Straight and Level: Practical Airline Economics, 3rd Edition

This third edition of Straight and Level thoroughly updates the previous edition with extensive comments on recent industry developments and emerging business models. The discussion is illustrated by current examples drawn from all sectors of the industry and every region of the world. The fundamental structure of earlier editions, now widely used as a framework for air transport management courses, nonetheless remains unchanged. Part 1 of the book provides a strategic context within which to consider the industry's economics. Part 2 is built around a simple yet powerful model that relates operating revenue to operating cost; it examines the most important elements in demand and traffic, price and yield, output and unit cost. Part 3 probes more deeply into three critical aspects of capacity management: network management; fleet management; and revenue management. Part 4 concludes the book by exploring relationships between unit revenue, unit cost, yield, and load factor. Straight and Level has been written primarily for masters-level students on aviation management courses. The book should also be useful to final year undergraduates wanting to prepare for more advanced study. Amongst practitioners, it will appeal to established managers moving from functional posts into general management. More broadly, anyone with knowledge of the airline industry who wants to gain a deeper understanding of its economics at a practical level and an insight into the reasons for its financial volatility should find the book of interest. MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict MuPDF error: syntax error: invalid key in dict Contents 6 List of Figures 12 List of Tables 14 Acknowledgements 16 List of Abbreviations and Definitions 18 Foreword 26 Preface 28 PART 1 STRATEGIC CONTEXT 30 Chapter 1 Strategic Context 32 The scale of the challenge 32 Strategies and business models: some theory 34 Strategy 34 Business models 54 Airline strategies and business models: what is happening in practice 55 Why airline business models have been changing so rapidly 55 Changes in strategy and business model 58 A closer look at rhetorical labels 76 Conclusion 78 The rest of the book 81 Summary 81 PART 2 OPERATING PERFORMANCE DRIVERS 84 Chapter 2 Traffic 86 The modelling of demand: a brief refresher 86 Demand and traffic 92 Identification and segmentation of available demand 95 The drivers of air transport demand 108 Characteristics of air transport demand 125 Modelling, forecasting and allocating air transport demand 135 Capacity management: managing demand 147 Summary 149 Appendix 2.1: Fare elasticities found in North American studies 151 Chapter 3 Yield 154 Price 154 Tariff structures 172 Price drivers 183 Tactical pricing 192 Yield 207 Operating revenue 216 Summary 220 Chapter 4 Output 222 Definitions 222 The modelling of supply: a brief refresher 226 Airline output 228 Market structure and competition 234 Restraints on output 257 Capacity management: the supply side 291 Conclusion 292 Chapter 5 Unit Cost 294 Cost defined 294 Airline cost classification 302 Cost drivers and their management: introduction 313 Cost drivers and their management: upstream costs 314 Cost drivers and their management: the internal operating system 327 Cost drivers and their management: distribution 371 Cost management in practice 386 Summary 391 PART 3 CAPACITY MANAGEMENT 392 Chapter 6 Network Management: Design 394 Network design 395 Network strategies and tactics 422 Network outsourcing 436 Summary 451 Chapter 7 Network Management: Scheduling 452 The schedule development process 452 Scheduling: a response to demand 454 Scheduling: a response to the economics of supply 464 Scheduling: a response to external constraints 471 Scheduling a hub-and-spoke network 472 Scheduling tactics 481 Interfacing network and fleet management 484 Summary 485 Chapter 8 Fleet Management 486 Aircraft acquisition and financing 486 Tactical fleet management 515 Summary 522 Chapter 9 Revenue Management 524 Introduction 524 Approaches to revenue management 532 Commercial considerations 557 Revenue management system components 559 Conclusion 562 Managing freight revenues 564 Conclusion to Part 3 of the book: the importance of spill 566 PART 4 OPERATING PERFORMANCE 568 Chapter 10 Strategy, Economics, and Operating Performance 570 Operating performance 570 Unit cost, unit revenue, yield and load factor 574 Concluding comment 588 References 590 Index 606 A 606 B 607 C 607 D 609 E 609 F 610 G 610 H 610 I 610 J 611 K 611 L 611 M 611 N 612 O 612 P 613 Q 613 R 613 S 614 T 615 U 615 V 615 W 615 Y 616 Z 616 Straight and Level uses a simple yet powerful model to explore linkages between the fundamentals of airline economics and the volatility of industry performance at the operating level. Part 1 of the book provides a strategic context within which to consider the industry's economics. Part 2 is structured around a model that relates operating revenue and operating cost; it examines the most important elements in demand and traffic, price and yield, output, and unit cost. Part 3 probes more deeply into three critical aspects of capacity management: network management; fleet management; and revenue management. Part 4 concludes the book by exploring relationships between unit revenue, unit cost, yield, and load factor.

The author has rewritten, updated, and expanded the successful first edition. New sections have been added which link the economic fundamentals at the core of the book (covered in parts 2 and 3) to strategic context (explained in Part 1) and to performance outcomes (considered in Part 4). Extensive use is made of practical examples.

Straight and Level has been written primarily for masters-level students on aviation management courses; it should also be useful to advanced undergraduates. Amongst practitioners, it will appeal in particular to managers at the beginning of their careers and to established managers moving from functional posts into general management. More broadly, anyone wanting to gain an understanding of the economics of the airline industry at a practical level and an insight into the reasons for its financial volatility should find the book of interest.

About the Author:
Stephen Holloway is a consultant to the air transport industry specializing in both strategic and financial management. He has worked at a senior level in merchant banking, is a qualified pilot, and holds graduate degrees from Cranfield University, the University of Southern California and the London School of Economics. He is also author of several other books.

"This third edition of Straight and Level thoroughly updates the previous edition with extensive comments on recent industry developments and emerging business models. The discussion is illustrated by current examples drawn from all sectors of the industry and every region of the world. The fundamental structure of earlier editions, now widely used as a framework for air transport management courses, nonetheless remains unchanged." "Straight and Level has been written primarily for masters-level students on aviation management courses. The book should also be useful to final year undergraduates wanting to prepare for more advanced study. Amongst practitioners, it will appeal to established managers moving from functional posts into general management. More broadly, anyone with knowledge of the airline industry who wants to gain a deeper understanding of its economics at a practical level and an insight into the reasons for its financial volatility should find the book of interest."--Jacket