4 LEVEL PROFIT SCREENING METHOD
Our profit screening methodology is a relief for network professionals.
The 4 Level Profit screening method follows the logic of the
Network CALC profitability calculation method. This unique
method is geared to the specific economics of airline networks and give a realistic view of the
value of flights, traffic flows or aircraft.
This is an ideal inroad to identifying practically feasible optimization solutions. 4 Level profit screening follows this logic in searching for improvement options:
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Valuation of transfer traffic flows ;
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Sanitation of weak flights and routes;
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Trade-off fixed fleet & crew costs;
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Review of re-scheduling options;
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Assessment of a business model's maximum network target .
Screening at all these levels is comprehensive: all planning options to improve results are checked and the conclusions are crystal clear.
OPTIMIZING TRANSFER FLOWS
Bad money can drive out good money. Our valuation method of transfer traffic flows
cross-checks whether yield and revenue management has been effective. If the latter has not
sufficiently steered the traffic, it indicates that further measures are needed to block certain
flows.
The method weighs the direct costs with opportunity costs of occupied seats on all sectors of
the traffic flow.
This answers the question whether the network is better off with a certain flow or not.
Whether the sum of all flows is enough for a profitable network must be evaluated at higher levels.
The great benefit of putting this optimization level first is that it reveals possible measures
that can be taken without changing the schedules first. This brings stability in the commercial
offer.
SANITATION OF FLIGHTS
This is the most common level of profit screening. Yet is is crucial to make sure that all
possible cost savings are real. This implies that not all fixed costs can be weighed on a flight or
route level.
At the same time, the specific valuation of transfer traffic or other types of commercial
synergies may not be neglected.
Some flights can immediately be identified as loss-making. Others must be judged within their
context.
Including these aspects in the screening of flight profits results in a better quality of
decisions.
WEAKEST FLEET LINE EVALUATION
Indirect costs like fleet ownership, lease or crew salaries can only be affected if
groups of flights are taken out or added. Thus these flights must be evaluated together.
For this purpose, we feature the
Weakest Fleet Line Model. WFL is a ground-breaking OR-tool
that sorts the fleet-lines according to their value. It is familiar to the LIFO fleet rotations
that most companies use, but the allocation of flights to fleet lines is determined by the joint
value of a fleet line.
Sometimes a strong flight is on one of the weakest fleet lines or a weak flight on one of the
stronger lines (in off-peak capacity). The joint value of the flights is traded off with the fixed
costs involved.
Such screening is far more effective than a traditional approach, because it directly
indicates whether grounding fleet would be a solution. Sometimes growth is a better
sanitation-option…
RE-SCHEDULING OPTIONS
The screening of transfer traffic flows, flights, routes and fleet lines provides a rich
inventory of options to tune the schedules for better profits. Sanitation usually implies cutting
production, but can also mean replacing bad production with better production, growth on
under-utilized market opportunities or setting different priorities.
For example, a flight can be loss-making at a commercially optimal time while it is a welcome
source of cash-flow at other timings.
The great benefit of our profit screening methods is in the combination of pin-pointing the
weak spots while creating direct insight in the alternative options.
THE MAXIMUM TARGET OF A NETWORK
Network improvements have significant impact on company results. Yet there is a
limit to their effect. Sometimes other measures are inevitable like a fundamental change in the
business model, changes in supplier contracts or adjustments in labor agreements.
Our profit screening ensures that all possibilities of the present network are exhausted
before such decisions come in sight.
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