Biography for William Swan Currently the “Cheap” Economist for Boeing Commercial Aircraft. Previous to Boeing, worked at American Airlines in Operations.

Biography for William Swan

Currently the “Cheap” Economist for Boeing Commercial Aircraft. Previous to Boeing, worked at American Airlines in Operations Research and Strategic Planning and United Airlines in Research and Development. Areas of work included Yield Management, Fleet Planning, Aircraft Routing, and Crew Scheduling. Also worked for Hull Trading, a major market maker in stock index options, and on the staff at MIT’s Flight Transportation Lab. Apparently has a hard time holding a steady job. Education: Master’s, Engineer’s Degree, and Ph. D. at MIT. Bachelor of Science in Aeronautical Engineering at Princeton. Likes dogs and dark beer. © Scott Adams

New Perspective on Fleet Planning

Prepared for AGIFORS 2002 Symposium

October 2002William M. SwanChief Economist

Boeing Commercial

Review of Fleet Plan Techniques

• Put and Take

• Push Down

• Vest Pocket

• Abandon all Hope

SEA

DFW

ORD DTW

BOS

19:65

19:66

19:78

19:79

19:85

19:86

19:89

19:90

20:10

20:12

Put ‘n Take Fleet Plan Replaces Airplanes in a Schedule

20 oldN110s

17 oldN110s

15 NewN142s

25 MediumN240s

15 NewN142s

10 NEWN220s

18 MediumN240s

Push Down Fleet Plan Reassigns Schedule

3

7

Vest Pocket Fleet Plan Uses Demand Distributions

0

5

10

15

20

25

30

0 50 100 150 200 250 300Demand (monthly avg per departure) US domestic Airlines

Air

pla

ne

s N

ee

de

d f

or

De

pa

rtu

res

Notional 1985

Divide Distribution by Airplane Size to get Fleet & Mix

0

5

10

15

20

25

30


Air

pla

ne

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Notional 1985

100-seat

150-seat200-seat

Grow Demand Distribution Based on Trends

0

5

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15

20

25

30

35

40


Air

pla

ne

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Feb-90

Notion-85

Trend Changes with RJs

05

101520253035404550


Air

pla

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de

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or

De

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Feb-95

Feb-90

Notion-85

Aside:

RJs Big Time

05

101520253035404550


Air

pla

ne

s N

ee

de

d f

or

De

pa

rtu

res Feb-00

Feb-95

Feb-90

Notion-85

Further Aside:

Review of Fleet Plan Techniques

• Put and Take• Push Down

• Vest Pocket

• Abandon all Hope

Big Markets Do Not Mean Big Airplanes

150

200

250

300

350

400

450

0 1000 2000 3000 4000 5000 6000 7000

Seats/day Aug 2001 by Airport Pair

Sea

ts/D

epar

ture

Au

g 2

001,

Sam

e P

air

>5000km, 5+deps/week

Average

0

50

100

150

200

250

300

350

400

450

0 2000 4000 6000 8000 10000 12000 14000 16000 18000

Seats Per Day

Sea

ts P

er D

epar

ture

Average


All Airport Pairs under 5000km and over 1000 seats/day

Big Markets do not Mean Big Airplanes

0

50

100

150

200

250

0 1000 2000 3000 4000 5000 6000Seats/day in Airport Pair, European Regional Aug 2001

Sea

ts/D

epar

ture

data for markets > 4/week 1991 & 2001

Big Aircraft Markets Do Not Stay Big

150

200

250

300

350

400

450

150 200 250 300 350 400 450Seats/Departure Aug 1991

Sea

ts/D

epar

ture

Au

g 2

001,

Sam

e P

air


150

200

250

300

350

400

450

150 200 250 300 350 400 450

Seats/Departure in 1990, Atlantic pairs

Sea

ts/D

ep in

200

0 (s

ame

pai

r)

Size in 1990 Not a Forecast for Size in 2000

Size in 1990 Not a Forecast for Size in 2000

Size in 1991 not a Forecast for 2001

0

50

100

150

200

250

50 100 150 200 250 300

Seats/Dep Aug 1991 Pairs (Europe>4/week)

Sea

ts/D

ep A

ug 2

001,

sam

e pa

ir

Size Getting Larger

Size Getting Smaller

Small Airplanes not in New Markets

150

200

250

300

350

400

450

5000 7000 9000 11000

Distance (km)

Se

ats New

Old

Atlantic Airport Pairs with Service Aug 2000 but not Aug 1995


150

200

250

300

350

400

450

0 1000 2000 3000 4000 5000 6000 7000

Seats/day Aug 2001 by Airport Pair

Sea

ts/D

epar

ture

Au

g 2

001,

Sam

e P

air


Average

Small Airplanes Not in New Markets

150

200

250

300

350

400

450

5000 6000 7000 8000 9000 10000 11000 12000 13000

Distance (Km)

Sea

ts/D

epar

ture

, Au

g 2

001

>5000km, 5+dep/week

Small Airplanes not in New Markets ?

0

50

100

150

200

250

0 500 1000 1500 2000 2500Distance (Km), European Regional Markets

Sea

ts/D

ep, A

ug 2

001

Old Markets

New Markets

Log. (New Markets)

Log. (Old Markets)

Why No Pattern in Size?

Cost per Seat Declines with Size

$-

$50

$100

$150

$200

$250

$300

$350

0 100 200 300 400Seats

$/S

eat Cost/Seat

Revenues Track Costs[30 business + discount fill to 80% LF]

$-

$50

$100

$150

$200

$250

$300

$350

0 100 200 300 400Seats

$/S

eat

Cost/SeatRev/Seat

Revenues Track Costs II[30 business + 90 discount, with Spill]

$-

$50

$100

$150

$200

$250

$300

$350

0 100 200 300 400Seats

$/se

at

Cost/SeatRev/Seat

Any Size Will Do[Averaged Demand Curve]

$-

$50

$100

$150

$200

$250

$300

$350

0 100 200 300 400Seats

$/se

at

Cost/SeatRev/Seat

Any Airplane Size Works

• Cost and Revenue Lines are the same shape• Profit nearly the same at any size• Possibility of a minimum profitable size• Upper limit at twice that size?

– Limit not set by airplane technology– Limit possibly set by market entry, split in ½– Or does cost curve rise due to ground costs?

This is Speculation, Not Proof

• Strong lack of pattern in airplane size as used

• Need for model to explain observed behavior

• Proposed model explains what we see

• Proof by “Occam’s Toothbrush”

not convincing

Bonus: An example of business sleaze

(Occam’s Toothbrush) Introducing a technique often used in business

Proof by Assumptions “Test”What is the most reasonable set of assumptions

That fits all known data pointsAnd allows our guess to be right?

Any Size Will Do[from minimum to 2x]

$-

$50

$100

$150

$200

$250

$300

$350

0 100 200 300 400Seats

$/se

at

Cost/SeatRev/Seat

William Swan:

Data Troll

Story Teller

Economist

Chief Economist, Boeing Commercial Airplanes, Marketing

Biography for William Swan Currently the “Cheap” Economist for Boeing Commercial Aircraft. Previous to Boeing, worked at American Airlines in Operations.

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