Fleet Management

Fleet Management is done in following ways:

i. Aircraft acquisition and financing
An airline is in principle a portfolio of resources – some tangible, many intangible- brought together to pursue a corporate mission or purpose. In the same vein, a fleet is a portfolio assembles to fulfill a number of payload-range missions. The primary objective of fleet planning is to equate production capacity (and the out put that is a capable to produce if efficiently utilized with forecast demand, given certain price and other marketing assumptions. These are 2 fundamental reasons for acquiring air craft.

1. Replacement of Existing Capacity.
It might be necessary to replace part of the current fleet because of high operating cost, unacceptable noise or
emissions, limited remaining structural life; inadequate passenger appeal, type rationalization or an ongoing
fleet rollover policy intended to maintain a low average fleet age. The task is to find an aircraft capable of
performing a largely unchanged mission more effectively and/or efficiently than the aircraft to be replaced.

2. Capacity Growth
Because the demand for air transport services is on the whole continuing to grow, the need
to replace ageing aircraft that are becoming expensive to operate or environmentally unsound is often
interlaced with the need to increase capacity .incremental capacity might be needed for one or both of two
purposes.

• Growth within the existing network. Aircraft acquisition could be necessary to accommodate traffic
growth arising from either or both an expanding market or improved market share. Growing demand can
in principle be met by using larger aircraft and maintaining frequencies, by operating more of the same
aircraft at higher frequencies or by some combination of the two. (It can also be met by raising
utilization, increasing seating densities or accepting higher load factors in respect of the existing fleet,
by code – sharing, or by wet leasing aircraft and crews from another carrier.)
• New missions. Capacity might be needed to satisfy new mission requirements beyond the capability of
the existing fleet, such as the introduction of ultra – long – haul services
An ‘absorption ratio’ can be calculated for an individual airline or indeed for a group of airlines ( e.g. US
measures) or the industry as a whole . This is the ratio of outstanding orders (aircraft units) or number of seats) to the existing fleet, net of planned disposals or retirements. When projected absorption runs well ahead of forecast demand growth questions need to be asked .For example, assuming annual passenger demand growth of five percent and fleet augmentations of around eight per cent per annum. If this percentage of its equivalent “order-tofleet ratio is substantially exceeded, there might be an overcapacity situation developing. (on the other hand, it should be borne in mind that at a macro-level demand growth is usually measured in RPMs- which can be produced by aircraft or many different sizes, and therefore numbers, flying many different alternative stage-lengths- while purchases are retirements are measure in discreet aircraft or, less usually, seat numbers. So for example, a singleairlines or industry-wide shift to higher frequencies using aircraft similar in size or smaller than aircraft already operated might raise aircraft acquisition numbers without necessary threatening overcapacity.)

There are at least three reasons why fleet planning should be treated not as a separate, isolated or occasional
exercise, but as an ongoing process intimately linked to marketing planning.

1. Changes in the market place. A fleet can only ever be optimized to serve one particular set of markets at one particular point in time: as existing markets change in size and/or structure and as markets are added or deleted, the fleet will become sub-optimal. Fleet planning is therefore a continuous process of reassessment.

2 Changes in corporate priorities Fleets and networks are managed within the wider context provided by
decision about which markets and segments to serve, and how to serve them. If, for examples an airlines,
decided to change its market position by offering higher frequencies and /or an improved in-flight products
this could well have an impact on its optimum fleet. Similarly, when British Airways decide in late 1990s to de-emphasize low-yield flow traffic and concentrate on premium traffic (particularly in point- to- point
markets.) this had an immediate impact on its projected fleet mix- with future requirements shifting from B
747-400 to B 777s, and from B 757s to A320s series.

3 Strategic commitment. A significant fleet acquisition or restructuring also has a strategic impact beyond its
direct effect on future costs, revenues, and cash flows. This is usually discussed in the strategic management
literature under the heading of ‘commitment’.

Strategic commitments are decisions to acquire and deploy resources that have a long-term impact and are
difficult and/or expensive to reverse. They have a direct economics influence through their effect on revenues and
costs, but they can also have an indirect impact through their effect on competitor’s behaviors and therefore on
market equilibrium.
A competitors face with a visible, understandable, and credible (i.e. largely irrevocable) commitments is likely to
adjust its own tactical and/or strategic behaviors in some way. a decision by a carrier to increase capacity by a
significant amount might deter new entrants, but could also intensify price competition amongst incumbents.
Game Theory (augmented by simulation j models have been increasingly used to help understand the impact of
strategic commitments on market rivalry and how, in turn, the nature and intensity of market rivalry influences
commitment decisions.
Strategic commitments can include competitor or potential competitors to behave less aggressively, or they might alternative lead to intensified completion. Manager would do well to look at what their competitors actually do, rather than what they say For example, when a new entrant’s managers say they have no intention of challenging incumbent’s core markets but nonetheless commit to rapid fleet expansion, it is the strategic commitment rather than the words that matter. Ryan air and easy Jet, on the other hand, makes no sec5ret of their strategies: they intend mounting a sustained challenge to European full-service carriers in their short-haul mainline markets, and they are making the commitments in aircraft required to implement this challenge Airlines clearly need as much flexibility in their fleets as they can get. A good start is shorter lead-times on purchase and customizing decision for new aircraft, even at the top of ordering cycles. In particular, many carrier want greater flexibility in determining variants and even types which they enter into long-term purchase contract – the ides being in some cases to project seat requirement, but leave until as late as possible the final specification of units into which those seats will be broken down.
Airframe manufacturers and their supplier have in fact worked hard to improve flexibility by shortening order
lead times- the average having dropped from close to five ye ruin mid-1980s to a little over a year by the later 1990s (Clark(2001, citing Airclaims data).
Another source of flexibility is the used of purchase options (including ‘rolling options’) which, depending upon market circumstances, manufacturers quite frequently price far below their real value . the growth of operating leasing has also added flexibility although operating leases rarely run for less than 3 years and frequently have lives well in excess of this , the lessee usually has an option after a certain period to pay an early termination
penalty and return the aircraft.]

AIRCRAFT EVALUATION: PASSENGER AIRCRAFT
The intention here is to highlight some of the principal issues that arise in the course pf comparative evaluations.
Readers interested in a more detailed explanation of fleet planning should refer to Clark(2001).
The people involved
In any airline, various people will want to have their say in fleet planning decisions. Sometimes the influences are balanced. On the other occasions discussion might be oriented towards the interests of operations personnel concerned primarily about aircraft performance and maintainability , marketing personnel preoccupied with product design or finance people focused on operating costs and the appeal of the different types to financiers ( or alternatively the willingness of respective manufactures , and possibly their export credit agencies , to provide finance or credit support . political factors sometimes come into play , and government interference in the decision making process of national carriers is not uncommon.

Collection of airline specific data

This type of data required will include the following
• NETWORK DATA – markets to be served and the route patterns and frequencies flown to serve
them. this data flags payload requirements .
• ROUTE DATA – flight legs to be operated and alternate airports for each destination; elevation;
‘reserve fuel requirements and rout meteorological assumptions and turn around times. This data
flags likely speed and range requirements
• AIRPORT DATA – runway lengths , slopes and construction: obstacle clearance, elevation;
average and extreme meteorological conditions; taxi way and apron widths and load baring
capabilities, dimensions of parking spaces on the ramp and at gates: and terminal infrastructure
and handling capacities. This data flags the need for specific capability requirements such as good
hot- and- high performance.
• CURRENT FLEET-when considering new types an airline will offer bench mark it’s analysis
against types with similar mission capabilities that it currently operates.
• PRODUCT REQUIREMENTS-passenger service requirements by class are derived from
marketing decisions in respect of service attributes such as seat pitch and width , aisle width , bin
sizes , entertainment and communication systems and provision and location of galleys and
lavatories . cabin cross section can affect passengers over all perceptions of spacious ness , the
feasible seating configuration across each row ( which itself affects both passenger perception and,
white bodies, the efficiency of meal service in the main cabin), and the scope for different galley,
lavatory , storage , and crew rest – area options.(the ability to operator long hall flight legs
depends upon the provision of the crew rest areas which, if located below the main deck rather
than in a cabin ceiling wide , may displace revenue pay load through their impact on frequencies
and seat accessibilities targets , product requirements will also affect the capacities of aircraft needed to operate a given route network. Finally in many regional markets passengers are increasingly unwillingly turboprop service when jet alternatives are available. Carriers with significance businesses will in addition have specific freight – related requirements in respect of
belly hold capacities and cross sections and container compatibility with other types in the current fleet that will be retained into foreseeable future.

MARKETING ANALYSIS
Despite significant cuts in delivery lead – times , and despite the growing contribution of operating
lessors to improving fleet flexibility, airlines still must make their strategic fleet acquisition decisions on the
basis of forecasts that run an uncomfortable distance in the future.3 types of forecasts in particular are being used
• DEMAND FORECASTS demand can be forecast by region ,by origin and destination (O & D) market by
segment , a common approach is to forecast aggregate growth , then focused down onto individual markets
and segments
• TRAFFIC FORECAST-‘traffic is the share of demand that a particular airline forecast it will carry given
price and other marketing assumptions.
• REVENUE FORECAST-both demand and traffic forecast are driven by a wide range of assumptions , one of which is average yield (revenue per RPM).revenue management systems can be valuable source of
information on current yields , revenue models link traffic forecast to variables such as fare structures and
freight rates , discounting , pro rate dilution and agency commissions.
TECHNICAL ANALYSIS
Technical analysis, which generally follow the ATA 100 coding formulated by the Air Transport Association in the
United State to facilitate description of aircraft components and system will consider:
• Structures and flight controls:
• Mechanical systems:
• Avionics and instrumentation system: and
• Propulsion system
The system of different aircraft area compared by ranking them in respect of attributes describing their design
objectives, overall safety, reliability, redundancy, maintainability, simplicity, use of proven technology, and effects
on the airline’s existing equipment and personnel infrastructure. Fleet planner will also want answers to a variety
of questions related to aerodynamics, stability and control, internal noise, exterior noise and emission and
certification criteria. The structural efficiency of an aircraft (i.e. payload relative to weight) is an important costrelated
issue which is increasingly being addressed by the use of composite materials.
PERFORMANCE ANALYSIS
‘Performance’ refers to the capabilities and limitations of an airplane in different phases of flight. It is
outlined in each aircraft’s performance manual and can be illustrated by expressing graphically a number of
relationships- the most widely recognized of which perhaps the payload-range diagram is.Performance analysis
involves looking at a maximum take-off weight (MTOW) and its various components, payload capabilities at
different ranges, and range capabilities with different payload to gain a sense of the aircraft performance and economics in the context of the airline’s present and likely future networks. A carrier might be looking for a type optimized for a specific group of its routes having particular stage-lengths and payload requirement, or it might be more interested in the flexibility to operate an aircraft profitably across a numbers of different mission profiles.
In addition to more general analysis, performance will often also be evaluated, using the airline’s standard
procedures, at a limiting airport and on a limiting route within the network that a re subject to abnormally
demanding operational requirements. Separately, some short-haul operators wanting to maximize aircraft
utilization by keeping turnaround and transit times to a minimum will be interested in the ability of a type to operate
multiple sector without refueling- so much so that an aircraft’s ‘range’ in this sense can be an important input
evaluation exercises even though the routes served might each fall well within its performance capabilities.
COST ANALYSIS
This sub-section distinguished between capital and operating cost (DOCs). In fact, capital cost feeds through into
DOCs through ‘cost of ownership’ like items such as depreciation an/or lease rentals (which are fixed DOCs)
Furthermore, what really maters is the cost of acquiring and operating an aircraft across its entire life cycle, and it is
therefore life-cycle cost as a whole that need to e the focus of analysis. At a growing number of airlines,
shareholder value is the framework used for this analysis: the acquisition and operation of an aircraft must be seen
to add shareholder value through its impact on eight or both revenue and costs.
The most important point to bear in mind is that whilst an aircraft’s capital and operating costs are critical, they
are- like any cost an airline might incur- relatively meaningless figures outside the context of revenue generated.
With regard to aircraft, we need to look at the revenue they can generate (and therefore at their service design
implications in reselect of variable such as the onboard product and also frequency/capacity tradeoffs on the airlines
network) in order to assess whether their life-cycle cost are acceptable.

air fleet management ltd

airline fleet asset management

Maani Sharma [ MBA Aviation ]
Manager Aviation NEWS Project

www.All-Aviation-NEWS.in

www.AeroSoftCorp.com

www.AeroSoft.in

www.AeroSoft.co.in

www.AeroSoftseo.com

On-Line Assistance:

Gtok:                       maani.aerosoft@gmail.com

Y!Messenger:          maani.aerosoft@yahoo.com

Rediff:                     maani.aerosoft@rediffmail.com

MSN:                     maani.aerosoft@hotmail.com