Fleet Planning of the New American Airways - Assignment Example

“Fleet planning of the New American Airways” Introduction The American Airline is the primary carrier in the USA. It principally works with the British American airways (BAA). It has grown rapidly because of its merging with primary leaders in the market, which includes the Iberia. It is notable that, the American airlines and British Airways are the two-naissance members of the Oneworld. Its main destination hub is the Heathrow Airport in London. Its capacity and ability is attributed to the size of fleet, international destinations, international flights and the number of passengers carried. It is notable that, this airport receives the largest number of passenger capacity from America (New American Airways, 2009). It is imperative to note that the long- haul journey of fleet replacement by the New American Airways started back in 2009, when the company ordered 84 next- generation Boeing 737-800s. More over, it ordered 35 airbus A320 family aircraft from the long- time Boeing customer, which were to be delivered in 2011.The fleet replacement was intended to reduce the use of the MD80 aircraft, which were expensive in fuel consumption. This study establishes that, the new fleet replacement from the Boeing added up 35% reduction in fuel consumption on a seat mile. It is noteworthy that, the Boeing 737-800s is the epicenter of the airline’s long-haul fleet; it has with nearly 100 examples in service (New American Airways, 2009). The magnitude of operations makes the American Airways the leading operator in the world. Although the American airways operate a large Boeing fleet, it operates aircrafts from other manufacturers. The following analysis indicates the British American Airways fleet in 2011 (British American Airways, 2012). Aircraft Number No of seats per a/c Average age Airbus A340-300 3 290 15 Airbus A340-600 8 380 7 Boeing 747-400 6 410 11 Total 17 The American airlines operate over 450 aircrafts globally. It carries close to 60 million passengers yearly. It serves over 200 destinations. Questions Look at the forecasts on the Boeing and Airbus web sites and any other sources you think useful. Interpolate the forecasts, as necessary, for the years to 2016 and adjust them by your own calculations and judgment. Explain why you have chosen the growth rates you use. The Market for Large Commercial Jet Transports released by the Forecast Internationals projects that 14,655 large commercial airliners will be produced in the 10-year within the period from 2012 to 2021 (Ottaway, Susan & Ian, 2007). The market research based at Connecticut approximates the value of this fabrication at $2.04 trillion in constant 2012 U.S. dollars. It is notable that, the two leading manufacturers in the market, Airbus and Boeing, are implementing production increases. They are taking into consideration ancillary increases for the future. However, establishing how rapid and lofty to increase production remains a tricky objective for the two companies. More over, the susceptibility of their supply chains poses a concern of universal healthiness of the airline industry (Ottaway, Susan & Ian, 2007). The aspiration of Airbus and Boeing to raise production is putting a significant strain on their suppliers. This situation is a gigantic concern in light of the ongoing international economic lethargy and improbability. In such a milieu, a considerable number of suppliers may be incapable or even reluctant to sustain recurrent production increases. This study intends to consider the Airbus and Boeing forecasts from 2011 through 2016 for the American airlines. The 2011 statistics of both the Airbus and Boeing indicated above are used as a blueprint of the subsequent forecasts. The variables to be used in determining approximate forecasted data of the aircrafts and passengers for both the Airbus and Boeing from 2011 trough 2013 include the annual passenger growth and the demand for aircrafts (Ottaway, Susan & Ian, 2007). For instance, the Boeing passenger demand is 4.7 % annually while that of the Airbus is approximated at 3%. On the same note, the aircraft rate of growth, which is attributed to the passenger demand, is approximated to be 1.5% for the Boeing and 1% for the Airbus (New American Airways, 2012). This understanding is derived from the forecast international, which approximates that the rate of growth of passenger demand in the next 20 years is will doubled and that of aircrafts will range from 2% to 5% depending on the customer taste. This study intends to use the approximate growth rates to forecast or make a judgment on the trend of the passenger and aircraft growth for the next four years (Washington: U.S. G.P.O, 2010). Consider the following forecast break down at annual passenger growth rate of 4.7 % for Boeing and 3% for Airbus. In essence, the 2011 figures of the American airline’s passengers have been increasing annually by the approximated rates. This judgment can be subjected to criticism, however, the growth range of between 1% and 5% indicated earlier in this study is considered. Aircraft in-service Passengers growth rate 2011 2012 2013 2014 2015 2016 Airbus A340-300 3 290 299 308 317 326 336 Airbus A340-600 8 380 391 403 415 428 441 Boeing 747-400 6 410 429 449 471 493 516 Total 17 On the other and, the growth rate of the aircrafts can be approximated by 9% for the Boeing and 7 % for the Airbus. Aircraft/year 2011 2012 2013 2014 2015 2016 Boeing 6 7 8 9 10 11 Airbus 11 12 13 14 15 16 The above calculation is based on the sustainable growth rate due to the industrial effects that can be caused to the environment. In addition, this growth rate does not restrain the firm’s capital and available airlines (Ottaway, Susan & Ian, 2007). This enables to have liquid capital for running other operations and increases efficiency in service delivery. It is notable that, unlimited expansion of the firm’s operations is immensely attributed to the high extent of risk. On the other hand, the current the capability in terms of ASK will raise at an average of 4.7% per year which is a little less than the passenger traffic growth because of load factor enhancement from 78% to 81% for the next 20 years (Channon, 2006). This will see increase of seat kilometers to reach 16,424 billion, which is 2.5 times more than the present capacity. Consider the following approximation of both ASK and RBK based on the a growth rate of 4.7% Variable/Year 2011 2012 2013 2014 2015 2016 ASKs 25,000 26,175 27,405 28,693 30,041 31,456 RBK 25,000 26,175 27,405 28,693 30,041 31,456 Consider the following graphical representation. Decide if you expect to increase, decrease or maintain market share and explain why you have chosen the figure you choose. Assume this airline is the only UK airline operating to the USA from Heathrow, other than British Airways, but the several USA airlines compete. BA has achieved Anti Trust Immunity with American Airlines and merged with Iberia. There has been an open skies agreement between Europe and the USA since March 2008. Assume BAA’s current market share is 20%. Increased activities between the UK and the USA are directly attributed to increased BAA’s market share (Ottaway, Susan & Ian, 2007). The stiff competition from other players in the field is among the variables considered by the American airline in making a judgment as to increase or decrease the market share. American Airline being one of the leading players in the market would opt to enhance its operations to expand its market niche (Washington: U.S. G.P.O, 2010). It is imperative to notice that, the current market share is likely to increase to around 28%. The increase is closely attributed to factors such as the Anti Trust Immunity with the American Airlines. The fact that there is allowance for merging, the market share increase is inevitable. This is because when two or more firms merge up, their operations tend to expand. More over, the fact that, it is the sole airline allowed to operate from the UK to the US increases the market niche, and finally the free skies agreement allowed for this airline is a key contributory factor to the intended growth rate of the market share (London, 2007). The strength of this judgment (28% -increase) is based on two factors which include the baseline growth rate of the airline market share across the European Union ranges from 4.5% to 9% Apply your growth rates and market share assumption to the baseline. Decide on the planning seat factor for 2016 and explain your decision. Then calculate the number of ASKs required in 5 years from the baseline (i.e. 2016). Don’t confuse aircraft utilization (how hard the aircraft are worked) and seat factor (% of seats that are filled). Considering the growth rates and market share mentioned in this study, deciding on the planning seat factor for 2016 is a complex activity; however, a judgment can be made from the gauge of the amount of use of the total available aptitude of aircrafts. The passenger load factor is valuable in calculating the average occupancy on diverse routes of airlines and railways. This information is fundamental in determining the prosperity (profitability) and revenue ability of routes (Washington: U.S. G.P.O, 2010). For instance, an aircraft with 100 seats traveling a distance of 1000 kilometers results to 100,000 seat kilometers. Consider the case of the distance from the US to the UK, which is approximately 5567.11 kilometers. An aircraft with an average of 250-passenger capacity will have 1391777.5 seat kilometers. If an average of 180 passengers travels to the end, then the passenger kilometers will be 1002079.8. The estimated PLF is 1002079.8/1391777.5 = 0.72 (British American Airways, 2012) Suggest how to change the fleet by 2016, using only types and models already in the fleet, to meet the capacity need. Explain your rationale for the option(s) you choose. Show your workings. Fundamentally, the current models in the American airlines fleet are the Boeing and the Airbus. The estimated capacity in 2016 is averaged at 70 million and changing the fleet using the Boeing and Airbus models to meet this capacity (Washington: U.S. G.P.O, 2010). The 2016 fleet change can be estimated by using the PLF calculated earlier. Take the projected 70 million passengers and the expected passenger kilometers of 1002079.8 per aircraft. It is realizable that the capacity needed can be achieved by increasing the number of Airbus and Boeing by a rate of 4% and 6% respectively. It is notable that, the fleet change approximation should be applied in tandem with the market share changes to facilitate adequate balance of the available fleet and the market niche. It is imperative to note that proper fleet change will result in efficiency of the American airline operations without financial strain and consequent increase in profitability. What aircraft types would you like to explore rather than stick with the type the airline already has? Why? What effect might these types have on your overall fleet plan? You do not need to rework the fleet plan in detail. What new issues might such changes raise? The American airline can explore models with a proven history of functionality and less accident rates. Some of these include the Lodestars Model, the Vickers VC10, Boring 777-200 and Airbus 321-200. The Lodestars Model is economical to operate. It is evident that kind of model has been operated in many nationals across the globe (Channon, 2006). For instance, Israel uses the Lodestars aircrafts in the Country’s Air Force wile New Zealand use it for aerial top dressing (Washington: U.S. G.P.O, 1997). On the other hand, the Vickers VC10 is designed to fly on long distance routes. It flies at subsonic speed. In addition, it has ability to operate in both hot and high conditions especially those in African airports and parts of Europe. This kind of aircraft can be used in aerial top dressing and surveillance (MSO, 1996). It is imperative to note these models are both economical and can fly at high speeds in bad climatic conditions. On the other hand, the Boeing 777-200 is a long range, with twin aisle and engine. It has a low landing gear and a narrow tailfin. The Boeing Company, which is the American’s primary aerospace company, manufactures the jet (Washington: U.S. G.P.O, 2010). This jet is the world’s leading aircraft in terms of technology since it was the first commercial aircraft entirely designed by a computer in the world’s history. The jet’s benefits are attributed to its ability to plough on long hauls routes to both the UK and parts of North and South America. It has the ability to travel up 16, 417Km in 18 hours (Washington: U.S. G.P.O, 2010). In addition, this aircraft is efficient in fuel consumption as it burns 20% less fuel compared to the Boeing 747 and has sufficient cabin comfort. Some of the benefits for the passengers include existence of personal audio and video systems for all the seats, excellent silence due to wide cabins with high-level ceilings. The airbus 321-200 is single aisle with a twin engine. Airbus manufacturers manufacture it. It is a European consortium. This jet is one of the Airbus 320 family, which forms the best selling aircraft in the world market (Washington: U.S. G.P.O, 2010). The jet is distinguished from A320 and A321 by the stretched fuselage and more powerful engines. This jet is preferred due to its ability to plough long haul routes and comparatively less fuel consumption. The benefits attributed to the passengers include existence of moving video screens showing destination maps. More over, the jet is fixed with leather seats offering comfort to the passengers. It is imperative to note that all these models are both economical and can fly at high speeds in appalling climatic conditions. In conclusion, the American airline has stretched its potential in investing in its operations, which has seen it continually increase its market niche. It is imperative to note that, the intended forecasts are capital intensive consequently; sound decision on budgetary aspect should be critically measured to ensure the continued functionality of the company (Washington: U.S. G.P.O, 2010). It is imperative to note that, these forecasts if implemented will see the American airline continue remaining the leading player in the market share. Similarly, the company’s returns will be expected to shoot. However, it should be noted that rapid expansion in this industry might pose serious environmental effects. This is because of the magnitude of the emissions from the aircrafts. In essence, there should be regulated to enhance health growth in this industry. Bibliography Antitrust Implications: The British Airways-American Airlines Alliance : Hearing Before the Subcommittee on Antitrust, Business Rights, and Competition of the Committee on the Judiciary, United States Senate, One Hundred Fifth Congress, First Session ... April 22, 2010. Washington: U.S. G.P.O, 2010. Print. Annual Report and Statement of Accounts of the New American Airways Corporation for the Year Ended 31st March 2009. London, 2009, Ottaway, Susan, and Ian Ottaway. Fly with the Stars: British South American Airways : the Rise and Controversial Fall of a Long-Haul Trailblazer. Stroud: Sutton, 2007. Print. 1948. Print. The Proposed Alliance between British Airways and American Airlines: Sixth Report. London: HMSO, 1996. Print. Channon, Paul. The Proposed Alliance between British Airways and American Airlines. London: Stationery Office Books, 2006. Print. Annual Report and Statement of Accounts. London, 2007. Print. Read More