• Malaysia University of Science and Technology
• School of Science and Engineering
• Department of Transportation and Logistics
Air Carriers
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Date: 28th Oct 2015
Air Transport
Wright Brothers first flight: 1903
Air Transport
Definition:
A firm that transports company personnel or freight in
planes to support its primary business
Majority of use is for transport of
personnel
Subject to federal safety
regulations administered by the
Federal Aviation Administration.
(FAA)
Air Transport
Development and promotion of air transport begins in 1920s:
- U.S. Post Office air mail subsidy program helps launch
commercial passenger airline industry
Competitive advantage: Speed (travel time savings)
Econ. Deregulation enables more competitive pricing
Type of Air Carriers
Private Carriers
• Firms that transport company personnel or freight
• In aircraft that the firm owns or leases.
• Primary cargo is people
• Subject to Federal Aviation Administration safety regulations
Type of Air Carriers
For-hire
• Provides services to the public & charges a fee for the service
• No longer economically regulated by the Federal Government
• Can be classified by annual revenues & type of service offered
Major Air Carriers
Provide service between major population centers
• Kuala Lumpur, Bangkok, Jakarta, New Delhi and etc
• Typically use high-capacity aircraft
• Also service some medium-sized population centers
• Alor Star, Langkawi, Goa, Bali and etc
National Air Carriers
• Provide service between less
populated areas and the major
population centers
• Fly shorter routes with smaller
aircraft
Regional Air Carriers
Operate within a particular region of the country
Similar to national carriers, feed passengers to the majors from
smaller population areas
Best Regional Airlines : Asia World's Best Regional Airlines 2015
1 Dragonair 1 Dragonair
2 Bangkok Airways 2 Bangkok Airways
3 Hong Kong Airlines 3 Aegean Airlines
4 SilkAir 4 Hong Kong Airlines
5 Juneyao Airlines 5 SilkAir
6 Tianjin Airlines 6 Porter Airlines
7 Shenzhen Airlines 7 jetBlue Airways
8 Shandong Airlines 8 Copa Airlines
9 Xiamen Airlines 9 Alaska Airlines
10 Sichuan Airlines 10 American Eagle
Classifying by Type of Service
• All-cargo carriers
– Transport cargo only
• Commuter air carriers
– Typically only transport people
– Technically regional carriers
• Charter carriers
– No time schedule or designated routes
– Transport people or freight on a
one-time fee basis
Nature of the service
• Nature of passenger service competition
– Flight frequency on given route
– Timing of flights
– Meals, in-flight communications, other services
– No-frills alternatives intensify competition
– Advertising used to differentiate carriers
• Nature of competition for cargo, express traffic
– Published schedules and rates
– Door-to-door, time-definite service
General Service Characteristics
• Passenger transport accounts for 73% of revenues
• Freight transportation accounts for about 10%
• Remainder from emergency shipments
• Typically transport high-value, perishable, or emergency cargo
Typical cargo
• Typical cargo
– Mail
– Clothing
– Communications equipment
– Jewelry
– Human organs
General Service Characteristics
1. Speed
– Key advantage for air carriers
– Terminal-to-terminal time lower than any other carrier
– Can fly from New York to LA in 6 hours
– Advantage reduced by fewer scheduled flights & airport
congestion
General Service Characteristics
2. Length of Haul & Capacity
– Average freight haul length = 1400 miles = 2253.082 KM
– Average passenger haul length = 1000 miles = 1609.34 KM
3. Average Capacities
• Wide-body, 4-engine jets
– Passengers exclusively: average of 375
– Cargo exclusively: average of 90-100 tons (90000KG
-100000 KG)
– Combined: reduces cargo capacity to about 50 tons
General Service Characteristics
• Regular-body, 4-engine jets
– Passengers exclusively: average of 290
– Cargo exclusively: 35-40 tons
– Combined: reduces cargo capacity to about 20 tons
• Typically regional carrier uses jets with 100-150
capacity & all-cargo of 90-100 tons
• Commuter airlines typically use aircraft with 10-40
passenger capacity
Equipment and Facilities
• Types of vehicles (aircraft)
– Many aircraft types
• Wide range of seating capacity, cargo payload,
speed, fuel consumption, operating costs/hour
• Key is to match operating characteristics to
demand needs of route
• Terminals (airports)
– Airports financed by government
• Federal construction assistance programs
• State and local governments operate and maintain
– Air carriers and users pay for use 18
Cost Structure
Fixed vs. Variable Cost Components
• High variable costs (80% of total operation costs)
– About 38% attributable to flight operations
– About 10% for maintenance
– About 14% for aircraft and traffic servicing
• Low fixed costs
– Due to government investment in terminals and operating
infrastructure
• Increasing price competition creates pressure to reduce labor
costs, increase productivity
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Fuel Consumption
• Fuel costs: rising fuel costs have major impact on total operating
costs
– A Boeing 474-400 consumes 3,411 gal./hour
– Airlines turn to more fuel efficient aircraft and smaller planes
on low-density routes
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Labor
• Represents over 1/3rd of total operating expenses
• Wide variety of skills
– Pilots
– Flight engineers
– Flight attendants
– Communication personnel
– Mechanics & ground crews
– Baggage handlers
– Counter personnel
– Office personnel & management
Rates - Pricing
• Many passenger fare variations
– Price of same seat on flight may vary depending on
restrictions at time of purchase
• Advance purchase, time of day, competition
– Yield management used to increase revenues and improve
capacity utilization
• Load factors average about 79.9% in 2007
• Cargo pricing
– Based mainly on weight or cubic dimensions
– Over-dimensional charge for < 8 cu ft. density
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Current Issues - Safety and Security
Air transport has lowest accident rates
Factors affecting airline safety
a) Airport security and threat of airline terrorism
b) Substance abuse
Drug testing policies, alcohol consumption guidelines
c) Security-related initiatives
Passenger and luggage screening. carry-on limitations
Screening of freight carried on passenger airlines
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Current Issues - Safety and Security
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Current Issues - Technology
▫ Automated information processing programs
Air Cargo Fast Flow Program
Paperless, speeds processing through customs
Improves shipment tracking
Improves communication between connecting carriers
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Current Issues - Technology
▫ Air traffic control system
Potential application of GPS navigation aids
Potential to reduce operating costs, improve service, and
safety
Requires high cost investment for new technology on aircraft
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Thank You
