Route and fleet planning is an important long-term decision that affects the long-term success and sustainability of the airlines. The airlines should be able to set efficient and profitable route and fleet plans that would guarantee better financial success and minimizing of the overall operating costs. Investing huge capital would also help to sustain a long-term operational and economic projection for the airline routes. The route plans and decisions mainly depend on the assessment of the influence of the new aircraft on the financial performance of the airlines. The assessment process is determining the profitability potential of the new airline routes. The decision-making process of the new route to Shenzhen destination will review the projections of the expected traffic demand(RPK), the planning average load factor, productivity of the airline, and the revenue estimates among other factors (Baxter and Bardell, 2017, p.43). United Airlines will benefit from the decision-making process to ensure that the flights to Shenzhen is profitable and sustainable in the coming periods. Sustainability of airline operations is critical in maintaining a good reputation and image with the clients. The design of aircraft configurations is necessary in improving the proper planning of the airline fleets to improve the performance of the new route. Therefore, the allocation of the aircraft for the selected route to Shenzhen will be based on the assessment of the operating costs and other elements to ensure the aircraft operations are profitable.
Airlines and Route Selection and Aircraft Allocation United Airlines is a major airline that serves various local and international routes. The airline has presence in most parts in Asia region. The airline is also a part of the Star Alliance that comprises various major airlines across the world. It faces stiff competition from other U.S domestic airlines including Alaska Airlines and American Airlines among others. The huge market capitalization shows its ability to manage its air flight destinations effectively and efficiently. However, United Airlines does not operate in Shenzhen. United Airlines operates in 4 destinations in China including Beijing, Chengdu, Hangzhou, Shanghai, and Xian. The management should consider increasing its destinations in the Chinese market.
Shenzhen is one of the highly populated parts of China connecting Hong Kong and mainland China.
Shenzhen is one of the highly populated parts of China connecting Hong Kong and mainland China. The city comprises of numerous malls with large number of wares and other shopping products. United Airlines should capitalize on the demand for shoppers to travel to Shenzhen to expand their current passenger base. Therefore, Shenzhen destination has a potential due to the huge passenger travel demand in the city.
Performance Capability Boeing 777-300ER is a suitable aircraft for the route to Shenzhen for United Airlines.
United Airlines has some Boeing 777-300ER aircrafts that have been used in other flight destinations.
United Airlines has some Boeing 777-300ER aircrafts that have been used in other flight destinations.
The Boeing 777-300ER is reliable and its performance is good to maximize the overall profits for the airline. The aircraft provides significant growth and potential of maximizing profitability compared to other aircrafts.
With the aircraft, United Airlines has a clear route to becoming a profitability airline in Shenzhen. The twin-engine 777-300ER has the capacity to carry 396 passengers in two class configurations with a range of 13,650 km making it suitable for the route from New York to Shenzhen.
Compared to other aircraft such as A350-1000, the 777-300ER provides higher performance, comfort for the passengers and guarantees low costs of operation. The 777-300ER is also the most reliable aircraft with a 99.5 per cent probability of being on time during all the flights.
The 777 offers exemplary cabin flexibility and the capacity for the operators to accommodate in-flight services such as on-demand video and music entertainment and installation of premium seats. The aircraft also has advanced technologies integrated into its features making the airplane admirable by the passengers and the operators as well.
Some of the technologies includes flight deck features that allows the pilots to optimize flight metrics for flight schedule, comfort, and economy. Electronic checklists integrated into the aircraft allows for the customization of the airline with specific information and procedures to increase time saving, which could buffer departure schedules.
Continuous efforts also being put to improve the Boeing 777-300ER. Through the improvement, the 777-300ER has increased its range by 1,166km, reduced the maintenance cost by 14 per cent and allowed for upgrading of the numerus software improving on its efficiency.
New features such as the TSP system has helped to reduce noise levels and improving the fuel consumption by 1.5 per cent. Therefore, the new route to Shenzhen will be allocated Boeing 777-300ER due to its passenger capacity, performance ability, and economic efficiency compared to its competition.
United Airlines has the capacity to meet the demand and payload requirements for operating in Shenzhen. The airline has been operating in China for many years and thus, it has the right capacity and understanding of the Chinese airline network to meet the passenger demand in Shenzhen.
China is one of the fast-growing markets for passenger airline and it is estimated that the overall passengers in China grow to more than 1 billion passengers by 2020. United Airlines will be able to benefit from the growing number of passengers in the region while entering a new destination in Shenzhen.
Operating in Shenzhen is possible for United Airlines because they will be able to capitalize on the demand for air travel in the market. The proper analysis of the demand and economic guidelines is critical in shaping the economic evaluation of the demand market for the passengers and cargo operations.
United Airlines has a strong financial result as indicated in the recent financial reports. In 2017, UAL reported a net income of $2.1 billion and margin of 7.9 percent. During the year, the company has the lowest number of cancellations and good baggage handling and performance.
The airline has also been recognized for their ability to provide excellent customer service that helps in building its reputation and public image. For instance, UAL improved its mobile app to include baggage tracking, cancelling of flights, and allowing the passengers to access their boarding passes among others.
The overall customer experience has improved significantly (Fu, Lei, Wang and Yan, 2015, p.4). In 2018, the airline also developed a clear strategic plan to renew its potential for expanding into new destinations.
In terms of expenditures, United Airlines has made significant investments in its business and continues to use proper cost control strategy to reduce overall spending in the airline. Passenger and Cargo Demand
Shenzhen Bao’an airport mainly serves cargo transportation. In 2011, the airport underwent major expansion plans. The expansion program increased the passenger movement to around 43 million in 2017. The airline has a huge passenger demand considering that more than 43 million passengers are served by Shenzhen airport. United Airlines will be able to rely on the passenger demand and expected growth of the payload to expand their operations. In 2016, the volumes of Cargo transported to Shenzhen is more than 3.5 million tonnes. The cargo from United States accounts for 24% of the total cargo moved to and from Shenzhen. The large amount of cargo moved to Shenzhen provides a huge opportunity for airline cargo business.
The airline passenger movements and cargo business will expand into the various networks including 17 destinations. The air flight movement from Shenzhen to United States will pass through two or one destinations. The integration of the flight movements will allow the airline to serve the new destination easily. Most air flights to China are served through linking to other destinations in Europe (Kasirzadeh, Saddoune and Soumis, 2017, p.113). Both the passenger and cargo demand in Shenzhen to United States is high and United Airlines should consider its opportunity to expand into the destination. Thus, the United Airlines is relevant in shaping the long-term potential to operate efficiently in Shenzhen through proper demand management in the new destination route. Fig.1:
New Schedule for Shenzhen. Depart Arrive Duration Flight & Aircraft Mon to Sunday 16.50(JFK) 18.20(PEK) 18h 55m Boeing 747 2h 5m layover in Beijing(PEK) 20.50(PEK) 23.45(SZX) 18h 55m Boeing 777-200/200ER)
The new flight schedule will involve a 2hours and 5 minutes layover in Beijing to allow for crew to prepare for the long flight to New York destination. The new schedule will make it for passengers to prepare well for the U.S travel journey. The schedule provides good information to determine the timeline program effectively to enhance productivity and performance. Based on the current demand for passenger travel and cargo demand to the Chinese market, as of 2017, the number of passengers is 3.4 million.
The passenger load factor is 77% for the United States flight.
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The passenger load factor is 77% for the United States flight. The passenger yield is $23.6 million with an on-time performance of 73%. The total RASK for the flight destination is $22.1 million. The passenger load factor is lower than the international passenger load factor is 78%. However, the airline has a potential of increasing its overall investment in the new destination. Investing in the new flight destination is useful in growing the overall yield revenues.
Based on the current market factors, the new flight to Shenzhen will have the following estimate outcomes, Route New York to Shenzhen Route ASK 2,700 RPK 1,900 Yield 8 RASK 15,200 Total costs 10,670 Margin $4,530 The positive margin from the route shows that the airline will be able to make substantial returns from routes. However, inclusion of other costs could reduce the margin percentage. In spite of all, a positive margin for the route based on the RASK is a clear indication of strong performance capability of the aircraft in the route and the profitability of the route. The management of United Airlines should rely on the economic metrics of RASK compared with other existing routes. Some of the existing routes to the Chinese region have a lower RASK compared to Shenzhen route. Such an advantage makes it possible for the airline to invest their resources into the destination.
Fig. 2: Weight build up Chart for the New Flight. Based on the chart above, it is clear that manufacturer’s empty weight accounts for a large percentage of the total aircraft’s weight. MEW is measured proportionately to help the new flight with propulsion and ability to travel the expected distance to the new destination. Passenger & baggage, cargo, reserve fuel, std & operator’s items and taxi-out fuel are other elements that contributes to the weight of the aircraft. However, trip fuel accounts for a larger portion of the weight as it is necessary for the movement of the aircraft into the projected distance, which could take more than 15 hours. The chart confirms my assumptions on the weight of the aircraft before carrying passengers or cargo.
Key Costs The main direct operating costs for the Shenzhen route is fuel, crew cost, and aircraft cost. The crew costs will include the cost of hospitality and providing good hotel services to the passengers. The proper management of the airline costs would involve investing in good management and personnel who have a good understanding of the airline destinations to Shenzhen. All the cost elements should be reviewed well to reduce potential excesses of the cost of operation.
The total direct operating costs of the aircraft will be $9,285 per block hour that includes the crew costs, fuel costs, and the aircraft costs.
The total direct operating costs of the aircraft will be $9,285 per block hour that includes the crew costs, fuel costs, and the aircraft costs. The three cost elements should be managed well to ensure that the airline operates profitability. The inability to manage the direct operating costs well would undermine the decision to invest in the destination route. The evaluation of these operating costs for the airline is appropriate to enhance aircraft performance and productivity.
The two important direct operating costs related to the new flights will include ground handling charges and the inflight services.
The two important direct operating costs related to the new flights will include ground handling charges and the inflight services. The ground handling charges are different depending on the international operational requirements and guidelines. Even though the handling service charges could be predictable, changes in the operations such as changes in the arrival and departure times could increase or reduce the ground handling costs for an airline. The ground handling services usually includes the towing of aircraft charges, immigration costs, baggage handling, and water services among others (De Neufville, 2016, p.61). The handling charges are computed based on the assessment of costs involved within the aircraft maximum takeoff weight(MTOW). The ground handling charges are the costs of managing the flight operations after arriving into the new destinations. The airline should work with the airport services and authority to get proper information and support for their ground handling services and works. Working with the airport management is effective in reducing the costs associated with the ground operations for the airline.
In terms of the inflight services, they mainly involve the crew costs including the catering services and providing good customer service to the passengers during the flights. Catering services seeks to ensure that passengers are comfortable during the flight. The flight from United States to Shenzhen is long and thus, offering inflight services are important to improve efficiency and promoting performance capability in the aircraft. United Airlines mainly outsources its flight services to third parties who have specialized their services. Outsourcing of the functions helps in reducing the high costs of managing the services. Thus, it is critical to work with other specialized firms to provide quality inflight services such as catering and cleaning services.
Fig.3: Costs per Block Hour Aircraft Carrier Crew Costs Fuel Costs AC Cost Maintenance cost Insurance Other Total 777-300ER United Airlines $1,152 $7,340 $793 $1,167 $6 $212 $10,670
Other important costs for the airline operations includes landing fees, ground handling costs, marketing, and security costs. The landing fees usually varies from one airport to another. Landing fees are associated with emissions, noise, and the weight of the airplane. For instance, in New York(JFK), the landing fees for 777-300ER is $1,106 while, the landing fees in Boa’an Airport in Shenzhen is $530. The decision to consider the flight to Shenzhen should also consider the costs of landing the aircraft in the respective airports. However, the costs might seem insignificant (Alnuaimi, Xia and Jawad, 2016, p.114). Marketing costs will help the airline in getting more revenues by advertising to the wider market in Shenzhen. The company faces stiff competition from local airlines such as Shenzhen airlines. Working with local marketing consultants and firms will help in growing their passenger and cargo base in the market. The security costs will involve hiring experienced security personnel or outsourcing the security services to other specialized firms.
Conclusion and Recommendation Based on the review and demand analysis, it is recommendable for United Airlines to expand its operation in the Shenzhen destination route.
The destination has a good passenger and cargo demand.
The destination has a good passenger and cargo demand. The forecasted yields revenues are also high. The management of the United Airlines is critical and provides an opportunity to expand the revenue base and capacity. The reception of the Shenzhen market is good and the potential of getting more passengers is high. Such factors make it possible to grow the overall airline market in the Shenzhen passenger market. The performance capacity of United Airlines is also good including its good financial performance. The financial position of United Airlines makes it easy for them to operate into new destinations in China without unnecessary financial challenges. Thus, the route to Shenzhen from New York is viable and will be able to improve the profitability potential of the airline.
In terms of the costs of operation and other charges, it is recommendable for United Airlines to work with various partners and experts in reducing the costs. The management of the operating costs is useful in shaping the economic feasibility of the airline route to Shenzhen. Compared to other airlines, the 777-300ER aircraft to Shenzhen has a higher RASK compared to the existing routes of United Airlines. The company is always seeking to invest in routes that are profitable and provides a higher financial return in the organization. Higher RASK will help in improving the overall annual revenues of the airline from both cargo and passenger transportation. The new route is known for vibrant shopping businesses that would attract increased revenue growth and expansion. Other costs that should be managed well includes the marketing, landing fees, ground handling costs, and security costs. The overall airline market in the larger Chinese market is expected to improve and thus, expanding into Shenzhen is a viable and profitable decision for United Airlines.
Personal Learning Paper From the module, I learned that the process of fleet planning and the determination of the aircraft routes is useful in improving the long-term success of the airlines. For example, the selection of Boeing 777-300ER for the new route is effective in improving the long-term viability and performance of the airline. Such evaluation of the aircraft and the route is critical. The module provides a background information on the commercial airline sector and how demand and economic forecasting helps in making important airline route decisions. Integration of advanced technologies also forms part of fleet planning and selection process. for instance, United Airlines chose Boeing 777-300ER because of its advanced technology features and innovation. Such innovations and technologies help to improve the comfort of the passengers and thus, expanding the reputation and image of the airline.
Three important aspects of airline reroute and fleet planning process includes demand forecasting, operating costs of the airline, and reviewing the economic potential of the destination market. The understanding of the demand for cargo and passenger is critical in ensuring that the rerouting of the airline is good and will profitable. Understanding the cargo demand and passenger potential helps in ensuring that the route is viable. The operating costs will also help in managing the overall costs working in the foreign destination such as Shenzhen. Costs will include the fixed and variable costs such as the cost of inflight services, crew costs, and the maintenance costs among others. The economic metrics and potential of the Chinese market, more the growing population in Shenzhen city is critical in providing capacity for more passengers. These aspects should be well understood before deciding on investing in a new foreign destination such as Shenzhen.
One of the important element of airline route planning process learned is the significance of aircraft performance through analyzing the aircraft economics. The analysis of the economics of the airlines is effective and efficient in the running of customized fleet assessments. Some of the critical economic metrics for analyzing the airline performance includes RASK, load factor, and the operating costs among others. Having a proper evaluation of the operating costs is important. The key operating costs identified in the research work includes the aircraft cost, crew cost, and fuel costs among others. The understanding of these costs is useful in improving the overall planning of fleets and the aircraft new route.
In addition, I learned that the management of the airline should work with the airport authority and other partners to ensure that they reduce costs of operation. For example, it is critical to collaborate with Shenzhen airport authority in security aspects to help in providing some security to the passengers and cargo and thus, reducing some expenditures related to safety management of the airline. Without working with other partners and firms, it would be highly costly to run airline operations in the new destination, Shenzhen. Therefore, the recommendation for United Airlines to operate in Shenzhen is good and it would assist in growing the overall revenues. I also learned that economic considerations and analysis are important in evaluation of the various routes for long-term investment. The economic metrics includes the forecasting of the demand for passengers and cargo that is critical in improving proper route evaluations. The original destination demand is critical in determining the demand for passengers and revenues for the specific route. Such economic analysis is necessary in forecasting the potential market share for the airline to improve economic viability and profitability for the airlines.