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Business Report

Airline 6-------Airline business simulation game


Report of the Hos Airline

Business Report
Airline 6-------Airline business simulation game

Introduction
Business plan
Our 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 traffic. 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 for the running of our operation. After summiting the business plan, we have generated an investment capital of $71,754,540.00.

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 and passenger service and use the limited resource to the highest cost etc.

Business Report

Region of destinations
We have chosen 78 different places in the world as our destinations. They are usually big cities which have a high passenger demand (reflected 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 aircraft
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Airbus 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.

Business Details

Selection of aircraft
Airbus (Passenger & Cargo) A300-600 PW A300-600R GE A300-600 GE A300-600R PW A310-300 GE A310-300 PW A340-200 A340-300 A330-200 PW A330-200 RR A330-200 GE A340-213X A340-500 A380-800 EA A380-800 RR Boeing (Cargo Only) 747-400F PW 747-400F RR 747-400F GE 747-300SF GE 747-300SF 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 fly 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 Standard
We offered full service to our passengers, and the First and Business class are our targeted customers. Since they have higher financial ability, we would be able to earn a lot from these people if they satisfied 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, inflight internet and video monitor during their flight. Moreover, laptop power, in-seat phone and message are also provided so as to facilitate them to do their work during the flight.
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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 flight.

Staffing
In order to ensure the safety of our flights, 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 flights 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 flights, 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 flights, 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 first-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 to serve the customers properly and professionally, we also provide the staff with some benefits so as to motivate them. Generally, the salaries of the flight deck and cabin crew has attained the union requested salaries, some posts even exceed the union requested salaries greatly, like the flight crew of large aircraft. Also, we offered travel discount to the staff, ranging from 10% to 20%. By offering more benefits to the staff, they will have higher motivation to work and thus the customers will be more satisfied with the services we provided.

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Route

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Short Haul Asia


Bangalore Hindustan (BLR) Bangkok (BKK) Beijing (PEK) Busan Kimhae (PUS) Cebu ( CEB) Chengdu (CTU) Delhi Gandhi (DEL) Doha (DOH) Dubai (DXB) Fukuoka (FUK) HaiKou (HAK) Ho Chi Minh Sou Nhut (SGN) Jakarta Soekarnd ( CGK) Kaohsiung (KHH) Kuala Kinabalu (KUL) Kuching (KCH) Khabarov sk Novy (KHV) Kota kinabalu( BKI) Manila Seoul (MNL) Gimpo (SEL) Moscow Shanghai Domodedo HongQiao vo (DME) (SHA) Nagoya Shanghai Chubu Pudong (NGO) (PVG) Denpasar Singgapor Bali Ngurah e Changi Ral (DPS) (SIN) Kathmandu Surabaya (KTM) Juanda (SUB) Okinawa (OKA) Osaka Kansai international (KIX) Penang (PEN) Phuket (HKT) Pyongyang Sunan (FNJ) Riyadh K.khaled (RUH) Sapporo Chitose (CTS) Tokyo Narita (NRT) Taipei Shek (TPE)

South America
Washington Dulles (IAD) Manchester (MAN) Anchorage (ANC) New York Kennedy (JFK) Atlananta HartsfieldJackson (ATL) Boston Logan (BOS) Chicago OHare (ORD) Salt Lake City (SLC) San Francisco (SFO) Toronto Pearson (YYZ) Vancouver (YVR) Ontario (Los Angeles) (ONT) Philadelphi a (PHL)

Long Haul Europe


Amsterdam(AMS) Frankfurt (FRA) Istanbul (IST) Leipzig(LEJ) London Heathrow (LHR) Milan Malpensa (MXP) Munich Franz Joseph Strauss (MUC) Paris Orly(ORY) Rome Da Vinci (FCO) Sharjah (SHJ) Tel Aviv-Yafo Ben Gurion (TLV) Zurich (ZRH)

North America

Africa
Addis Ababa Bole (ADD) Johannesbu rg jan Smuts (JNB) Mauritius (MRU)

Australia
Adelaide(ADL) Auckland internation al (AKL) B.Serl Begawan (BWN) Brisbane (BNE) Cairns (CNS) Calcutta (CCU) Melbourne Tullamarin e (MEL) Sydney Kingsford (SYD)

Santiago Arturo Merino (SCL)

Honolulu (HNL) Indianapolis (IND) Los angeles International (LAX) Miami (MIA)

Business Report

The above tables showed all the routes we offered. There are 78 routes in total. All of them start out their flight 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 fly for short hauls first 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 profits for our operation. Because of the profits 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, we are able to earn an immense profit.

Business Report

Scheduling
Apart from offering different routes, we also increase the frequency of our flights in order to attract more customers. For short haul, we have daily operations. In order to fully utilize the aircrafts, we scheduled it fly for three times or more per day. What we defined 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. The rest 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 flight as more as possible. However, it still contain about 3 hours the aircraft do nothing in average. This cost is inevitable.
Business Report

Cargo
Apart 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 profitable. 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 profit. 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 flight, 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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Marketing
Since 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 implemented the Frequent Flyer Program so as to attract more customers, especially the businessmen. This is because businessmen always need to fly 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 benefits 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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Business Report

Financial performance
In total, we have run 12 quarters. For our financial details, we can refer to the graph as shown below:
$2,000,000,000 $1,800,000,000 $1,600,000,000

$1,400,000,000
$1,200,000,000 $1,000,000,000 $800,000,000 $600,000,000 $400,000,000 $200,000,000 $0 Income Expend Net Profit

We can see that the income was increased steadily from the first season to the fifth season. Since we have not big changes of our business plan, the income increase rate is narrowed. After quarter1 of 2006, the income and profit become stable. And at the last two seasons, we enrolled the cargo freight and the income boost up to over $1800000000. At first, 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 profit. Although the income is quite high at the last season, expend is high too. Therefore, the net profit is very less. In 2005, there is no cargo in quarter1 because we concern that our planes cannot fulfill 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.

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The next quarter, we started to have cargo freight. Thanks to it is the start of 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 profit 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.
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Following season is the same. Last two quarters of our airline. We can see that decrease of passengers income has modified. Because of the both increase on total income and expenses, profit do not go backward. Nevertheless, the last quarter, we earn profit but have reduced. During the game, we have found something about how to boost the profit. First of all, we think we should use the aircraft more efficiency 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 fly 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 flight is 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 the staff training every year. These two changes can confirm 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 exercise


Referring 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.

Business Report

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 cargo facilities 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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Conclusion
After finishing 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 profit is even a more difficult task. At first, we have encountered many difficulties 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 profit. We therefore increase our coverage of our air routes as well as the frequency of our flights. 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 profitable 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 finally 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 Pacific, 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 members


The distribution of workload of each group mates are as show as follow:

Team members

Vincent

Grace

Sam

Koey

Ho

Sections Airline 6 Business Report

Introduction

Business Details

Financial Performance

Reflections on this exercise

Conclusion

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