Miller22 From United States of America, joined Nov 2000, 731 posts, RR: 4 Posted (14 years 8 months 2 weeks 4 days 5 hours ago) and read 4657 times:
I'm working with a group of people and we're designing an airline business simulation. We are using factors such as, city size, ticket price, competition, aircraft speed and aircraft age to determine demand at various cities. If anyone has any insights on demand equations, it would be much appreciated.
B727-200 From Australia, joined Nov 1999, 1051 posts, RR: 2
Reply 2, posted (14 years 8 months 1 week 3 days 17 hours ago) and read 4570 times:
There is also a game called "Airbucks" that is a business simulator. This might give you some ideas. Also, "Transport Tycoon " is another simulator that will give you good ideas about how to do growth.
Can I play devils advocate and ask a couple of questions?
How are you growing the population of the cities?
These economic indicators, along with population growth for other reasons (such as a new industry opening, football stadium, etc..), could be used for the basis of your demand.
Are you planning to have new airports built through the duration of the simulation?
For demand fluctuations and market preferences, you can use a series of quality of service indicators (QSI's) to determine market preference. These are a calibrated rating system on passenger preferences that can be used for many factors.
A couple of examples are:
Aircraft - an A320 might have a rating of 1.0, a B747 might have a rating 2.0 and a Fokker F50 might be 0.3 etc…
Sectors: A direct service may be 1.0, one-stop 0.8, two stops 0.4 etc…
Brands: Brand A = 1.2 , Brand B = 0.9 , Brand C = 1.1, Brand D = 0.7 , etc…
Brand preference is based on factors such as local market presence, advertising, safety record, on-time reliability, frequency and long-term pricing policy.
Pricing can have a huge influence on demand, referred to as price elasticity. This basically says that demand is stimulated to a certain extent by the fare class. To dramatise, if you have a fare of $0.00 then your demand is probably the entire population of the city-pair. Even at $10.00 you start to create a financial burden which may eliminate 20% of your local population from flying.
As you get closer to the accepted average fare in real life, fluctuations are more measurable. For instance, a widely accepted equation is that a 1% drop in average fare will stimulate 2% growth in traffic. This works both ways but of course, is not as linear as that (I do not know the exact algorithms, or even if there exists such an algorithm). Don't forget cargo either.
If possible, generate your base demand on origin and destination (O/D). So for instance if you start the simulation back in the early 50's, you may have a demand for a market like New York to London. At this point you have to go via the Azores or Greenland, but as aircraft range increases, you can go direct. The QSI's will determine that the company that offers the direct service is more likely to get the demand. Subsequently, the demand for Azores or Greenland should fall as the true demand is being catered over the direct sector (should also increase the brand rating of the start-up carrier).
I hope I have given you some ideas. Please put some specific questions down if you want more assistance and I will see what I can do.
SOCAL Approach From , joined Dec 1969, posts, RR:
Reply 3, posted (14 years 8 months 1 week 3 days 13 hours ago) and read 4560 times:
Great! Glad to hear of a new effort in this market!
I would also suggest looking at "Airline: A Strategic Management Simulation." It is a pretty complex simulation of a commuter airline for a MBA-type course with significant variables regarding demand, seats available, load factors, and markets. You can get the student booklet through Amazon.com or similar booksellers. You might also look at the authors' site: http://www.fau.edu/~golden/webdoc2.htm
For other airline business sims, please check the "Airline Simulations" page at Socal Approach. http://www.ags.uci.edu/~tmheaney/SNA/