Planning and Operating United Airlines:

Business Model and Optimization Enablers

Gregory Taylor
Senior Vice President – Planning
United Airlines
 United’s Route Network Model

Air travel is dominated by thousands of small markets where total travel demand
does not justify “point-to-point” non-stop flights

Western United States Eastern United States

Las Vegas (LAS) Boston (BOS)

Seattle (SEA) Albany (ALB)
Portland (PDX) Buffalo (BUF)

LAS BOS

SEA ALB

PDX BUF

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 United’s Route Network Model

United has chosen a “Hub-and-spoke” model that maximizes number of markets served
with given aircraft assets

LAS BOS

SEA ORD ALB

PDX BUF

Hub-and-spoke

•This model provides several additional connecting options to the

customers through Chicago (ORD)
•United is also able to carry local traffic between all six cities and ORD
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 United’s Route Network Model

In addition to the 59 passengers from the

In addition, United was able to carry 1600
original three markets, 91 more passengers
passengers each-way between the six
from six new markets were accommodated
cities and its hub, ORD

Daily local passengers volume

Daily connecting passenger volume

ALB-ORD SEA-ORD
BUF-SEA
13 292
BUF-LAS 79
22

BOS-LAS BUF-ORD
28 99
ALB-PDX
17
ALB-SEA LAS-ORD
19 460
PDX-ORD
ALB-LAS BUF-PDX 176
13 12
BOS-SEA
9 BOS-PDX
17

BOS-ORD
494

4
 The Chicago Hub

Chicago Operating Statistics (Daily)

United and United Express

Number of cities served 125

Number of markets 7,800
Number of departures 1,015
Total passengers 42,300
Local passengers 22,000 (52%)
Connecting passengers 20,300 (48%)

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 The United System

System Operating Statistics (Daily)

United and United Express

Number of cities served 201

Number of markets 19,682
Number of departures 3,407
Total passengers 185,000
Aircraft 780

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Overview of United’s Network Planning Automation
Suite - Zeus

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 United’s Scheduling Strategy

United’s scheduling strategy balances marketing goals and operating imperatives to

meet financial goals

Marketing goals
•Marketing strategy •Market selection
•Maintain market
– Where should we
share
•Competitive response fly?
•Provide travel day Profitability
and time •Flight frequency/time Financial goals
flexibility to – How often should •Maximize
passengers we fly? revenue
Operating imperatives •Minimize cost
– When should we
•Safety/maintenance depart/arrive?
requirements
•Aircraft availability
•Fleet selection
•Crew availability
•Other operating – Which aircraft
restrictions type should we
use?

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 Fine Tuning the Schedule

United changes its schedule based on passenger travel patterns

•Weekdays – higher External factors

business e.g. Iraq war,
demand •Business SARS, etc.
•Weekends – higher destinations – more
leisure weekday flights
demand
•Leisure United’s flight
•Higher leisure demand destinations – schedule
during school more weekend
vacations/holidays flights
•Higher leisure demand
•Schedule changes
during summer
based on season
•Higher business
demand during
spring/fall

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 The Zeus Suite

Slot
SIMON
O&D Fleeting Administrator
International
Flouting Data Query &
Analysis

Airline Profitability
Simulation Forecast

AIRFLITE
Weekend Fleet Assignment
Schedule Database/Editor
Cancellation

Level of Through
Operations Assignment
(LOOPS)

Re-fleeting 1PLAN Web

Models Neighborhood Portal
Maintenance Dissemination -
Search
Routing IDEAS

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 ZEUS Enables All Stages of Planning and Scheduling

Strategic Planning Schedule Optimization

Strategic Long Term Mid Term Operational

Process Planning Planning Planning Planning

Time* Multi-year 365-108 days 108-80 days 80-52 days

• Hub Planning • Markets • Fleeting • Operability

Activities • Fleet Plan
• Acquisitions
• Frequencies
• Schedule Structure
• Crew Interactions
• Reliability
•Aircraft Flows
•De-peaking
• Schedule Structure • International Slots • Maintenance • Reliability
• Flight Number Integrity
•Weekends, Transition

• Profitability • PFM • UA Fleet • Through

Forecast (PFM) • Joint UA-UAX Assignment Assignment /
• Joint UA-UAX Fleet • Re-Fleeting Routing
Key Fleet Planning Assignment • Routing • Flight Number
• Codeshare Continuity
Models Optimizer • Exception
Scheduling
• De-peaking
Suite

*Time = days from schedule start date

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 Profitability Forecast Model (PFM)

Objective
PFM is United’s strategic network-planning tool. PFM incorporates historical cost and
fare data with itinerary-level passenger forecasts to determine schedule profitability

Inputs Methodology and Key Capabilities Outputs

air-carrier PFM employs advanced econometric techniques Passengers

schedule (Multinomial Logit (MNL) methodology) (total, local)
(OAG)
•Passenger preference factors for itinerary attributes (#
of stops, departure time, equipment, codeshare, etc.)
Industry are simultaneously estimated using MNL techniques Fares
Demands •Consistent with passenger utility-maximizing choice (local, OD)
behavior

Cost model Revenue

(local, OD)
PFM aids strategic decisions such as:
•Merger and acquisition scenarios
Industry fares •Codeshare scenarios Profitability of
•Equipment preference studies future
•Hub location/buildup studies schedule

MAPD – Mean Absolute Percent Deviation

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 Fleet Assignment Models

Objective
The O&D models are used to obtain the optimal fleet assignment for a flight schedule
based on itinerary based demands and market share

Inputs Methodology and Key Capabilities Outputs

UA Schedule

The model uses advanced Operations Research

techniques to solve the entire network to determine the
Itinerary Level optimal fleet assignment.
demand and fare
forecasts Fully fleeted
Uses a Mixed Integer Linear Program. Maximizes UA’s schedule
profitability subject to various operational and other
Aircraft
Inventory constraints.
By Type
Time Windows capability creates opportunity for further
improve profitability by making small changes to
Aircraft
Characteristics, departure/arrival times
Cost, Operational,
other constraints

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 Codeshare Optimizer

Objective
Codeshare Optimizer is a strategic decision-making tool to determine the best set of
flights to code share based on market share and prorate agreements.

Inputs Methodology and Key Capabilities Outputs

OAG Codeshare Optimizer uses a Dynamic Program-like

Schedule approach to model incremental code share opportunities
and PFM’s itinerary building algorithms and LOGIT
methodology

Market List The objective is to maximize incremental revenue while

satisfying the flight number and other marketing List of flights
constraints with best
Codeshare
Airport-pair
Ability to support several scenarios: Revenue
passenger
forecasts •Evaluate new codeshare or expand existing codeshare
•Optimize flight number usage when there is a shortage
Marketing
of flight numbers
Constraints •Make tactical market/flight changes during major
schedule change

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 Exception Scheduling Model

Objective
Optimize exceptions on weekends to improve profitability while adhering to operational
constraints

Inputs Methodology and Key Capabilities Outputs

UA Schedule The model uses a Mixed Integer Linear Program to model

the weekend schedule and maximize the profitability
subject to operational and other constraints

Demand and Associated business process changes have resulted in Fully Fleeted
Fare independent construction of optimal weekday and Weekend
Forecasts weekend schedules Schedule

Operational
Constraints The model ensures that the weekend schedule meshes
seamlessly with the surrounding weekday schedules

The model recaptures demands from canceled flights and

moves the demand to neighboring flights in the market

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 Schedule Improver (Simon)

Objective
Simon determines the optimal schedule to fly from a given base schedule and a large
superset of potential flight opportunities.

Inputs Methodology and Key Capabilities Outputs

Mandatory Given an aircraft inventory and a list of potential flights to

and optional fly, SIMON selects flight legs and assigns fleet types to
flights
flight legs in order to maximize contribution.

O&D level Simon honors a host of operational constraints including

demand those related to maintenance, noise, and crew availability.
In addition, users can specify schedule structure Optimal
constraints. Schedule
O&D level
fares
By varying the amount of the schedule that is considered
mandatory, users can control the amount of changes to an
existing schedule in an incremental manner.
Cost model
Simon can intelligently determine the best pattern of flights
to retain in any market

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Revenue Management Automation Suite
This Section Will Focus on Yield (Inventory) Management

Schedules
Objective: Develop optimal
schedule network based on
market forces, estimated
demand/fares, available
capacity, operational
imperatives, etc.

Pricing Yield Management

Objective: Given a schedule
Objective: Set the fares to
and estimated demand/fares,
maximize revenue across
optimally allocate the seat
customer segments and to
inventory on each flight to
effectively compete in the
market place ensure revenue-maximizing
passenger mix

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 Passenger Segmentation Strategy

Low Low Higher

•Business travelers
Frequent schedules

Willingness to commit in advance

Last minute
F

And schedule flexibility

availability

Price sensitive
Full service
A

Global access R
Recognition E
S
•Leisure travelers
Low fares

Quality service
High High Lower

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 Capacity Control Problem: UA881 on Sep 16 2004

0 334 26
56 passengers
3 187 17 paying an average
fare of $238; total
revenue $13,328
Travel restrictions

Business
7 110 13 125 passengers
paying an average
fare of $148; total
revenue $18,503
14 95 17
69 passengers
paying an average
fare of $75; total
Sale 7 79 24
revenue $5,175
Leisure
Sale 14 60 28
High
No. of advance
Fares Demand
purchase days 20
 What is O&D Control ?

SFO (1 Se
at)
(1 Seat)

ORD LGA
at)
(1 Se

LAX Itinerary Fare Demand

LGA-ORD $100 5

ORD-LAX $100 2

ORD-SFO $100 1

LGA-ORD-LAX $150 5

LGA-ORD-SFO $225 1

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 O&D Control Yields Better Revenue

SFO (1 Se
at)
(1 Seat)

ORD LGA
at)
(1 Se

LAX Itinerary Fare Demand Leg Based ORION

LGA-ORD $100 5 1 0

ORD-LAX $100 2 1 1

ORD-SFO $100 1 1 0

LGA-ORD-LAX $150 5 0 0

LGA-ORD-SFO $225 1 0 1
$300 $325
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United has been the Leader in Adopting Cutting Edge
Yield (Inventory) Management Technologies

Major Airlines

Leg based Inventory Management systems with fare class

Enhancements to systems
Overbooking control reservation systems
to compete with Low Cost
systems AA, SAS implemented O&D systems in the 1990s. CO, LH
Carriers
started using O&D controls in the mid 1990s

1980s 1990 - 1995 1996 - 2000 2001 - 2003 2004 and Beyond

Overbooking systems Orion implementation

Static O&D system with O&D control included path based
forecast, network Strategic research to
optimization compete with Low Cost
and dynamic passenger Carriers
Orion
Development valuation

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 United’s Yield Management System - Orion

tickets, data
published fares
Orion
Pricing and
rules
Accounting
Systems Passenger
Valuation
adjustments Base
Fares
RM PV parameters
Planners AU Levels
Inventory
controls Displacement Costs System
Optimization
(Apollo)
Path level demand
& no-show forecast
adjustments bookings
cancellations Travel Agents
Demand schedule change United Res.
departure data
Aircraft Forecasting Online Agencies
Scheduling schedule

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 High-Level Orion Statistics

• Flight Network
 Orion optimizes revenue on approximately 3,600 UA and UAX daily departures
 About 27,000 unique paths are flown each day by United’s customers

• Forecast and Optimization Statistics

 Orion produces 13 million forecasts for all 336 future departure dates
 All future departure dates are optimized every day
 Orion produces flight level controls for nearly 1.1 million flights in the future
 Options exist for analysts to load changes into Apollo throughout the day
 Passenger valuation produces new base fares every two weeks

• Hardware infrastructure
 A dedicated IBM supercomputer complex is utilized to run the forecasting and
optimization algorithms

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 Advanced Availability Processing
Challenges and Opportunities
• Consumers are price conscious and
conditioned to shop for travel
• Availability of internet outlets is
increasing shopping activity
• Most airlines are experiencing
higher look to book ratios,
stretching computing capability
• Opportunity to further tailor product
offering to passenger segments
Advanced Availability Processing
• Increased inventory control
capabilities
 Improved channel control
 Customer centric RM
• Distribution capabilities
• Manages dramatic growth of availability
requests and reduces processing costs
• Maintains revenue integrity through
real-time application of inventory
controls
• Open system architecture for faster
development
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Day of Operations Automation Suite
 Airport Manpower Assignment Models

How many employees do we need at the airport for daily Operations?

Customer Gate Baggage

Service Agents Handlers

Airport Employees

Passengers
Overestimating Need  Costly, Idle employees
Underestimating Need  Long lines, dissatisfied
Input Output
customers
Demand How many employees?
& Their respective Considerations
Schedule assignments Multiple start times
OR-Based Overtime/Parttime
Assignment Model Employees call in sick
IRROPS (Bad Weather)

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 Block Time Forecasting Model

How many minutes should United take to fly between a City Pair?
Initial Response to the Question above:
Why doesn’t United fly the most fuel efficient route and use that time?

Let’s Use JFK-LAX as an example

The range used for a 767 is anywhere between 5:10 & 5:30

Going Too Fast:

Higher fuel cost
Going Too Slow:
Higher crew costs
Input Output
Missed connections
Demand Complications:
Enroute Air traffic delays
Fuel cost # minutes to fly
FAA re-routes
Crew Cost
Weather
Block Time
Forecasting

Statistical Forecasting Techniques

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 Real-time IRROPS Management Models

Q: When things go “wrong” on the day-of-operations,

what is the best way to “Respond and Recover” ?

What can go wrong?

1. Bad Weather (60 days out of 360 days)
2. Aircraft needs maintenance Challenges:
3. Crew shortage All of this has to be done in close
4. Runway closedowns to “real time”
All Resources have to be “re-
positioned” so that the next day
What are the choices? Operations can run smoothly
1. Cancel the flight(s)
2. Delay a flight
3. Get a Spare Aircraft
4. Get Reserve Pilots/Flight attendants

United has built a whole

host of math-based
Applications to assist in
these decisions
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 Irregular Operations Management at United

A “Bad” Day
Operations Data Store
at ORD
GDP
Feedback
Issued
FAA ODS Operations Data Warehouse to Planning
for ORD

Real-time Resource
Information
SkyPath Recovery

Aircraft
Reassignment
Analyze the
Analyze the Impact of
Impact of Proposed
30
Proposed Cancellations
25

20

15
Re-ordering & Recovery Pilot Apps
10

Arrival Delay Vs
DynaBlock Flight Attendant
Sequencing Cancels Recovery
Optimized Optimized set of
Re-sequencing Cancellations
of Arrivals at ORD
Passenger
Recovery

All these tools work interactively to provide the overall solution 31

 The Future for Operations

The Operations Holy Grail:

Can there be one Global application that can
make ALL these decisions?
 Irregular Operations Management at united
A “Bad” Day
Operations Data Store
at ORD
GDP
Feedback
Issued
FAA ODS Operations Data Warehouse to Planning
for ORD

Real-time Resource
Information
SkyPath Recovery

Aircraft
Reassignment
Analyze the
Analyze the Impact of
Impact of Proposed
30
Proposed Cancellations
25

20

15
Re-ordering & Recovery Pilot Apps
10

Arrival Delay Vs
DynaBlock Flight Attendant
Sequencing Cancels Recovery
Optimized Optimized set of
Re-sequencing Cancellations
of Arrivals at ORD
Passenger
Recovery

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 Irregular Operations Management at united

A “Bad” Day
Operations Data Store
at ORD
GDP
Feedback
Issued
FAA ODS Operations Data Warehouse to Planning
for ORD

Real-time
Information
SkyPath

Analyze the
Impact of
Proposed
Ops
30

25

20

15
Re-ordering
10

Global
5

DynaBlock
Arrival Solver
Sequencing
Optimized
Re-sequencing
of Arrivals at ORD

At United, we are working on building this “Global Solver”

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 Next Frontiers – A Sample

• Game theoretic models to predict and respond to

competitor actions

• Multiple Criteria Decision Making

• Modeling trade-offs between key decision variables

• Data Mining

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Operations Research at United Airlines
 Enterprise Optimization - Overview

Mission. Provide thought leadership and ground breaking research capabilities that challenge the status quo ; partner
with business units and delivery groups to create value through excellence in modeling and research.

The Group The Activities

Experts in optimization and forecasting Solve complex business problems using

techniques dedicated to solving complex
business problems
 Approximately 45 people
 Advanced degrees in Mathematics, OR,
Statistics, Transportation Science, Industrial
Engineering, and related fields
 19 PhDs
 Mix of employees from academia, the airline
industry, and management consulting
 Partnerships with universities
math modeling, forecasting, stochastic
modeling, heuristic optimization, statistical
modeling, game theory modeling, artificial
intelligence, data mining, and other
numerical techniques
 Review business processes in high-
leverage areas
 Rapidly develop model prototypes to
validate theories and provide quick returns
 Partner with IT professionals to build full
blown, robust production systems

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 Enterprise Optimization – Business Areas
Aircraft Scheduling
 Profitability forecasting to make
long term business plan decisions
including market selection and
frequency of operations.
 Fleet Assignment models for fleet
planning and profit maximization.
 Aircraft Routing models to
operationally route aircraft
 Codeshare Optimization to
effectively manage the growing
revenue opportunity through partner
airline relationships.
Crew Planning
 Models to efficiently plan trips and
monthly schedules for pilots and flight
attendants.
 Crew Manpower Planning Models for
pilots and flight attendants to manage
complex decisions including staffing
levels, training levels, vacation
allocations and distribution of crew
among geographically dispersed
bases.
Revenue Management
 Revenue Optimization models
focused on inventory, pricing, and
yield.
 O&D Demand forecasting to feed
decision making in revenue
optimization models.
 Next Generation Revenue
Management model to more
effectively compete with growing
airline segment of Low Cost Carriers
that have a dramatically different and
uniquely simplified price and inventory
strategy.
Supply Chain Management
 Models to balance reduction in
inventory costs while maintaining
and improving the reliability of our
operation.
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 Summary

• The airline industry presents many high-value

opportunities for Operations Research systems

• United has historically invested, and continues to

heavily invest in state-of-the-art tools

• United has also consistently partnered with academia to

develop cutting edge models

• Increasing computing power at lower cost  many high

value opportunities remain

39