project airline
TRANSCRIPT
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Business ReportAirline 6-------Airline business simulation game
Report of the Hos Airline
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Learning
objective
Aim: The reason
of us studying airline 6
is that we can know
more about the
knowledge of an airline
operation. For
example, we can study
the establishment of
different airline form
the home country to
other countries,
provide cargo andpassenger service and
use the limited
resource to the highest
cost etc.
Business ReportAirline 6-------Airline business simulation game
IntroductionBusiness planOur company is called the HO Airline Company and we
set HO as our IATA code.
The business plan of our company is as follows:
Network: International and Domestic (both long and
short haul)
Aircraft Seating: Standard
On board Catering: Standard
Main Source of Income: Cargo and Passengers
Cabin for both long and short haul: First, Business and
Economy
Location of Headquarter: Hong Kong
We put our headquarter at Hong Kong because it has a
good geographic location. Moreover, since there is a
rapid economic growth in Hong Kong, there is an
increasing demand for air trafic. Despite a relatively
short history, Hong Kong International Airport has
won the Skytrax Worlds Best Airport Awards for
several times already. This showed that the Hong
Kong International Airport is an airport of high
quality. All these create a very favorable condition forthe running of our operation.
After summiting the business plan, we have generated
an investment capital of $71,754,540.00.
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Region of destinationsWe have chosen 78 different places in the world as our destinations. They
are usually big cities which have a high passenger demand (relected by
the PAX Load Factors). Examples are Washington Dulles, Shanghai
Pudong, Osaka Kansai International, Manila, Phuket, and Dubai, etc. Apart
from the main cities, we also include small cities like Penang, Salt Lake City
so as to cater the need of different customers. By offering different choices
of destinations to the customers, we can earn a wider source of income
from the customers.
Besides the passenger side, we also do business on the cargo side.
Types of aircraftAirbus and Boeing are the two main types of aircraft we used. For Airbus,
we have A300, A310, A330, A340, A380. And for Boeing, we have 747.
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Business DetailsSelection of aircraftAirbus (Passenger & Cargo) Boeing (Cargo Only)
A300-600 PW 747-400F PW
A300-600R GE 747-400F RR
A300-600 GE 747-400F GE
A300-600R PW 747-300SF GE
A310-300 GE 747-300SF RR
A310-300 PW
A340-200A340-300
A330-200 PW
A330-200 RR
A330-200 GE
A340-213X
A340-500
A380-800 EA
A380-800 RR
Since we do not have enough money at the very beginning of our
operation, we choose to lease aircrafts instead of buying them.
There are several reasons why we select the above-mentioned aircrafts.
First, they are usually aircrafts with a large capacity which means that it
can accommodate more customers. Moreover, a larger aircraft is favorable
for our cargo operation since cargo is quite space-demanding. Second, the
speed of these aircrafts is high. Third, they are not very fuel-consuming.
Fourth, the range of these aircrafts is long which is suitable for both our
long and short haul. Fifth, they are usually aircraft with a newer age. Since
people prefer to ly in newer aircrafts, we would be able to attract more
customers with a more recent date of introduction of aircrafts.
The reason why we mainly focus on two main types of aircrafts is that it
can help to save the cost on pilot training as well as the simulator costs.
Moreover, since we have selected an airport specialized in Airbus aircraft,
it is therefore normal for us to choose Airbus as one of our main types of
aircrafts.
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Service StandardWe offered full service to our passengers, and the First and Business classare our targeted customers. Since they have higher inancial ability, we
would be able to earn a lot from these people if they satisied with our
service. We therefore provided a series of high-standard service to the
First and Business class customers.
For the First class, we provided passengers with quality meal and
beverage service. For beverages, we provided both soft drinks and
alcoholic for them to choose. Passengers in First class can enjoy audio, in-
light internet and video monitor during their light. Moreover, laptoppower, in-seat phone and message are also provided so as to facilitate
them to do their work during the light.
And for the Business class, they can enjoy the standard food and the same
beverage as the First class enjoyed. Also, they can enjoy audio, movie
screens. Similar to that of First class, laptop power, in-seat message are
provided.
Since most of the First and Business class passengers are businessmen, in
order to facilitate them, we offered limousine service to them. Moreover,we provided club lounge access for these passengers so that they can rest
in a pleasant and comfortable area while they are waiting their light.
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StaffingIn order to ensure the safety of our lights, our staff are required to take a
series of professional training. Particularly the pilots, it is necessary for
him to take the pilot training since the safety of the lights mainly hinges
on him. Besides, by providing the training course, it would be assured that
they know how to operate the aircrafts we have. Since safety is the most
important consideration of the customers when they take the lights, if we
perform badly in this aspect, it would seriously affect our reputation and
so do our revenue. It is therefore important for us to maintain a high
standard over the aspect of safety.
The cabin crew and supporting staff are also required to take the training
course on medical needs. This is because when medical emergency events
happened during the lights, it would not be able to go to the hospital
within a short time, it is therefore necessary for the cabin crew to learn
some medicals skills like irst-aid so that they can deal with these
emergency events properly and provide immediate medical help to
customers.
Since the performance of the staff will directly affect the impression of
customers towards the company, so apart from training them how toserve the customers properly and professionally, we also provide the staff
with some beneits so as to motivate them. Generally, the salaries of the
light deck and cabin crew has attained the union requested salaries, some
posts even exceed the union requested salaries greatly, like the light crew
of large aircraft. Also, we offered travel discount to the staff, ranging from
10% to 20%. By offering more beneits to the staff, they will have higher
motivation to work and thus the customers will be more satisied with the
services we provided.
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Route
Short Haul
AsiaBangaloreHindustan (BLR)
Doha (DOH) KualaKinabalu
(KUL)
Khabarovsk Novy
(KHV)
Okinawa(OKA)
Tokyo Narita(NRT)
Bangkok (BKK) Dubai (DXB) Kuching(KCH)
Kotakinabalu(
BKI)
Osaka Kansaiinternational
(KIX)
Taipei Shek(TPE)
Beijing (PEK) Fukuoka
(FUK)
Manila
(MNL)
Seoul
Gimpo
(SEL)
Penang
(PEN)
Busan Kimhae(PUS)
HaiKou(HAK)
MoscowDomodedo
vo (DME)
ShanghaiHongQiao
(SHA)
Phuket(HKT)
Cebu ( CEB) Ho Chi Minh
Sou Nhut(SGN)
Nagoya
Chubu(NGO)
Shanghai
Pudong(PVG)
Pyongyang
Sunan (FNJ)
Chengdu (CTU) Jakarta
Soekarnd( CGK)
Denpasar
Bali NgurahRal (DPS)
Singgapor
e Changi(SIN)
Riyadh
K.khaled(RUH)
Delhi Gandhi
(DEL)Kaohsiung
(KHH)Kathmandu
(KTM)Surabaya
Juanda(SUB)
Sapporo
Chitose (CTS)
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Long HaulSouth America Europe North
America
Africa Australia
Washington
Dulles (IAD)
Salt Lake
City (SLC)
Amsterdam-
(AMS)
Santiago
Arturo
Merino(SCL)
Addis
Ababa Bole
(ADD)
Adelaide-
(ADL)
Manchester
(MAN)San
Francisco(SFO)
Frankfurt
(FRA)Johannesbu
rg janSmuts
(JNB)
Auckland
international (AKL)
Anchorage
(ANC)
Toronto
Pearson(YYZ)
Istanbul (IST) Mauritius
(MRU)
B.Serl
Begawan(BWN)
New York
Kennedy (JFK)
Vancouver
(YVR)
Leipzig(LEJ) Brisbane
(BNE)
AtlanantaHartsield-
Jackson (ATL)
Ontario(Los
Angeles)(ONT)
LondonHeathrow
(LHR)
Cairns(CNS)
Boston Logan
(BOS)
Philadelphi
a (PHL)
Milan
Malpensa(MXP)
Calcutta
(CCU)
Chicago OHare(ORD)
Munich FranzJoseph Strauss
(MUC)
MelbourneTullamarin
e (MEL)
Honolulu (HNL) ParisOrly(ORY)
SydneyKingsford
(SYD)
Indianapolis(IND)
Rome Da Vinci(FCO)
Los angeles
International(LAX)
Sharjah (SHJ)
Miami (MIA) Tel Aviv-Yafo
Ben Gurion
(TLV)
Zurich (ZRH)
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The above tables showed all the routes we offered. There are 78 routes intotal. All of them start out their light in Hong Kong. Generally speaking,
we have covered 6 regions in the world including Asia, Africa, Australia,
North America, South America and Europe.
Due to the limited budget at the beginning of our operation, we ly for
short hauls irst so as to lower our operation cost especially the cost used
on fuel. And we choose cities in Asia as our destinations. These cities are
usually popular tourist sites which mean that demands for these routes
are high. With a high demand, we are able to earn money from it. A low
cost together with a high revenue, we are able to earn proits for ouroperation.
Because of the proits earned, our budget increased. With more money, we
then expand our routes to other regions-- Africa, Australia, North America,
South America and Europe. Though these long haul routes have to travel a
longer distance, which requires more fuel, the income we earned from
these long hauls is still enough to cover the cost.
By offering different routes to the customers, we are able to get a bigger
market and a wider amount of income is received. With this strategy, weare able to earn an immense proit.
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SchedulingApart from offering different routes, we also increase the frequency of our
lights in order to attract more customers.
For short haul, we have daily operations. In order to fully utilize the
aircrafts, we scheduled it ly for three times or more per day. What we
deined as the Asia routes which content the travel hours less than 4
hours.
For long haul, we have operation 3 times a week and we scheduled one
time per day only since the long haul should spend two days for a trip. Therest of the time of the aircraft we design a short haul trip for them to travel
to some popular place such as Tokyo, Taipei or Bangkok. Both short and
long haul are operated under the basis of turnaround trip.
To reduce the operation cost of the aircraft, we let the aircraft light as
more as possible. However, it still contain about 3 hours the aircraft do
nothing in average. This cost is inevitable.
CargoApart from doing the passenger business, we also operate cargo business.
Unlike the aircrafts which carry both passengers and cargo, the aircrafts
which focus on the cargo only are much more proitable. We, therefore,
lease ten Boeing aircrafts to operate the cargo business. We have cargo
operation in different parts of the world so as to earn more proit.
In order to support the cargo operation, we have set up cargo handling
facilities in the airport which provide cargo service and we have
advertising our cargo services. However, for the passenger-and-cargo
light, it still earned less than the only cargo one (although the advertising
is same).
We also signed up the logistic contract with other company to reduce the
cost to operate the cargo. At last, we earned about a billion from the cargo
services each quarter.
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MarketingSince our company is a new airline company, in order to make our
company more famous, we have implemented a series of promotion and
advertisement including sponsorship, billboard and TV advertisement in
different countries.
In order to facilitate and attract more customers, tickets are available at
the Internet and customers can buy their tickets in the Internet. 5%
discount is offered when customers buy their tickets via the Internet.
Apart from advertising and offering discount, we have also implementedthe Frequent Flyer Program so as to attract more customers, especially the
businessmen. This is because businessmen always need to ly for their
business; it would be attractive to these people if we can offer privileges to
them. Under the Frequent Flyer Program, customers can enjoy a variety of
beneits such as upgrades and tickets with discounts. With the Frequent
Flyer Program, we would be able to secure certain groups of customers
and also attract more new customers to use our airline.
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Financial performanceIn total, we have run 12 quarters. For our inancial details, we can refer to
the graph as shown below:
We can see that the income was increased steadily from the irst season tothe ifth season. Since we have not big changes of our business plan, the
income increase rate is narrowed. After quarter1 of 2006, the income and
proit become stable. And at the last two seasons, we enrolled the cargo
freight and the income boost up to over $1800000000.
At irst, we got $34,550,178 capital. Also, we have the equation that:
=
In every quarter, we have a higher income than expend, thats why we
always get proit. Although the income is quite high at the last season,
expend is high too. Therefore, the net proit is very less.
In 2005, there is no cargo in quarter1 because we concern that our planes
cannot fulill cargos need. Therefore, we only serve passages in this
quarter and we process 12 planes. But we can see that, we still have a good
result as $199,697,600 passengers income and the expenses are only
$90,261,820. It is include operating cost, staff, staff training, Etc.
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$1,400,000,000
$1,600,000,000
$1,800,000,000
$2,000,000,000
Income
Expend
Net Profit
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The next quarter, we started to have cargo freight. Thanks to it is the startof carrying cargo, we have just only $4,865,396 income. In addition, there
are more planes that we can carry more passengers; the income of
passenger loading has a big margin of increase. We keep possessing more
planes and have more routes simultaneously. More place to arrive, more
passengers will choose our airline.
Next year, cargo income has a stable improvement as we have some
aircrafts are only for cargo. The proit now is a ten million more than
previous one.
The last four quarters, it is a bit lower of passenger income than before.
However, we still have advancement on cargo. As we have more and more
cargo facilities in different country.
Following season is the same. Last two quarters of our airline. We can see
that decrease of passengers income has modiied. Because of the both
increase on total income and expenses, proit do not go backward.
Nevertheless, the last quarter, we earn proit but have reduced.
During the game, we have found something about how to boost the proit.First of all, we think we should use the aircraft more eficiency such as cut
down the low seat sold routes and replace it by the multiple stopping
routes, such as the aircraft start from Hong Kong to City A and ly to City B.
Second, we think we should develop some few company cities such as
North Korea, Sharjah. Since these routes have not too much company join
the business, so the seat sold have got the better performance.
Third, we think we should lease some cargo-only aircraft because this kind
of aircraft only concerned about the fuel price and the cost to have a lightis much lower than the PAX-and-cargo aircraft.
Fourth is about operation contracts such as fuel contracts, logistic
contracts, insurance and enrolled the stock market. Sign up the fuel
contract and logistic contract can reduce the fuel price and the cargo
transfer cost.
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Fifth, we should change the service plan to full service and organize thestaff training every year. These two changes can conirm the quality of our
services and increase the passenger number. So that it would increase our
income. Also we will contain a reasonable salary of our staff which means
the salary is higher than the average. And we will add some more welfare
to our staff such as the children care and the elder care.
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Reflections on this exerciseReferring to this program, the airline we have designed has many parts
similar to reality. Take the Cathy Pacific as an example, firstly, for the
routes, we have international routes fly to different territories. Secondly,
for the aircraft, we have 2 categories of aircraft - Airbus and Boeing that
responsible for passenger and cargo or cargo only which is equal to the
Cathy Pacific. Thirdly, for the passenger service, we provide full-service,
we offer meal, newspaper, luggage allowance and ground service etc.
Finally, for the welfare of staffs, we give the discount of staff traveling and
medical care etc.
On the other hand, something is missing and unrealistic. In reality,
external factors should also be included, such as weather, accidents,
disease and economic issue which may affect our business.
Another thing that we have try and have a deep impression is how to set
up a cargo flight (which is the freight.). We should set up the cargofacilities and advertising which will affect so much on our business. At last,
we earn about seven billion on the cargo business. Then we have try how
to paint our aircraft to have better promotion.
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ConclusionAfter inishing this project, we realized that running an airline company is
not as easy as we imagined. There are in fact lots of factor we need to
consider while we are running our operation. Running for a proit is even
a more dificult task.
At irst, we have encountered many dificulties and we always resulted in
loss. However, after several trials, we began to realize that our operation
cannot only rely on a few air routes, it would be impossible for us to earn a
proit. We therefore increase our coverage of our air routes as well as the
frequency of our lights. In order to follow the situation in the real world,
we would not set our routes over the Fifth Freedom. Moreover, during our
trials, we found that running of aircrafts for cargo only is in fact much
more proitable than the aircrafts which carry both passengers and cargo,
we thus put 10 aircrafts mainly focus on cargo operation. Besides,
marketing of our company, provision of full service are also carried out in
our operation. Although we have investment on hotel, due to limited time,
the result of the hotel are not available in this report.
After implementing the above arrangements, we inally got cash balance of
$4,415,388,172.77 in the last quarter.
Running this software, we know more about the operation of an airline
company. At the same time, since we set our operation by referring to
some realistic operation like the Cathay Paciic, we learn a lot of aviation
information from those sources. And these information helps us to take up
the aviation topic more easily.
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Contribution of the membersThe distribution of workload of each group mates are as show as follow:
Team members
Sections
Vincent Grace Sam Koey Ho
Airline 6
Introduction
Business
Details
Financial
Performance
Reflections on
this exercise
Conclusion