Project Airline

7/30/2019 Project Airline

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Business ReportAirline 6-------Airline business simulation game

Report of the Hos Airline


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BusinessReport

Learning

objective

Aim: The reason

of us studying airline 6

is that we can know

more about the

knowledge of an airline

operation. For

example, we can study

the establishment of

different airline form

the home country to

other countries,

provide cargo andpassenger service and

use the limited

resource to the highest

cost etc.

Business ReportAirline 6-------Airline business simulation game

IntroductionBusiness planOur company is called the HO Airline Company and we

set HO as our IATA code.

The business plan of our company is as follows:

Network: International and Domestic (both long and

short haul)

Aircraft Seating: Standard

On board Catering: Standard

Main Source of Income: Cargo and Passengers

Cabin for both long and short haul: First, Business and

Economy

Location of Headquarter: Hong Kong

We put our headquarter at Hong Kong because it has a

good geographic location. Moreover, since there is a

rapid economic growth in Hong Kong, there is an

increasing demand for air trafic. Despite a relatively

short history, Hong Kong International Airport has

won the Skytrax Worlds Best Airport Awards for

several times already. This showed that the Hong

Kong International Airport is an airport of high

quality. All these create a very favorable condition forthe running of our operation.

After summiting the business plan, we have generated

an investment capital of $71,754,540.00.


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Region of destinationsWe have chosen 78 different places in the world as our destinations. They

are usually big cities which have a high passenger demand (relected by

the PAX Load Factors). Examples are Washington Dulles, Shanghai

Pudong, Osaka Kansai International, Manila, Phuket, and Dubai, etc. Apart

from the main cities, we also include small cities like Penang, Salt Lake City

so as to cater the need of different customers. By offering different choices

of destinations to the customers, we can earn a wider source of income

from the customers.

Besides the passenger side, we also do business on the cargo side.

Types of aircraftAirbus and Boeing are the two main types of aircraft we used. For Airbus,

we have A300, A310, A330, A340, A380. And for Boeing, we have 747.


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Business DetailsSelection of aircraftAirbus (Passenger & Cargo) Boeing (Cargo Only)

A300-600 PW 747-400F PW

A300-600R GE 747-400F RR

A300-600 GE 747-400F GE

A300-600R PW 747-300SF GE

A310-300 GE 747-300SF RR

A310-300 PW

A340-200A340-300

A330-200 PW

A330-200 RR

A330-200 GE

A340-213X

A340-500

A380-800 EA

A380-800 RR

Since we do not have enough money at the very beginning of our

operation, we choose to lease aircrafts instead of buying them.

There are several reasons why we select the above-mentioned aircrafts.

First, they are usually aircrafts with a large capacity which means that it

can accommodate more customers. Moreover, a larger aircraft is favorable

for our cargo operation since cargo is quite space-demanding. Second, the

speed of these aircrafts is high. Third, they are not very fuel-consuming.

Fourth, the range of these aircrafts is long which is suitable for both our

long and short haul. Fifth, they are usually aircraft with a newer age. Since

people prefer to ly in newer aircrafts, we would be able to attract more

customers with a more recent date of introduction of aircrafts.

The reason why we mainly focus on two main types of aircrafts is that it

can help to save the cost on pilot training as well as the simulator costs.

Moreover, since we have selected an airport specialized in Airbus aircraft,

it is therefore normal for us to choose Airbus as one of our main types of

aircrafts.


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Service StandardWe offered full service to our passengers, and the First and Business classare our targeted customers. Since they have higher inancial ability, we

would be able to earn a lot from these people if they satisied with our

service. We therefore provided a series of high-standard service to the

First and Business class customers.

For the First class, we provided passengers with quality meal and

beverage service. For beverages, we provided both soft drinks and

alcoholic for them to choose. Passengers in First class can enjoy audio, in-

light internet and video monitor during their light. Moreover, laptoppower, in-seat phone and message are also provided so as to facilitate

them to do their work during the light.

And for the Business class, they can enjoy the standard food and the same

beverage as the First class enjoyed. Also, they can enjoy audio, movie

screens. Similar to that of First class, laptop power, in-seat message are

provided.

Since most of the First and Business class passengers are businessmen, in

order to facilitate them, we offered limousine service to them. Moreover,we provided club lounge access for these passengers so that they can rest

in a pleasant and comfortable area while they are waiting their light.


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StaffingIn order to ensure the safety of our lights, our staff are required to take a

series of professional training. Particularly the pilots, it is necessary for

him to take the pilot training since the safety of the lights mainly hinges

on him. Besides, by providing the training course, it would be assured that

they know how to operate the aircrafts we have. Since safety is the most

important consideration of the customers when they take the lights, if we

perform badly in this aspect, it would seriously affect our reputation and

so do our revenue. It is therefore important for us to maintain a high

standard over the aspect of safety.

The cabin crew and supporting staff are also required to take the training

course on medical needs. This is because when medical emergency events

happened during the lights, it would not be able to go to the hospital

within a short time, it is therefore necessary for the cabin crew to learn

some medicals skills like irst-aid so that they can deal with these

emergency events properly and provide immediate medical help to

customers.

Since the performance of the staff will directly affect the impression of

customers towards the company, so apart from training them how toserve the customers properly and professionally, we also provide the staff

with some beneits so as to motivate them. Generally, the salaries of the

light deck and cabin crew has attained the union requested salaries, some

posts even exceed the union requested salaries greatly, like the light crew

of large aircraft. Also, we offered travel discount to the staff, ranging from

10% to 20%. By offering more beneits to the staff, they will have higher

motivation to work and thus the customers will be more satisied with the

services we provided.


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Route

Short Haul

AsiaBangaloreHindustan (BLR)

Doha (DOH) KualaKinabalu

(KUL)

Khabarovsk Novy

(KHV)

Okinawa(OKA)

Tokyo Narita(NRT)

Bangkok (BKK) Dubai (DXB) Kuching(KCH)

Kotakinabalu(

BKI)

Osaka Kansaiinternational

(KIX)

Taipei Shek(TPE)

Beijing (PEK) Fukuoka

(FUK)

Manila

(MNL)

Seoul

Gimpo

(SEL)

Penang

(PEN)

Busan Kimhae(PUS)

HaiKou(HAK)

MoscowDomodedo

vo (DME)

ShanghaiHongQiao

(SHA)

Phuket(HKT)

Cebu ( CEB) Ho Chi Minh

Sou Nhut(SGN)

Nagoya

Chubu(NGO)

Shanghai

Pudong(PVG)

Pyongyang

Sunan (FNJ)

Chengdu (CTU) Jakarta

Soekarnd( CGK)

Denpasar

Bali NgurahRal (DPS)

Singgapor

e Changi(SIN)

Riyadh

K.khaled(RUH)

Delhi Gandhi

(DEL)Kaohsiung

(KHH)Kathmandu

(KTM)Surabaya

Juanda(SUB)

Sapporo

Chitose (CTS)


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Long HaulSouth America Europe North

America

Africa Australia

Washington

Dulles (IAD)

Salt Lake

City (SLC)

Amsterdam-

(AMS)

Santiago

Arturo

Merino(SCL)

Addis

Ababa Bole

(ADD)

Adelaide-

(ADL)

Manchester

(MAN)San

Francisco(SFO)

Frankfurt

(FRA)Johannesbu

rg janSmuts

(JNB)

Auckland

international (AKL)

Anchorage

(ANC)

Toronto

Pearson(YYZ)

Istanbul (IST) Mauritius

(MRU)

B.Serl

Begawan(BWN)

New York

Kennedy (JFK)

Vancouver

(YVR)

Leipzig(LEJ) Brisbane

(BNE)

AtlanantaHartsield-

Jackson (ATL)

Ontario(Los

Angeles)(ONT)

LondonHeathrow

(LHR)

Cairns(CNS)

Boston Logan

(BOS)

Philadelphi

a (PHL)

Milan

Malpensa(MXP)

Calcutta

(CCU)

Chicago OHare(ORD)

Munich FranzJoseph Strauss

(MUC)

MelbourneTullamarin

e (MEL)

Honolulu (HNL) ParisOrly(ORY)

SydneyKingsford

(SYD)

Indianapolis(IND)

Rome Da Vinci(FCO)

Los angeles

International(LAX)

Sharjah (SHJ)

Miami (MIA) Tel Aviv-Yafo

Ben Gurion

(TLV)

Zurich (ZRH)


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The above tables showed all the routes we offered. There are 78 routes intotal. All of them start out their light in Hong Kong. Generally speaking,

we have covered 6 regions in the world including Asia, Africa, Australia,

North America, South America and Europe.

Due to the limited budget at the beginning of our operation, we ly for

short hauls irst so as to lower our operation cost especially the cost used

on fuel. And we choose cities in Asia as our destinations. These cities are

usually popular tourist sites which mean that demands for these routes

are high. With a high demand, we are able to earn money from it. A low

cost together with a high revenue, we are able to earn proits for ouroperation.

Because of the proits earned, our budget increased. With more money, we

then expand our routes to other regions-- Africa, Australia, North America,

South America and Europe. Though these long haul routes have to travel a

longer distance, which requires more fuel, the income we earned from

these long hauls is still enough to cover the cost.

By offering different routes to the customers, we are able to get a bigger

market and a wider amount of income is received. With this strategy, weare able to earn an immense proit.


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SchedulingApart from offering different routes, we also increase the frequency of our

lights in order to attract more customers.

For short haul, we have daily operations. In order to fully utilize the

aircrafts, we scheduled it ly for three times or more per day. What we

deined as the Asia routes which content the travel hours less than 4

hours.

For long haul, we have operation 3 times a week and we scheduled one

time per day only since the long haul should spend two days for a trip. Therest of the time of the aircraft we design a short haul trip for them to travel

to some popular place such as Tokyo, Taipei or Bangkok. Both short and

long haul are operated under the basis of turnaround trip.

To reduce the operation cost of the aircraft, we let the aircraft light as

more as possible. However, it still contain about 3 hours the aircraft do

nothing in average. This cost is inevitable.

CargoApart from doing the passenger business, we also operate cargo business.

Unlike the aircrafts which carry both passengers and cargo, the aircrafts

which focus on the cargo only are much more proitable. We, therefore,

lease ten Boeing aircrafts to operate the cargo business. We have cargo

operation in different parts of the world so as to earn more proit.

In order to support the cargo operation, we have set up cargo handling

facilities in the airport which provide cargo service and we have

advertising our cargo services. However, for the passenger-and-cargo

light, it still earned less than the only cargo one (although the advertising

is same).

We also signed up the logistic contract with other company to reduce the

cost to operate the cargo. At last, we earned about a billion from the cargo

services each quarter.


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MarketingSince our company is a new airline company, in order to make our

company more famous, we have implemented a series of promotion and

advertisement including sponsorship, billboard and TV advertisement in

different countries.

In order to facilitate and attract more customers, tickets are available at

the Internet and customers can buy their tickets in the Internet. 5%

discount is offered when customers buy their tickets via the Internet.

Apart from advertising and offering discount, we have also implementedthe Frequent Flyer Program so as to attract more customers, especially the

businessmen. This is because businessmen always need to ly for their

business; it would be attractive to these people if we can offer privileges to

them. Under the Frequent Flyer Program, customers can enjoy a variety of

beneits such as upgrades and tickets with discounts. With the Frequent

Flyer Program, we would be able to secure certain groups of customers

and also attract more new customers to use our airline.


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Financial performanceIn total, we have run 12 quarters. For our inancial details, we can refer to

the graph as shown below:

We can see that the income was increased steadily from the irst season tothe ifth season. Since we have not big changes of our business plan, the

income increase rate is narrowed. After quarter1 of 2006, the income and

proit become stable. And at the last two seasons, we enrolled the cargo

freight and the income boost up to over $1800000000.

At irst, we got $34,550,178 capital. Also, we have the equation that:

=

In every quarter, we have a higher income than expend, thats why we

always get proit. Although the income is quite high at the last season,

expend is high too. Therefore, the net proit is very less.

In 2005, there is no cargo in quarter1 because we concern that our planes

cannot fulill cargos need. Therefore, we only serve passages in this

quarter and we process 12 planes. But we can see that, we still have a good

result as $199,697,600 passengers income and the expenses are only

$90,261,820. It is include operating cost, staff, staff training, Etc.

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

$1,600,000,000

$1,800,000,000

$2,000,000,000

Income

Expend

Net Profit


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The next quarter, we started to have cargo freight. Thanks to it is the startof carrying cargo, we have just only $4,865,396 income. In addition, there

are more planes that we can carry more passengers; the income of

passenger loading has a big margin of increase. We keep possessing more

planes and have more routes simultaneously. More place to arrive, more

passengers will choose our airline.

Next year, cargo income has a stable improvement as we have some

aircrafts are only for cargo. The proit now is a ten million more than

previous one.

The last four quarters, it is a bit lower of passenger income than before.

However, we still have advancement on cargo. As we have more and more

cargo facilities in different country.

Following season is the same. Last two quarters of our airline. We can see

that decrease of passengers income has modiied. Because of the both

increase on total income and expenses, proit do not go backward.

Nevertheless, the last quarter, we earn proit but have reduced.

During the game, we have found something about how to boost the proit.First of all, we think we should use the aircraft more eficiency such as cut

down the low seat sold routes and replace it by the multiple stopping

routes, such as the aircraft start from Hong Kong to City A and ly to City B.

Second, we think we should develop some few company cities such as

North Korea, Sharjah. Since these routes have not too much company join

the business, so the seat sold have got the better performance.

Third, we think we should lease some cargo-only aircraft because this kind

of aircraft only concerned about the fuel price and the cost to have a lightis much lower than the PAX-and-cargo aircraft.

Fourth is about operation contracts such as fuel contracts, logistic

contracts, insurance and enrolled the stock market. Sign up the fuel

contract and logistic contract can reduce the fuel price and the cargo

transfer cost.


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Fifth, we should change the service plan to full service and organize thestaff training every year. These two changes can conirm the quality of our

services and increase the passenger number. So that it would increase our

income. Also we will contain a reasonable salary of our staff which means

the salary is higher than the average. And we will add some more welfare

to our staff such as the children care and the elder care.


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Reflections on this exerciseReferring to this program, the airline we have designed has many parts

similar to reality. Take the Cathy Pacific as an example, firstly, for the

routes, we have international routes fly to different territories. Secondly,

for the aircraft, we have 2 categories of aircraft - Airbus and Boeing that

responsible for passenger and cargo or cargo only which is equal to the

Cathy Pacific. Thirdly, for the passenger service, we provide full-service,

we offer meal, newspaper, luggage allowance and ground service etc.

Finally, for the welfare of staffs, we give the discount of staff traveling and

medical care etc.

On the other hand, something is missing and unrealistic. In reality,

external factors should also be included, such as weather, accidents,

disease and economic issue which may affect our business.

Another thing that we have try and have a deep impression is how to set

up a cargo flight (which is the freight.). We should set up the cargofacilities and advertising which will affect so much on our business. At last,

we earn about seven billion on the cargo business. Then we have try how

to paint our aircraft to have better promotion.


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ConclusionAfter inishing this project, we realized that running an airline company is

not as easy as we imagined. There are in fact lots of factor we need to

consider while we are running our operation. Running for a proit is even

a more dificult task.

At irst, we have encountered many dificulties and we always resulted in

loss. However, after several trials, we began to realize that our operation

cannot only rely on a few air routes, it would be impossible for us to earn a

proit. We therefore increase our coverage of our air routes as well as the

frequency of our lights. In order to follow the situation in the real world,

we would not set our routes over the Fifth Freedom. Moreover, during our

trials, we found that running of aircrafts for cargo only is in fact much

more proitable than the aircrafts which carry both passengers and cargo,

we thus put 10 aircrafts mainly focus on cargo operation. Besides,

marketing of our company, provision of full service are also carried out in

our operation. Although we have investment on hotel, due to limited time,

the result of the hotel are not available in this report.

After implementing the above arrangements, we inally got cash balance of

$4,415,388,172.77 in the last quarter.

Running this software, we know more about the operation of an airline

company. At the same time, since we set our operation by referring to

some realistic operation like the Cathay Paciic, we learn a lot of aviation

information from those sources. And these information helps us to take up

the aviation topic more easily.


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Contribution of the membersThe distribution of workload of each group mates are as show as follow:

Team members

Sections

Vincent Grace Sam Koey Ho

Airline 6

Introduction

Business

Details

Financial

Performance

Reflections on

this exercise

Conclusion

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