Airline network decisions mostly require assumptions on future market developments.
That’s delicate because traditionally, dogmatic visions or over-enthusiastic traffic forecasts are among the industry’s main sources of losses.
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Airline network decisions mostly require assumptions on future market developments.
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No wonder that managers are cautious and look for more certainty about the response of markets to new flights or to schedule changes.
This has largely professionalized airline network management over the past decades.
A lot of effort has been invested in supporting planners to estimate effects on traffic and yields with sophisticated models that emulate market responses.
Especially in large organizations with a lot of different views, this is a welcome way to insert more objectivity in the process.
As with all trends, the pendulum can also swing to the other side.
For many airline managers, the idea to have a crystal ball that gives a solid revenue forecast is blinding.
System results get exceptional status, especially when based on detailed “market intelligence” and scientific algorithms.
Of course there is a price tag to this, also because the systems burn expensive data.
Awkward situations occur, like airlines spending a lot of money buying back what is basically their own traffic information in a different wrapping.
And they keep doing so, because the results give them the welcome confirmation that their flights are exactly where the markets are!
The problem is that the finesse of systems and the detail of data suggest a level of forecasting accuracy and precision that is beyond reality.
First, historic data sources are rarely complete. To compensate that, data-suppliers partly patch them up -with estimations-.
So you never know what you have; any O&D number can be fact, or it can be a mix of fact and fiction, while you still don’t know whether it represents 100% of the market.
Speaking of which; what is the size of a market? Putting a fixed number on that neglects the very existence of influences like price elasticity.
Further, in practice, especially smaller O&D markets show very high fluctuations from year to year. No model will predict this with precision.
On top of this come unexpected economic developments, events on the world-political stage, moves by competitors, impact of revenue management actions or own marketing initiatives; all influences that have larger impact than most QSI factors.
Airlines that struggle with marginal profits mostly need structural improvements. There's no system to replace expert judgement and creativity needed for that.
Contrary to how systems are marketed, traffic based optimization models generally aim at fine-tuning parts of a schedule, not in re-optimizing the entire schedule.
This gives managers a false sense of comfort that their schedule is optimized.
True renewal in the industry never came from systems. It came from entrepreneurs that found the right balance between factual leads and gut feeling.
Airlines that rely on systems as all-knowing black boxes, deprive themselves of such very needed innovation.
Of course, managing an airline network will always involve a lot of calculation. But it’s crucial to keep seeing it in the right perspective; once data and systems become too important, something is wrong.