Master in Aeronautical Engineering

Air Transport

Ex. 3; 2.5 pt. CIII Airlines , with base in Madrid, wants to expand its network offering
8 daily flights between Madrid and Paris using two Embraer ERJ 190 to
cover them (each aircraft will departure 4 times per day).
The expected annual traffic demand between MADRID and PARIS using
direct route for 2018 is 500.000 passengers in economy class and 50000 in
business class. The average ticket fare (return) is 200 Cand 400 Cfor econ-
omy class and business class respectively. With the proposed frequency,
the expected market share of CIII Airlines over this route would be 40%.
Flight time from MADRID to PARIS (and viceversa) is 2 hours and the
direct route distance is 2000Km.
The Embraer ERJ 190 has a capacity of 110 passengers in economy and
10 in business class. The operating costs for the Embraer ERJ 190 can be
found below:

OPERATING COSTS
Aircraft Type Embraer ERJ 190

• Cost per Block-Hour ( C):

– Crew Cost: 1000;
– Fuel/Oil: 2000;
– Ownership: 1000 ;
– Maintenance: 1000;
• Indirect Operating Costs:
– Passenger Service 0.015 C per RPK;
– Traffic Servicing 20 C per Enplanement passenger;
– Aircraft Servicing 2000 C per Departure;
– Promotion and Sales 1.00% of Passenger Revenues;
– General and Admin 20.00% of Total Operating Cost.

Please, answer the following questions:

• Should CIII Airlines enter this market with the proposed frequency?
Justify why using different KPIs. (0.75pts)
• Calculate the minimum market share to ensure this operation is prof-
itable. (0.5pts)
• Analyse the different characheristic of your product using differnt
KPIs and propose different alternatives to improve the profitability
obtained for this route, linking them with the effect in the KPIs.
(1.25pts)