SYST660 Airline Operating Costs and Airline Productivity Lorenzo Flores It is a Network Legacy Carrier NLC It is covering regional Horizon domestic and international services Has different ID: 205619
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Slide1
Alaskan Airlines
SYST660
Airline Operating Costs and Airline
Productivity
Lorenzo Flores Slide2
It is a Network Legacy Carrier (NLC).
It
is covering regional (Horizon), domestic, and international services.Has different types of aircraft (Q400s & B737s)Has premium class & mileage program It is codeshare member (one world)
Alaskan Airlines
Overview
Slide3
RPMs =
Revenue Passenger Miles
∑(# of PAX per flight i)(distance flown by flight i)ASMs = Available Seat Miles ∑(# of seats per flight i)(distance flown by flight i)RASM = Revenue per Available Seat Mile (total revenue)/ASMCASM =
Cost
per Available Seat Mile (total operating expenses)/ASMYield = average fare paid per passenger per mile (passenger airfare revenue)/RPMPRASM = Passenger Revenue per Available Seat Mile (passenger revenue)/ASM
Alaskan Airlines
Terms
Slide4
Fuel Consumed = Amount
of f
uel consumed over some time Fuel Costs per ASM = Cost of Fuel per ASM (total fuel cost)/ASMNon-Fuel Costs per ASM = Non-Fuel Cost per ASM Wages,
landing fees, depreciation
and amortization, maintenance and other operating expensesAlaskan Airlines Terms Slide5
Alaskan Airlines
Chart ISlide6
After 9/11 , ASM and RPM slowly have recovered.
Along with the increase in ASM supply, the airline has managed to maintain a System Load Factor of about 80% in the past 10 years.
Alaskan Airlines Chart I - Analysis Slide7
Alaskan Airlines
Chart
IISlide8
Total Operating Revenues and Total Operating Expenses have high
correlation, which mean there is a thin margin of profitability.
In 2008, due to the increase of the price of oil the, at the end of the fiscal year the airline end up with deficit.Alaskan Airlines Chart II – Analysis Slide9
Alaskan Airlines
Chart
IIISlide10
RASM, CASM, Yield, and PRASAM have a high correlation.
In 2008, there is a significant increase on CASM due to the escalation in oil price.
Alaskan Airlines Chart III – Analysis Slide11
Alaskan Airlines
Chart
IVSlide12
The Non-Fuel Expenses are major operating costs and they out weigh
Fuel Expenses.
Both expenses had a similar behavior. Alaskan Airlines Chart IV – Analysis Slide13
Alaskan Airlines
Chart
VSlide14
Effect on Expenses
:
Oil is the variable cost with more weight in total operational expenses.Effect on Airline Finance: The profitability of this industry depend s directly on the price of oil.Effect on Airline Network Structure: Since airlines do not have any control on price of oil, the industry has had to improved efficiency and keep the costs from growing in other areas. (e.g. increasing Load Factor to reduce costs).
Alaskan Airlines
Analysis of Fuel Price