AIRLINE NETWORK PROFITABILITY CALCULATIONS

SHARPEST CALCULATION METHOD

Profitablity calculation on airline networks is a very specific challenge.

Traditional accountancy methods cannot handle this complexity and thus often simply point in the wrong direction.

This is not acceptable; the stakes are high and it is crucial that the math supports optimization purposes as accurately as possible.

To deal with this omission, Schedule Consult has developed Network_Calc.

Its great advantages are that it shows the true impact of network decisions, helps discover hidden inefficiencies and provides insight in a range of improvement options.

  • Specific for airline networks
  • Free of unrealistic cost allocations or pro-rates
  • Shows real impact of decisions
  • Traces hidden in-efficiencies & sub-optimizations
  • Brings opportunity costs to the equation
  • Helps to prevent cosmetic decisions

THE PRINCIPLES OF NETWORK_CALC

Instead of striving for figures that are compatible with a virtual mathematic framework, Network_Calc takes the types of decisions that occur in the practice of Network Management as starting point.

The calculation formats are designed to reflect the real effects of such decisions on company profits.

Important aspects that make Network_Calc different from traditional methods are:

INTERDEPENDENCE

Flights do not stand alone. There is strong interdependence according to the schedule context.

This can be because they are operated by the same aircraft, or because they connect, or because they serve the same client base.

Hub handling costs are another good example. An extra flight at peak times takes a complete new shift of staff, at shoulder times the extra costs are zero...

REALISTIC ALLOCATIONS

The figures of Network_Calc are based on feasible decisions and determine what the impact of these decisions is on company results.

A pro-rate does not match this objective; never will an online connecting passenger yield a pro-rate. It's either the full O&D or zero.

The same for fixed costs that never have a linear correlation with production.

HIDDEN INEFFICIENCY DRIVERS

Airlines are full of sub-optimizations.

A good commercial example is the difference between a long turn time and a short turn time in an out-station. The same block hours, but very different fleet utilization.

A good operational example are maintenance checks: no difference in direct costs but when they are timed at the expense of operational reserve capacity they often incur additional irregularity costs.

These are aspects that route P&L's simply don't take into account.

SIMPLIFICATION?

It's understandable that we'd prefer to see an airline network in a simplified modular way, where routes can be cut and pasted to optimize results.

So is the sense that each flight should carry a fair share of the cost burden.

Yet, it's a misunderstanding that routes or flights are the sole building stones of an airline network. There are other drivers of costs and commercial offer and in the end, the only thing that really counts is the profitability of the entire network.

back to top