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Future Performance
Reading In
The Future (3)
Case Study
83 %
Mohammed Salem Awadh
Aviation Consultant
Date of issue: 14 July 2015
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
• Introduction
– Airline Market Segmentation
– Key Performance Indicators For Airlines
– Errors Vs KPIs
• Forecasting
– Basic concept of forecasting Model
– Model Constrains
– Max.& Min Signal Tracking Analysis
– Accuracy Forecasting Matrix
Future Performance
Outline 2/2
• Case Study : ( IAG )
– Basic Data Base ( Three years data )
– Passengers Forecasting 2015
– RPKs Forecasting 2015
– ASKs Forecasting 2015
– Load Factor Forecasting 2015
– Results
– Market Segments
– Analysis
• Summary
• Contact
Future Performance
Reading in the future :
Looking Forwards Vs Looking
Backwards,
The main message of this presentation, is
to highlight the benefits of Setting Goals
and Targets, thus company can
developed an effective KPI System
instead of looking backward – using
month by month approach - to compare
current performance with past
performance instead of achieving targets.
Reading in the future, is addressing the
best forecasting scenario approach for
setting targets and developing the level
of key performance indicators for
Airlines, as Load Factor, ASK, and RPK, as
demonstrated by airline investors
monthly /annually reports.
Future Performance
Airline Market Segmentation
To facilitated business, the business units define by
their Market Segments, International Airlines Group
( IAG ) addressing six regions / areas , As ,
1- Domestic ( UK, Spain & Italy ),
2- Europe,
3- North America,
4- Latin America & Caribbean,
5- Africa, Middle East &Asia,
6- Asia Pacific.
Defining by two main performance factors, RPK,
and ASK.
So most of airlines working on a clear objectives and
that’s come with clear targets which lead us to set a
clear picture of forecasting process.
Based on that, our objective is to develop a clear
massage for top managements for the key
performance figures of the airline, not just to
compare month by month approach but to develop
the right path ( time series ) in the future to set the
right targets which consequently develop K.P. I for
the airlines .
Future Performance
K.P.I For Airlines
• Key Performance Figures
• Capacity = ASK( available seat kilometers )
• Traffic = RPK( revenue passenger kilometers )
• Load Factor ( LF ) =
RPK/ASK
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 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)
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 : (about IAG)
International Airlines Group is one of the world's largest airline groups with 466 aircraft
flying to 248 destinations and carrying 77.3 million passengers each year. It is the third
largest group in Europe and the sixth largest in the world, based on revenue.
Formed in January 2011, IAG is the parent company of British Airways, Iberia and Vueling.
It is a Spanish registered company with shares traded on the London Stock Exchange and
Spanish Stock Exchanges. The corporate head office for IAG is in London, UK.
IAG combines the leading airlines in the UK and Spain, enabling them to enhance their
presence in the aviation market while retaining their individual brands and current
operations. The airlines' customers benefit from a larger combined network for both
passengers and cargo and a greater ability to invest in new products and services through
improved financial robustness.
The airline industry is moving gradually towards consolidation though some regulatory
restrictions still prevail. IAG's mission is to play its full role in future industry consolidation
both on a regional and global scale.
British Airways and Iberia are members of the oneworld alliance.
Future Performance
Basic Data Base ( Three years data: 2012-2014)
36 months data files
83 %
Future Performance
Passengers
Forecasting
2015
Future Performance
Passengers Forecasting 2015
Total Passengers
Future Performance
Passengers Forecasting - 2015
1- Domestic ( UK, Spain & Italy )
Future Performance
Passengers Forecasting - 2015
2- Europe
Future Performance
Passengers Forecasting - 2015
3- North America
Future Performance
Passengers Forecasting - 2015
4- Latin America & Caribbean
Future Performance
Passengers Forecasting - 2015
5- Africa, Middle East &Asia
Future Performance
Passengers Forecasting - 2015
6- Asia Pacific
Future Performance
Passengers Forecasting - 2015
Accuracy Matrix ( Passengers )
Future Performance
RPKs
Forecasting
2015
Future Performance
RPKs Forecasting - 2015
Total RPKs
Future Performance
RPKs Forecasting - 2015
1- Domestic ( UK, Spain & Italy )
Future Performance
RPKs Forecasting - 2015
2- Europe
Future Performance
RPKs Forecasting - 2015
3- North America
Future Performance
RPKs Forecasting - 2015
4- Latin America & Caribbean
Future Performance
RPKs Forecasting - 2015
5- Middle East & Asia
Future Performance
RPKs Forecasting - 2015
6- Asia Pacific
Future Performance
RPKs Forecasting - 2015
Accuracy Matrix ( RPKs )
Future Performance
ASKs
Forecasting
2015
Future Performance
ASKs Forecasting - 2015
Total ASKs
Future Performance
ASKs Forecasting - 2015
1- Domestic ( UK, Spain & Italy )
Future Performance
ASKs Forecasting - 2015
2- Europe
Future Performance
ASKs Forecasting - 2015
3- North America
Future Performance
ASKs Forecasting - 2015
4- Latin America & Caribbean
Future Performance
ASKs Forecasting - 2015
5- Middle East & Asia
Future Performance
ASKs Forecasting - 2015
6- Asia Pacific
Future Performance
ASKs Forecasting - 2015
Accuracy Matrix ( ASKs )
Future Performance
Load Factor (L.F)
Forecasting
2015
( Future Performance )
Future Performance
Airline Performance
• Load Factor = RPK / ASK
• PASK (Profit/ASK) =
RASK - CASK
Future Performance
Load Factor Forecasting – 2015 (Results)
Load Factor can be
found by divided
RPK/ASK, its shows
the capacity
utilization for airline
fleet, in other wards
it measure the airline
performance.
IAG have 6 segments
The following table
shows the forecasted
values of Load Factor
based on the
forecast values of
RPK and ASK for
2015.
Future Performance
Load Factor Forecasting - 2015
Total Market
Future Performance
Load Factor Forecasting - 2015
1- Domestic ( UK, Spain & Italy )
Future Performance
Load Factor Forecasting - 2015
2- Europe
Future Performance
Load Factor Forecasting - 2015
3- North America
Future Performance
Load Factor Forecasting - 2015
4- Latin America & Caribbean
Future Performance
Load Factor Forecasting - 2015
5- Middle East & Asia
Future Performance
Load Factor Forecasting - 2015
6- Asia Pacific
Future Performance
Results
Future Performance
Market Segments – Traffic - 2015
Future Performance
Market Segments – RPKs - 2015
Future Performance
Market Segments – ASKs - 2015
Future Performance
Analysis
– Three Parameters IAG Addressing their performance
• Traffic : - in terms of Number of Passengers.
• Demand : in terms of Revenue Passengers Kilometers (RPKs)
• Capacity :- in terms of Available Seat Kilometers (ASKs)
• Load Factor :- it is the outcome of RPK/ASK.
– By referring to segments business market share for passengers, we found
that, about 78% ( 50 + 28 ) of represents domestic and regional market
(Core Business), while only 22 % for other 4 segments.
– Only 34% (25+9) represents operational capacity (ASKs) for domestic and
regional markets.
– Yield analysis for each segment should be hold to define the best level of
income.
– IAG should setup competitive strategy (for low cost carriers), if their
operation addressing regional sectors.
– IAG performance define by RPKs/ASKs, for each operational segment.
– The results shows all segments have positive trends except Latin America
& Caribbean has negative trend.
Future Performance
Summary
• Reading in the future, it is the third forecasting study concerning
IAG, it is addressing the best forecasting scenario approach for
setting targets and developing the level of key performance
indicators for Airlines, as Load Factor, ASK, and RPK, as
demonstrated by airline investors monthly /annually reports.
• While the message of this study is to highlight the benefits of
Setting Goals and Targets, thus airlines can developed an
effective KPI System instead of looking backward – using month
by month approach - to compare current performance with past
performance instead of achieving targets.
• By using the concept Max/Min Signal Tracking Approach, the
forecasting data will have one answer, no trail and errors. It is
define by the main elements of the forecasted model, i.e
Displacements and Directional.
• Most of the segments are fairly forecast except two, Africa, M.E &
Asia and Latin America & Caribbean segments
• The expected performance of total Market for 2015 (load factor)
= 79.65 %
Future Performance
Welcome In The Club
Thanks !
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 Case Study : IAG

  • 1. Future Performance Reading In The Future (3) Case Study 83 % Mohammed Salem Awadh Aviation Consultant Date of issue: 14 July 2015
  • 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 • Introduction – Airline Market Segmentation – Key Performance Indicators For Airlines – Errors Vs KPIs • Forecasting – Basic concept of forecasting Model – Model Constrains – Max.& Min Signal Tracking Analysis – Accuracy Forecasting Matrix
  • 4. Future Performance Outline 2/2 • Case Study : ( IAG ) – Basic Data Base ( Three years data ) – Passengers Forecasting 2015 – RPKs Forecasting 2015 – ASKs Forecasting 2015 – Load Factor Forecasting 2015 – Results – Market Segments – Analysis • Summary • Contact
  • 5. Future Performance Reading in the future : Looking Forwards Vs Looking Backwards, The main message of this presentation, is to highlight the benefits of Setting Goals and Targets, thus company can developed an effective KPI System instead of looking backward – using month by month approach - to compare current performance with past performance instead of achieving targets. Reading in the future, is addressing the best forecasting scenario approach for setting targets and developing the level of key performance indicators for Airlines, as Load Factor, ASK, and RPK, as demonstrated by airline investors monthly /annually reports.
  • 6. Future Performance Airline Market Segmentation To facilitated business, the business units define by their Market Segments, International Airlines Group ( IAG ) addressing six regions / areas , As , 1- Domestic ( UK, Spain & Italy ), 2- Europe, 3- North America, 4- Latin America & Caribbean, 5- Africa, Middle East &Asia, 6- Asia Pacific. Defining by two main performance factors, RPK, and ASK. So most of airlines working on a clear objectives and that’s come with clear targets which lead us to set a clear picture of forecasting process. Based on that, our objective is to develop a clear massage for top managements for the key performance figures of the airline, not just to compare month by month approach but to develop the right path ( time series ) in the future to set the right targets which consequently develop K.P. I for the airlines .
  • 7. Future Performance K.P.I For Airlines • Key Performance Figures • Capacity = ASK( available seat kilometers ) • Traffic = RPK( revenue passenger kilometers ) • Load Factor ( LF ) = RPK/ASK
  • 10. 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 we are applied.
  • 11. Future Performance Basic concept of forecasting Model
  • 12. Future Performance Basic concept of forecasting Model Directional Displacement
  • 13. 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
  • 14. 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
  • 15. 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) Unrelated : R is poor even T.S. is GOOD. ( no relation ) Poor : Both ( R + T.S) are out of the constrains region.
  • 16. Future Performance Case Study : (about IAG) International Airlines Group is one of the world's largest airline groups with 466 aircraft flying to 248 destinations and carrying 77.3 million passengers each year. It is the third largest group in Europe and the sixth largest in the world, based on revenue. Formed in January 2011, IAG is the parent company of British Airways, Iberia and Vueling. It is a Spanish registered company with shares traded on the London Stock Exchange and Spanish Stock Exchanges. The corporate head office for IAG is in London, UK. IAG combines the leading airlines in the UK and Spain, enabling them to enhance their presence in the aviation market while retaining their individual brands and current operations. The airlines' customers benefit from a larger combined network for both passengers and cargo and a greater ability to invest in new products and services through improved financial robustness. The airline industry is moving gradually towards consolidation though some regulatory restrictions still prevail. IAG's mission is to play its full role in future industry consolidation both on a regional and global scale. British Airways and Iberia are members of the oneworld alliance.
  • 17. Future Performance Basic Data Base ( Three years data: 2012-2014) 36 months data files 83 %
  • 20. Future Performance Passengers Forecasting - 2015 1- Domestic ( UK, Spain & Italy )
  • 22. Future Performance Passengers Forecasting - 2015 3- North America
  • 23. Future Performance Passengers Forecasting - 2015 4- Latin America & Caribbean
  • 24. Future Performance Passengers Forecasting - 2015 5- Africa, Middle East &Asia
  • 26. Future Performance Passengers Forecasting - 2015 Accuracy Matrix ( Passengers )
  • 29. Future Performance RPKs Forecasting - 2015 1- Domestic ( UK, Spain & Italy )
  • 31. Future Performance RPKs Forecasting - 2015 3- North America
  • 32. Future Performance RPKs Forecasting - 2015 4- Latin America & Caribbean
  • 33. Future Performance RPKs Forecasting - 2015 5- Middle East & Asia
  • 34. Future Performance RPKs Forecasting - 2015 6- Asia Pacific
  • 35. Future Performance RPKs Forecasting - 2015 Accuracy Matrix ( RPKs )
  • 38. Future Performance ASKs Forecasting - 2015 1- Domestic ( UK, Spain & Italy )
  • 40. Future Performance ASKs Forecasting - 2015 3- North America
  • 41. Future Performance ASKs Forecasting - 2015 4- Latin America & Caribbean
  • 42. Future Performance ASKs Forecasting - 2015 5- Middle East & Asia
  • 43. Future Performance ASKs Forecasting - 2015 6- Asia Pacific
  • 44. Future Performance ASKs Forecasting - 2015 Accuracy Matrix ( ASKs )
  • 45. Future Performance Load Factor (L.F) Forecasting 2015 ( Future Performance )
  • 46. Future Performance Airline Performance • Load Factor = RPK / ASK • PASK (Profit/ASK) = RASK - CASK
  • 47. Future Performance Load Factor Forecasting – 2015 (Results) Load Factor can be found by divided RPK/ASK, its shows the capacity utilization for airline fleet, in other wards it measure the airline performance. IAG have 6 segments The following table shows the forecasted values of Load Factor based on the forecast values of RPK and ASK for 2015.
  • 48. Future Performance Load Factor Forecasting - 2015 Total Market
  • 49. Future Performance Load Factor Forecasting - 2015 1- Domestic ( UK, Spain & Italy )
  • 50. Future Performance Load Factor Forecasting - 2015 2- Europe
  • 51. Future Performance Load Factor Forecasting - 2015 3- North America
  • 52. Future Performance Load Factor Forecasting - 2015 4- Latin America & Caribbean
  • 53. Future Performance Load Factor Forecasting - 2015 5- Middle East & Asia
  • 54. Future Performance Load Factor Forecasting - 2015 6- Asia Pacific
  • 59. Future Performance Analysis – Three Parameters IAG Addressing their performance • Traffic : - in terms of Number of Passengers. • Demand : in terms of Revenue Passengers Kilometers (RPKs) • Capacity :- in terms of Available Seat Kilometers (ASKs) • Load Factor :- it is the outcome of RPK/ASK. – By referring to segments business market share for passengers, we found that, about 78% ( 50 + 28 ) of represents domestic and regional market (Core Business), while only 22 % for other 4 segments. – Only 34% (25+9) represents operational capacity (ASKs) for domestic and regional markets. – Yield analysis for each segment should be hold to define the best level of income. – IAG should setup competitive strategy (for low cost carriers), if their operation addressing regional sectors. – IAG performance define by RPKs/ASKs, for each operational segment. – The results shows all segments have positive trends except Latin America & Caribbean has negative trend.
  • 60. Future Performance Summary • Reading in the future, it is the third forecasting study concerning IAG, it is addressing the best forecasting scenario approach for setting targets and developing the level of key performance indicators for Airlines, as Load Factor, ASK, and RPK, as demonstrated by airline investors monthly /annually reports. • While the message of this study is to highlight the benefits of Setting Goals and Targets, thus airlines can developed an effective KPI System instead of looking backward – using month by month approach - to compare current performance with past performance instead of achieving targets. • By using the concept Max/Min Signal Tracking Approach, the forecasting data will have one answer, no trail and errors. It is define by the main elements of the forecasted model, i.e Displacements and Directional. • Most of the segments are fairly forecast except two, Africa, M.E & Asia and Latin America & Caribbean segments • The expected performance of total Market for 2015 (load factor) = 79.65 %
  • 61. Future Performance Welcome In The Club Thanks !
  • 62. Future Performance Contact • Mohammed Salem Awad • Chairman Adviser – Yemenia • Tel: 00967 735222692 • Email: mohammed.hadi@yemenia.com smartdecision2002@yahoo.com