATC System 378 13.2.1 Communications Systems 378 13.2.2 Navigation Systems 379 13.2.3 Surveillance Systems 384 13.2.4 Flight and WeatherInformation Systems 387 13.3 Airspace and ATC Structure 387 13.4 ATC Operations 389 13.5 Standard Procedures 392 13.6 Capacity Constraints 393 13.7 Congestion and Air Traffic Management 398 13.8 Future ATC Systems 403 References 403

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