OMP STRATEGY TRAFFIC FORECASTING
In order to bring traffic forecasting back to realism, Schedule Consult has developed the solid OMP Strategy (Objective Multiple Path Strategy) method.
- What are the limitations of today’s forecasting models?
- What are the strengths of OMP Strategy traffic forecasting ?
- How does the OMP Strategy traffic forecasting work ?
- What makes OMP Strategy better than MIDT based forecasting ?
- OMP Strategy's benefits for Cargo forecasting
When flights are planned, traffic is the predominant success factor. Future traffic
volumes are always uncertain, but the more we know about them in advance, the better the schedules
can be tuned. A crystal ball does not exist but Schedule Consult’s OMP Strategy traffic
forecasting comes in second best after that!
Just a few markets in the world are fully saturated and matured. Only then can historic market data give a complete picture of size and shape of demand. In all other cases, the traffic is shaped -or deformed- by the offer, which will also have its impact on data. Therefore, available information about different markets has different weight and meaning. In one case it may provide a pretty good picture of the total volume, in many other cases it's just a snap-shot of an undefined portion of the total potential.
THE STRENGTHS OF OMP STRATEGY
In OMP Strategy, markets are forecasted at the detailed level of true O&D and class
of travel. Thus each city pair flow, at connection level, is estimated separately with forecasts of
passenger numbers, yields and cargo.
OMP Strategy traffic forecasting is especially designed to cope with not fully saturated markets and markets in which statistical data is incomplete. It is in particular here that a one-size-fits-all approach will fall short.
The different strategies of OMP are geared to the variance in available data and use the most reliable path towards estimation. This allows a very refined approach, inclusion of specific circumstances and information for each individual city pair. A positive side-effect is that, although OMP Strategy requires calibration, it does not entirely lean on it. Wherever there is a more rational -and more reliable- strategy to forecast traffic, it can produce better results without expensive data updates.
New or underserved markets pose the largest difficulties for traffic forecasting. Over-estimation is a great danger, but under-estimation is just as contra-productive. No enterprise in the world can develop without eventually developing something new. Where air services are poor, markets are under-served. Strategy recognizes the correlation between product offer and demand in such markets and will provide a balanced estimate of the impact of new services.
With this basis OMP Strategy provides the same quality of answers about new
opportunities as about known markets.
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HOW DOES OMP STATEGY TRAFFIC FORECASTING WORK?
For obvious reasons we have to stop short on publicly explaining too much details of OMP
Strategy traffic forecasting. Nevertheless, a short description of the basic fundamentals
explains how OMP Strategy forecasting can be so successful.
The basic principle of OMP Strategy traffic forecasting is that it uses a multiple path strategy, rather than a uniform approach. OMP Strategy taps into a variety of data sources and uses different types of valid forecasting algorithms. It prioritizes the results that are based on the path with the most relevant data that have the best quality for a particular flow. It also presents the results of other paths, providing the forecaster with insight in the sensitivities and enabling an overrule for the most reliable estimate of the future traffic for that particular flow.
Thus OMP Strategy takes into account historic data, changes in the
market, competition, start-up effects, frequency effects, capacity, aircraft type, proven
market appreciation, expert estimates, macro economic characteristics and various types of
elasticities.
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DISADVANTAGES OF MIDT BASED FORECASTING
In the United States, the Department of Transportation (DOT) creates a level
playing field for all airlines by making available traffic information in great detail to all
domestic carriers. This enables the running of a number of refined and detailed models based on
Quality Service Indicator (QSI) principles. Outside the USA, this kind of information is not
available, so the rest of the world needs to refer to other methods.
- Bookings are not real pax flown. The amount of no-shows can vary tremendously from market to market.
- A shrinking share of bookings go via GDS systems. Direct internet bookings are more and more the standard and reduce the value of the MIDT data.
- In unsaturated markets, there is a large portion of potential traffic that does not submerge in the statistics because simply because the potential was not disclosed by a product offering.
So the models may be fine, but the refined detail is not reflected in the outcome. In fact, the answers can be highly distracting as they will by definition always favor the status quo over more substantial changes. Some may welcome such confirmation of their work, but the airline needs a real answer.
A great advantage of OMP Strategy is that it works on cargo just as well as on passenger traffic.
Cargo traffic volumes and yields develop independently from passenger traffic and are subject to a number of very specific dynamics. OMP Strategy traffic forecasting includes a number of strategies that deal with these specific circumstances and allow a reliable forecast of the revenue for each flow. This also takes into account the volume and weight restrictions of the aircraft.
In this way, OMP Strategy Traffic Forecasting, in combination with our elaborate cost calculation features facilitates a complete and solid estimation of company results for any evaluated schedule.
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