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Future Performance
Reading In The Future (6)
Case Study
Prepared By
Mohammed Salem Awadh
Aviation Consultant
Future Performance
The Impact of Capacity
Reduction
Future Performance
“Excellence is never an accident. It is always
the result of high intention, sincere effort, and
intelligent execution; it represents the wise
choice of many alternatives - choice, not
chance, determines your destiny.”
― Aristotle
Future Performance
Future Performance
Outline 1/2
• Airberlin – Introduction
• Key Performance Indicators For Airlines
• Errors Vs KPIs
• Forecasting Model
– Basic concept of forecasting Model
– Forecasting – Trend vs. Seasonality
– Model Constrains
– Max.& Min Signal Tracking Analysis
• Case Study : ( airberlin )
• Data Base ( Three years data )
Future Performance
Outline 2/2
• Forecasting 2016
– Capacity Forecast
– ASK Forecast
• Upper level
• Trend
• Lower level
– Passengers Forecast
– Load Factor Forecast
– RPK Forecast
– Capacity 2015
• Analysis
• Summary
• Conclusions
Future Performance
airberlin – Your Investment: a stake in the future market
Investing in airberlin shares is a medium to long-term stake in the future air travel sector. Year by year, flying plays a
greater part in people’s mobility patterns. The world is becoming more mobile and boundaries are merging together
constantly. Air travel represents the fastest geographic connection between regions and continents. The demand for
supply is increasing - and with this the demand for services of airberlin.
Investing in airberlin shares is moreover an investment in customer services a future promising sector. Here it
becomes evident: In competition, only suppliers will maintain in market in the future which are able to meet
cusomer’s needs as fully as possible. Therefore as a company, airberlin is setting itself apart from low-cost carriers by
combining the elements of premium services of a full-service airline with the best possible price/performance
relationship. This offer makes airberlin unique in Germany.
With the strategic combination of oneworld and Etihad Airways, airberlin has completed the final stage of its
development and can focus on successfully expanding its position as a global full-service airline in the future. By
focusing on the hubs in Berlin, Dusseldorf, Vienna, Palma de Mallorca and last but not least Abu Dhabi, airberlin can
open up to optimum growth markets in the air travel industry and therefore strengthen its position in the world-wide
travel.
Aims
• Economic: In the short term, airberlin intends to turnaround to operating profitability. Based on this, the value of
the company should increase in the long term.
• Strategic: Increasing its growth and securing its future with strategic partnerships. Consciously using synergies of
the existing cooperation with oneworld and Etihad Airways in order to guarantee growth - despite the current
difficult market situation.
Future Performance
( Global Growth )
Future Performance
( Strategy )
Future Performance
K.P.I For Airlines
• Key Performance Figures
• Capacity = ASM( available seat miles )
• Traffic = RPM( revenue passenger miles )
• Load Factor ( LF ) =
RPM/ASM
Future Performance
K.P.I For Airlines
• K. P. I for Lufthansa Group:
Each Airline has its own
KPIs policy, PAX,
CAPACITY, ASK , RPK, &
L/F are main measuring
KPIs for Air berlin
Future Performance
Errors Vs KPIs
Future Performance
FORECASTING
Future Performance
FORECASTING
• Forecasting is a unique science, very useful in practice, and use widely in
many fields, especially Aviation.
• Today we are concerning on the application of Forecasting for Airlines, and
also Airports. Airlines can define their seasonality, and its impacts on
operations and maintenance programs, we have to define the right
demand for the right sector in the right segment.
• While most of Investors in Airline Industry are concerned for the
performance factors that’s Traffic and Capacity , RPM ,ASM , and Load
Factor. They evaluate them by comparing their values in past according to
month by month approach. here we look forward, to future to set targets.
• Forecasting is tilling us the future patterns for these factors, which
consequently, we can develop and forecast the expected Load Factor which
means also define the future performance for airlines.
• There are many methods of forecasting, but the approach of Max/Min
Signal Tracking, deliver the best scenario for the data that can be analyzed.
No grey region, just in a black and white / Good or Bad based on the
constrains that we are applied.
Future Performance
Basic concept of forecasting Model
Future Performance
Basic concept of forecasting Model
Directional Displacement
Future Performance
Model Constrains
 Two Main Constrains to get a fair model:
R2 = Coef. Of Determination T. S. = Tracking Signal
R2 > 80%
AND
-4 < T.S.< 4
Future Performance
Max.& Min Signal Tracking Analysis
Maximum & Minimum Signal Tracking Analysis
- It is almost as Quality Control Chart, that bond
all values in the control limits, but by adjusting
the values of the two basic elements in the
forecasting model, (Displacement and Rotational
one) we try to satisfies the constrains i.e ± 4 –
Accepted Region , if not we have to match the
values of max & min as a final solution for best
value of R (Coeff. of correlation ).
- By implementing this approach, we can get the
best answer ( in black or white no grey answer).
R2 > 80%
AND
-4 < T.S.< 4
Future Performance
Accuracy Forecasting Matrix
By setting the constrains for Accuracy of
Forecasting, Four possible outcomes we can get :
Fair, Mislead, Unrelated and Poor
R2 > 80%
AND
-4 < T.S.< 4
Fair : All Constrains are satisfied.
Mislead: Even R is GOOD, while T.S.
is not, the possibility of Mislead is
there, due to displacement effect.
(almost Fair – need visual sight)
Unrelated : R is poor even T.S. is
GOOD. ( no relation )
Poor : Both ( R + T.S) are out of the
constrains region.
Future Performance
Case Study :
The Impact of Capacity Reduction
Future Performance
Capacity Cutting by 5%
Future Performance
Impact of Capacity Adjustment
by airberlin using Quarter by Quarter Approach
Classical Approach
- Week by Week
- Month by Month
- Quarter by Quarter
- Year by Year
- Comparison
Future Performance
Data Base :
Future Performance
Data Base :
Future Performance
Capacity Forecast
2016
Future Performance
Capacity Forecast 2016
Seats
Future Performance
ASK Forecast
2016
Future Performance
Available Seat Kilometers - ASKs
Forecasting - 2016
Future Performance
Available Seat Kilometers - ASKs
Forecasting – 2016 – Normal ( Upper Part )
Based On
The First
Two Years
Data
Future Performance
Available Seat Kilometers - ASKs
Forecasting – 2016 ( Negative Trend )
Based On
Three
Years Data
& Keeping
the
seasonality
indexes
Future Performance
Available Seat Kilometers - ASKs
Forecasting – 2016 Normal ( Lower Part )
Based On
The Last
Year Data
& Keeping
the
seasonality
indexes
Future Performance
Passenger Forecast
2016
Future Performance
Passengers Forecasting 2016
Future Performance
Load Factor
Forecast
2016
Future Performance
Load Factor % 2016
Future Performance
RPK Forecast
2016
Future Performance
Revenue Passengers Kilometers - RPKs
Forecast - 2016
Future Performance
Accuracy Forecasting Matrix
- The outcomes of
Accuracy Forecasting
Matrix are :
- Load Factor ( Fair )
- ASK ( Poor )
- Capacity, RPK, Pax, in
(Mislead) but they are
almost Fair as R is High
and S.T. lay on both
sides of trend line as
they are greater than
±4 so they lay on the
actual data.
Future Performance
Analysis
– Usually the airline performance indicators are addressed in such
Case , as:
– Capacity :- in terms of Seats
• Since the strategy Air berlin is to reduce cost by maintaining the right
operating capacity to more profitable sectors. They started by reducing 5 %
from total seats, this impact the norms of stable distribution curve.
– Traffic : - in terms of Passengers ( Pax )
• the traffic passengers is looking to be not stable, but also there is a
passengers losses. (not increases)
– Load Factor :- it is the outcome of RPK/ASK.
• Almost stable figure, but it should subjected to incremental increasing level.
In classical approach the outcome based on point to point comparison.
– ASK – Available Seat Kilometers. ( 1/2 )
• The impact of capacity reduction is clear in graph, the reduction is effected
by frequency adjusted flights operations. Here we get a complete picture.
Not point to point decision.
Future Performance
Analysis Continue …
– ASK – Available
Seat Kilometers. (
2/2 ) – 3 Scenarios
:
• The Upper
Level: where the
first two
analysis keeping
the seasonality
index
• Trend
(negative): the
whole data are
analyzed.
• The lower level:
where the last
year is analyzed
keeping the
seasonality
Index
Future Performance
Analysis Continue …
– RPK – Revenue Passengers Kilometers.
• According to the law of supply and demand, since there is a heavily reduction
in ASK, there is an increase in RPK as shown in the Graph. We agree with
facts. But here is the difference, when airberlin compare, they compare with
the past i.e 3rd Q 2015 to 3rd Q 2014, while we are talking about 2016. so we
know there will an increase in RPK, THIS IS A FACT. ( Not Reduction )
– The period of 2016 is forecasted
for the propose of setting targets .
– The outcomes are almost fairs (
Mislead ) with one ( Poor ) , and
one ( Fair ) as shown in the
Matrix.
Future Performance
Results
Future Performance
Summary
• Most of Investors in Airline Industry are concerned for the
performance factors that’s Traffic and Capacity , RPK ,ASK , and Load
Factor. They evaluate them by comparing their values in past
according to month by month approach.
• This presentation tilling us the future patterns for these factors, which
consequently we can develop and forecast the expected Load Factor. (
AIRLINE Performance )
• This also will help the airline to set their targets, and developed the
right KPI policy for measuring airline performance.
• The data is fairly fitted, with a minimum errors.
• The results shows impact of capacity reduction especially for ASK and RPK for 2016,
While the load factor will be a stable for 2016 which is not fair, as it should logically be
increases.
• The expected Passengers for 2016 = 30,508,479 Pax
• The expected Capacity ( Seat ) for 2016 = 36,981,631 Seat
• The expected Load Factor for 2016 = 83.23 %
• The expected Available Seat Kilometer for 2016 = 57,999 ASK ( Upper Level )
• The expected Revenue Passengers Kilometer for 2016 = 56,413 RPK
Future Performance
Conclusions
Recently Airberlin reduce their capacity, by concentrating on a more profitable routes,
Logically if we are squeezing the capacity (ASK)- SUPPLY , the other part – DEMAND will
force to pump out i.e (RPK), then how we can get the complete picture, definitely the
load Factor should be increase in normal cases, … for this issue , there are two scenarios
or results, first if the load factor increase significantly the Airberlin absorb the pressure
of shifting their markets by increase the frequencies on their specific route which also
aircrafts assist in this process by accepting more passengers than the usual figure in
previous periods.
But if the load factor is stable it means that a part of airberlin
market spill to other competitors, and they are losing their
markets ,yes the only benefits from this is the revenue or more
specifically the YIELD, i.e is Yield is high enough to implement
this reduction if so then they are in a safe side. While the cost
will comes down due to the reduction in operation, means
reduction in the variable cost.
Future Performance
Welcome In The Club
Thanks !
Future Performance
Reading In The Future
Future Performance
Contact
• Mohammed Salem Awad
• Chairman Adviser – Yemenia
• Tel: 00967 735222692
• Email: mohammed.hadi@yemenia.com
smartdecision2002@yahoo.com

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Reading in the future airbrelin

  • 1. Future Performance Reading In The Future (6) Case Study Prepared By Mohammed Salem Awadh Aviation Consultant Future Performance The Impact of Capacity Reduction
  • 2. Future Performance “Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives - choice, not chance, determines your destiny.” ― Aristotle Future Performance
  • 3. Future Performance Outline 1/2 • Airberlin – Introduction • Key Performance Indicators For Airlines • Errors Vs KPIs • Forecasting Model – Basic concept of forecasting Model – Forecasting – Trend vs. Seasonality – Model Constrains – Max.& Min Signal Tracking Analysis • Case Study : ( airberlin ) • Data Base ( Three years data )
  • 4. Future Performance Outline 2/2 • Forecasting 2016 – Capacity Forecast – ASK Forecast • Upper level • Trend • Lower level – Passengers Forecast – Load Factor Forecast – RPK Forecast – Capacity 2015 • Analysis • Summary • Conclusions
  • 5. Future Performance airberlin – Your Investment: a stake in the future market Investing in airberlin shares is a medium to long-term stake in the future air travel sector. Year by year, flying plays a greater part in people’s mobility patterns. The world is becoming more mobile and boundaries are merging together constantly. Air travel represents the fastest geographic connection between regions and continents. The demand for supply is increasing - and with this the demand for services of airberlin. Investing in airberlin shares is moreover an investment in customer services a future promising sector. Here it becomes evident: In competition, only suppliers will maintain in market in the future which are able to meet cusomer’s needs as fully as possible. Therefore as a company, airberlin is setting itself apart from low-cost carriers by combining the elements of premium services of a full-service airline with the best possible price/performance relationship. This offer makes airberlin unique in Germany. With the strategic combination of oneworld and Etihad Airways, airberlin has completed the final stage of its development and can focus on successfully expanding its position as a global full-service airline in the future. By focusing on the hubs in Berlin, Dusseldorf, Vienna, Palma de Mallorca and last but not least Abu Dhabi, airberlin can open up to optimum growth markets in the air travel industry and therefore strengthen its position in the world-wide travel. Aims • Economic: In the short term, airberlin intends to turnaround to operating profitability. Based on this, the value of the company should increase in the long term. • Strategic: Increasing its growth and securing its future with strategic partnerships. Consciously using synergies of the existing cooperation with oneworld and Etihad Airways in order to guarantee growth - despite the current difficult market situation.
  • 8. Future Performance K.P.I For Airlines • Key Performance Figures • Capacity = ASM( available seat miles ) • Traffic = RPM( revenue passenger miles ) • Load Factor ( LF ) = RPM/ASM
  • 9. Future Performance K.P.I For Airlines • K. P. I for Lufthansa Group: Each Airline has its own KPIs policy, PAX, CAPACITY, ASK , RPK, & L/F are main measuring KPIs for Air berlin
  • 12. Future Performance FORECASTING • Forecasting is a unique science, very useful in practice, and use widely in many fields, especially Aviation. • Today we are concerning on the application of Forecasting for Airlines, and also Airports. Airlines can define their seasonality, and its impacts on operations and maintenance programs, we have to define the right demand for the right sector in the right segment. • While most of Investors in Airline Industry are concerned for the performance factors that’s Traffic and Capacity , RPM ,ASM , and Load Factor. They evaluate them by comparing their values in past according to month by month approach. here we look forward, to future to set targets. • Forecasting is tilling us the future patterns for these factors, which consequently, we can develop and forecast the expected Load Factor which means also define the future performance for airlines. • There are many methods of forecasting, but the approach of Max/Min Signal Tracking, deliver the best scenario for the data that can be analyzed. No grey region, just in a black and white / Good or Bad based on the constrains that we are applied.
  • 13. Future Performance Basic concept of forecasting Model
  • 14. Future Performance Basic concept of forecasting Model Directional Displacement
  • 15. Future Performance Model Constrains  Two Main Constrains to get a fair model: R2 = Coef. Of Determination T. S. = Tracking Signal R2 > 80% AND -4 < T.S.< 4
  • 16. Future Performance Max.& Min Signal Tracking Analysis Maximum & Minimum Signal Tracking Analysis - It is almost as Quality Control Chart, that bond all values in the control limits, but by adjusting the values of the two basic elements in the forecasting model, (Displacement and Rotational one) we try to satisfies the constrains i.e ± 4 – Accepted Region , if not we have to match the values of max & min as a final solution for best value of R (Coeff. of correlation ). - By implementing this approach, we can get the best answer ( in black or white no grey answer). R2 > 80% AND -4 < T.S.< 4
  • 17. Future Performance Accuracy Forecasting Matrix By setting the constrains for Accuracy of Forecasting, Four possible outcomes we can get : Fair, Mislead, Unrelated and Poor R2 > 80% AND -4 < T.S.< 4 Fair : All Constrains are satisfied. Mislead: Even R is GOOD, while T.S. is not, the possibility of Mislead is there, due to displacement effect. (almost Fair – need visual sight) Unrelated : R is poor even T.S. is GOOD. ( no relation ) Poor : Both ( R + T.S) are out of the constrains region.
  • 18. Future Performance Case Study : The Impact of Capacity Reduction
  • 20. Future Performance Impact of Capacity Adjustment by airberlin using Quarter by Quarter Approach Classical Approach - Week by Week - Month by Month - Quarter by Quarter - Year by Year - Comparison
  • 26. Future Performance Available Seat Kilometers - ASKs Forecasting - 2016
  • 27. Future Performance Available Seat Kilometers - ASKs Forecasting – 2016 – Normal ( Upper Part ) Based On The First Two Years Data
  • 28. Future Performance Available Seat Kilometers - ASKs Forecasting – 2016 ( Negative Trend ) Based On Three Years Data & Keeping the seasonality indexes
  • 29. Future Performance Available Seat Kilometers - ASKs Forecasting – 2016 Normal ( Lower Part ) Based On The Last Year Data & Keeping the seasonality indexes
  • 35. Future Performance Revenue Passengers Kilometers - RPKs Forecast - 2016
  • 36. Future Performance Accuracy Forecasting Matrix - The outcomes of Accuracy Forecasting Matrix are : - Load Factor ( Fair ) - ASK ( Poor ) - Capacity, RPK, Pax, in (Mislead) but they are almost Fair as R is High and S.T. lay on both sides of trend line as they are greater than ±4 so they lay on the actual data.
  • 37. Future Performance Analysis – Usually the airline performance indicators are addressed in such Case , as: – Capacity :- in terms of Seats • Since the strategy Air berlin is to reduce cost by maintaining the right operating capacity to more profitable sectors. They started by reducing 5 % from total seats, this impact the norms of stable distribution curve. – Traffic : - in terms of Passengers ( Pax ) • the traffic passengers is looking to be not stable, but also there is a passengers losses. (not increases) – Load Factor :- it is the outcome of RPK/ASK. • Almost stable figure, but it should subjected to incremental increasing level. In classical approach the outcome based on point to point comparison. – ASK – Available Seat Kilometers. ( 1/2 ) • The impact of capacity reduction is clear in graph, the reduction is effected by frequency adjusted flights operations. Here we get a complete picture. Not point to point decision.
  • 38. Future Performance Analysis Continue … – ASK – Available Seat Kilometers. ( 2/2 ) – 3 Scenarios : • The Upper Level: where the first two analysis keeping the seasonality index • Trend (negative): the whole data are analyzed. • The lower level: where the last year is analyzed keeping the seasonality Index
  • 39. Future Performance Analysis Continue … – RPK – Revenue Passengers Kilometers. • According to the law of supply and demand, since there is a heavily reduction in ASK, there is an increase in RPK as shown in the Graph. We agree with facts. But here is the difference, when airberlin compare, they compare with the past i.e 3rd Q 2015 to 3rd Q 2014, while we are talking about 2016. so we know there will an increase in RPK, THIS IS A FACT. ( Not Reduction ) – The period of 2016 is forecasted for the propose of setting targets . – The outcomes are almost fairs ( Mislead ) with one ( Poor ) , and one ( Fair ) as shown in the Matrix.
  • 41. Future Performance Summary • Most of Investors in Airline Industry are concerned for the performance factors that’s Traffic and Capacity , RPK ,ASK , and Load Factor. They evaluate them by comparing their values in past according to month by month approach. • This presentation tilling us the future patterns for these factors, which consequently we can develop and forecast the expected Load Factor. ( AIRLINE Performance ) • This also will help the airline to set their targets, and developed the right KPI policy for measuring airline performance. • The data is fairly fitted, with a minimum errors. • The results shows impact of capacity reduction especially for ASK and RPK for 2016, While the load factor will be a stable for 2016 which is not fair, as it should logically be increases. • The expected Passengers for 2016 = 30,508,479 Pax • The expected Capacity ( Seat ) for 2016 = 36,981,631 Seat • The expected Load Factor for 2016 = 83.23 % • The expected Available Seat Kilometer for 2016 = 57,999 ASK ( Upper Level ) • The expected Revenue Passengers Kilometer for 2016 = 56,413 RPK
  • 42. Future Performance Conclusions Recently Airberlin reduce their capacity, by concentrating on a more profitable routes, Logically if we are squeezing the capacity (ASK)- SUPPLY , the other part – DEMAND will force to pump out i.e (RPK), then how we can get the complete picture, definitely the load Factor should be increase in normal cases, … for this issue , there are two scenarios or results, first if the load factor increase significantly the Airberlin absorb the pressure of shifting their markets by increase the frequencies on their specific route which also aircrafts assist in this process by accepting more passengers than the usual figure in previous periods. But if the load factor is stable it means that a part of airberlin market spill to other competitors, and they are losing their markets ,yes the only benefits from this is the revenue or more specifically the YIELD, i.e is Yield is high enough to implement this reduction if so then they are in a safe side. While the cost will comes down due to the reduction in operation, means reduction in the variable cost.
  • 43. Future Performance Welcome In The Club Thanks !
  • 45. Future Performance Contact • Mohammed Salem Awad • Chairman Adviser – Yemenia • Tel: 00967 735222692 • Email: mohammed.hadi@yemenia.com smartdecision2002@yahoo.com