In the third of a series of six articles, Gavin Eccles, Professor of Aviation at Universidade Lusófona, will address how airlines look at network planning and route development, and how airports and destinations can benefit from knowing how carriers think when preparing a new route.
Gavin’s previous roles have included development in British Airways, as well as consultancy projects for United Airlines, American Airlines, Qantas, and supporting the development of low-cost airlines to touristic destinations. Gavin has held a Board Position (CCO) at Portuguese airline SATA International and has been the advisor to the Board of Visit Portugal on air connectivity.
As a Professor, Gavin is responsible for programs spanning the commercial aspects of aviation and airports and works closely with Aeroclass on executive courses bringing DMOs and airports together for tailored learning programs that support route development for destinations.
Will you fly to my airport or destination? This is the key question that airport marketing teams and tourism boards pose to airlines every day. But put yourself in the shoes of the carrier and how they might view your offer.
From the airline’s perspective, it is all about trying to add new destinations to the route network, where the key function is performing route evaluations in order to know if a route will be profitable in the long term. So, if you can offer insights and a business case that helps reduce this uncertainty, you will stand in good stead with your airline partner.
In essence, airliners use four programs and tools to perform their route studies: focusing on passenger demand forecasts, connectivity (behind and beyond the two locations that are being studied), aircraft accessibility, and the competitor landscape.
These four key principles can be applied to an airline looking to tweak existing routes and plan new ones.
What does demand look like?
In reality, the first question the airline planning team will look to ask, particularly when considering a brand-new route, is quite simple, how many passengers will travel on such a flight? So, to be able to answer and provide new insights for the decision, most airlines will use aviation market intelligence tools to analyze all available information.
This data comes from within the airline itself, as well as industry-wide passenger information that identifies trends in traffic. And essential data points to consider are fares, routes, airlines, and connections, whereby carriers are then looking to deploy this data to estimate how many passengers are traveling daily (including connections) between airport pairs. For example, there is only one daily flight from Daytona Beach in Florida to New York’s JFK airport, operated by JetBlue, but passengers can also travel on alternative airlines between these cities. For instance, a passenger that has strong brand affinity with American Airlines might decide to take their one-stop service via Charlotte.
From the multiple databases, airlines can study the ways people will make connections between two points when the destination has no direct service thus gaining valuable insights on which cities passengers connects through, the chosen airlines they flew on, and the average fare they purchased for each leg. And with such data airlines can then confirm what kind of aircraft is best suited for the route.
Connectivity – behind and beyond the airports in question
From the legacy airline’s perspective, most carriers have one or more hubs where they operate most of their flights, and the opportunity then for the network planning team is to make sure that most passengers will be able to go to the destination of their choice in the airline’s route network. Continuing with our Florida example, for those passengers flying out of Daytona Beach, the only nonstop flights are to Atlanta, Charlotte, and New York-JFK. At these airports, the flights are also timed to allow passengers to connect to a different flight, which will then take them on to their final destination. Local traffic between point A and point B is important, but airlines can also gain more traffic flow by getting passengers from connecting flights at the hub. Therefore, the network planning team must consider how many passengers can connect directly from Buffalo to Daytona Beach versus those connecting through JFK, as well as passengers from many other smaller airports. This strategy ensures that flights to Florida are fully booked by maximizing both local and connecting traffic.
Airlines can then predict revenue and profit on a route depending on different times of the day. In particular, if the flight is scheduled at a time when there is no possibility of connection to other cities then the airline might not do as well as a flight that is timed for inbound and outbound connections. Some flights have an optimal time for local traffic whereas other flights are timed for passenger connectivity.
Picking the aircraft to serve the route best
Another key function of the network team is determining which of the fleet to use on the route. From the perspective of airports or tourism boards there’s an idea that bigger is always better. For airports it’s all about the non-aviation gains that come with a greater number of passengers. And when it comes to tourism, more passengers potentially mean more hotel stays.
However, the demand analysis described earlier will help with the fleet decision, as ensuring you have the highest load-factor (numbers of seats occupied), and yields (revenue per seat) is a key milestone for the airline’s pricing and revenue management team.
The competitive landscape
Opening a new route that’s already flown by another air carrier is not unusual since there are thousands of airlines operating in the world, and the potential to ‘take passengers away from other carriers’ is the reason why. However, for an airline to believe it can succeed it will require strong analysis, and a reality that is not just adding capacity as a way to show strength. Otherwise, an airline can lose money very quickly by trying to muscle-in on a route that has successes already assigned. But some airlines might have an advantage. Large airlines, as mentioned earlier, can feed their flights at their hubs with connecting passenger traffic. On the other hand, smaller airlines that operate the ‘point-to-point’ model can provide a better experience and consider a more focused strategy. In essence, this is the legacy versus low-cost model that has been unfolding in the aviation space over the last few years.
And when a passenger goes to book a flight, there are some nonstop routes they would expect to find every time, for example, New York to London. But when a passenger is considering both smaller airports as well as major and minor international ones, their travel plans from A to B might include a stopover.
So, what goes into airlines’ route planning?
Route planning explained
Unsurprisingly, route offerings are not static, and they often change throughout the year – many airlines operate seasonal routes to accommodate travel trends. In particular, summer within the European landscape sees many airlines ramp up their route offerings, adding new cities or additional flights on established routes. And it all comes down to a team of network analysts crunching all sorts of numbers to figure out which routes are not only in demand, but also profitable.
But operational feasibility must also be considered. Particularly, the logistics of operating a route, such as the availability of aircraft and crew. Also, some particularly congested airports may be subject to capacity restrictions and a slot system may be in place that permits airlines a certain number of takeoffs and landings per day. Operational feasibility also involves other governmental regulations, particularly for international destinations. International route planning, especially for a new destination, can be more complicated as carriers need to factor in the foreign point-of-sale demand trajectory and all the regulatory constraints with flight-rights and bilateral air services accordingly.
The strategic value of the route is also taken into consideration when planning. For example, even if demand for a certain route might be somewhat weak, an airline may choose to fly the route with the goal of it becoming more ‘in-demand’ over time. And destinations themselves can also come into play here, as local governments may lobby for specific routes to drum up new tourism potential, offering incentives and marketing to drive ticket sales.
Planning is a difficult job
Route planning is constantly in motion with airlines, which is good and bad for airports and destinations, respectively. Pre-pandemic, legacy airlines were averaging about 50 new routes per year, but, on the flip side, carriers were suspending around 40 services. So, destination stakeholders may be gaining at the expense of another destination, but they need to have a three-year plan for a route. If destinations constantly see routes start and stop, the money spent on advertising and promotion is wasted and the key for route development is more sustainable success and not media PR to win over local communities.
To ensure that airlines are on top of the network, carriers are planning one to five years out, using trends and insights and monitoring market dynamics closely while also being nimble on route plans that can support experiments. d decide to serve a route in a period less than a year, which was not the norm. Post-COVID experiments are still happening, but the vision is also based on seasonality issues and, rather than saying we serve the full seven-month summer IATA season, airlines may just fly mid-June to mid-September allowing destinations to gain more traffic during the peak season. But this may not help with the destination’s seasonality challenges.
So, what next?
Airports and destinations may sometimes get the feeling that route decisions are made arbitrarily, as though the airlines are randomly throwing darts at a world map. While there are cases where route decisions are hastily made and not givenmuch thought, usually they are made deliberately andutilizing key insights and programs that consider passenger demand, competition, fares, and the potential for connections behind and beyond the airports in question.
Network planning is an extensive, strategic process, with many decisions needing support and understanding from other parts of the airline. Planning cannot be done without strong support from human resources, as in many cases carriers may have the route ready, but do not have the crew available to deliver the service.
When evaluating new routes, the planner must determine the following as part of their analysis. How airports and destinations assist in answering these is a vital part of a route development business case.
- What are the target markets for the new route?
- How many days per week should the route be served?
- At what time of day should a route be served?
- What type of aircraft should be used to serve the route?
- Who will be the main competitors?
- What costs and revenues are expected when operating the route?
In summary, the network planner must analyze the opportunity cost of deploying the aircraft to the new route under evaluation versus other opportunities in the airlines’ network. This means that an already complex task is becoming even more complicated. Does route A offer me a better route business case than route B? And to answer this question, the future will be reliant on models and forecasting technologies. Advanced and straightforward network planning tools try to achieve the same thing – a forecast into the future.
The future of planning must include historic insights (i.e., airline schedules) and demand data (i.e., bookings and sentiment analysis) and tools available today use machine-learning algorithms to calibrate their underlying models based on past and future insights. This occurs in two essential components of planning tools: the Connection Builder and the Market Share Mode.
Firstly, the Connection Builder will forecast what and how many itineraries are available for a passenger to choose from in a given market. Secondly, the Market Share Model will forecast the attractiveness of different itineraries, calibrated on millions of historical passenger itineraries analyzing relevant parameters such as airline preference, departure time, connect time, and detour factor.
So, planning routes is not an easy process and as airports and destinations continue to ask why airlines are not flying to support a region, putting yourself in the shoes of the network decision maker is key.