Operations as defined by Heizer is the management of production of goods and services that add value to the firm. Thus, operations cannot be ignored any wherelets first analyze briefly what actually is the function of an airline industry. Airline industry provides services to its customers by transporting them from one destination to another be it international, national, regional or simply for cargo purposes.
The operations issues that are important and critical include airport capacity, route structures, technology and costs to lease or buy the physical aircrafts1. Some of the larger issues that organizations face every time are the weather conditions, fuel costs and labor. Since weather effects flight schedules and is quite variable and naturally unpredictable; weather extremes such as snow, fog, and extreme temperatures can halt the operations of the air transport and hence add to costs both in terms of opportunity cost and the physical cost already incurred. Without fuel, no aero plane could fly, fuel costs comprise around 17-18% of the total cost of the airline company. For managing fuel efficiency the air transportation management should schedule flights properly as for example short haul flights are less fuel efficient as greater part is consumed in landing and take off. Labor is very important, which includes all sorts of labor and skills, flight attendants, pilots, baggage handlers, dispatchers, customer services, air hosts and hostesses etc.
The critical activities2 of an airline industry include demand forecasting, network design, revenue management, route planning, airline schedule planning, irregular operations aircraft routing, integrated scheduling, real time crew management, crew pairing optimization, air traffic flow management, crew rostering, air traffic simulation and control, and also coping with the concerned authorities' control program. Now the critical activities are discussed independently, and the relevant outcome and importance is also specified.
Demand forecasting by airlines
It is important for an air transportation industry to forecast demand levels correctly, as the management of demand can help in maximizing revenues as much as possible. And since demand for air travel seems to have been growing at the multiples of GDP therefore the need becomes more pronounced. And, there is a need to understand the demand for airlines industry is of two types, viz. underlying growth and the induced growth. The underlying growth in demand occurs as a reason of naturally occurring external factors in the environment;