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Report of "Why do airlines collect statistics? Definition and illustration of how to use five different statistics to compare airlines.?
Twinsen, KC Wong
Student number 057075
(A) Why do airlines collect statistics? Define and show how to use five different statistics to compare airlines using some real examples.
This report will illustrate the reasons of airlines collection of statistics, definition of statistics, and comparison of airlines.
Statistics in aviation are significant for the aviation industry. Statistics in aviation are widely studied and applied by organizations, companies and other individuals; for example, aircraft manufactures, airlines, aviation organizations, governments and students. Using statistics can increase productivity, profitability, efficiency of marketing, revenue and other financial benefits. Many organizations and companies offer aviation statistics. There are the organizations, which provide statistics in aviation
?ICAO
?IATA
Also, government bodies offer statistics in aviation
?Department of Transport
?ABS
?BTEC
Moreover, statistics in aviation can also be found
?Aircraft manufacturers (for example, the Boeing company)
?Airline annual reports
?Other airlines analysis
Statistics in aviation are usually collected by the governments, airlines and other users with uniform and comprehensive financial and market statistical economic data on individual air carrier (airline) operations and the air transportation industry. Statistics in aviation can be easily found in the Internet. Visiting the websites of the above organizations and companies is available for collecting statistics in aviation.
The statistics in aviation are dreadfully useful for airlines. The statistics in aviation are useful for
?Measurement of performance in operational, financial, and combinations of both.
?Measurement of demand and supply
?Competition comparison and market sharing
Statistics is studied for the measurement of performance in operational, financial, and combinations of both. They are useful for airlines to maintain and improve the performance in operational and financial. Increase of revenues and efficiency would take place. Also, the study of aviation statistics is useful for measurement of demand and supply. For example, statistics take an important role for forecasting demand of a route. Airlines can increase the revenue and efficiency by forecasting the demand of a route. Furthermore, competition comparison and market sharing can be studied by statistics. Airlines can make decisions by considering or study of statistics. For instant, study of statistics is significant for the decision of adding a route. Since airlines should consider the competition and market sharing among other airlines, they should consider those factors before making a decision. Therefore, statistics are significant for aviation industry.
Statistics are utilized to compare airlines. Using five different statistics is able to compare airlines. They are
1.Aircraft operating characteristics
.The efficiency of marketing
.Productivity
4.Profitability
5.Revenue
Aircraft operating characteristics
Statistics of aircraft operating characteristics are studied to compare airlines. Airlines own a certain number of aircrafts to operate their services. Airlines usually own a number of different types of aircrafts. Aircrafts differ in their operating characteristics
?Size
?Operating range
?Speed
?Aircraft utilization
Size
In size, generally, the larger the aircraft the more expensive it is to operate. However, conversely in unit cost terms they are very cheap. Unit costs are the costs of producing a unit of production, for example, cost per ASK or cost per ATK. Simply, unit costs are calculated by dividing expenditure by ASK or ATK. Since large aircrafts have a large number of available seats and a large amount of power for freight loads, ASK and ATK would be large, results unit costs would be low. The definition of expenditure will be given later on.
Operating Range
Different types of aircrafts operate different ranges. Every aircraft has its limit of operating ranges. Airlines schedule their flights with considering their operating ranges. Long range operating aircraft flies a long range. The higher cost per ATK the shorter aircraft distance is.
The longer the distance the less fuel is being used per km.
Speed
Aircraft speed affects unit costs. Unit costs is affected by the effect on an aircraft's hourly productivity. Since hourly productivity is the product of the payload and the speed, the greater an aircraft's cruising speed the greater will be its output hour. Some elements of cost might be higher for a faster aircraft. Fuel consumption might be slightly higher. However, assuming other things are equal, the cost per tonne-kilometer for the faster aircraft would be lower.
Aircraft utilization
Aircraft utilization is a measurement the number of hours per day that the aircraft operates for its airline. It is important to collect this data since airline can find out the number of hours that they use their aircraft, which allows them to determine how often they fly to a particular destination. The higher this factor gets, the more efficient the aircraft is. Therefore, a higher output is created. As a result, a higher profit can be made. This also allows the airlines to keep as a record to determine when they should do their regular technical inspection, it helps better maintenance of the aircraft.
The graph above illustrates the statistics of aircraft utilization of Cathay Pacific Airways over the past 10 years. Obviously, it had been rising from , and stopped in 00. In 001, it was decreased.
Efficiency of marketing
Efficiency of marketing is considered for comparison of airlines. Marketing is involved in deciding what should be produced as swell as how it should be sold. The role of airline marketing is to bring together the supply of air services, which each airline can largely control, with the demand, which it can influence but not control, and to do this in a way which is both profitable and accomplishes the airline's commercial objectives. There are three items considered in efficiency of marketing
?Seat Factor
?Load Factor
?Yield
Seat factor
Seat factor is defined as passenger load factor, which is calculated by RPKs as a percentage of ASKs. Simply, seat factor is the percentage of passenger of seats. According to Singapore Airlines 001 Annual Report, the seat factor of SIA in 001was 74%. It was dropped down from 76.8% to 74% from 000 to 001.
Load factor
Load factor is defined as freight load factor, which is calculated by FTKs as a percentage of ATKs. In addition, FTKs is the number of revenue tonnes of freight multiplied by the distance flown, and ATK is the number of tonnes of capacity available for the carriage of revenue load (passengers and cargo) multiplied by the distance flown.
Yield
Yield is calculated by revenue dividing by RPK. The unit of yield is cent/RPK or cent/km.
Productivity
Productivity of an airline is measured by items
?Cost per ATK
?ATK per employee
?Aircraft utilisation
Cost per ATK
Cost per ATK is calculated by dividing operating cost by ATK. Operating cost is identified as Direct Operating Costs (DOC) and Indirect Operating Costs (IOC).
The above graph is the 10 years statistics of Cost per ATK Cathay Pacific Airways. Cost per ATK had been dropping down from , stopped in , rising since .
ATK per employee
ASK per employee is calculated by dividing ASK by the number of staff.
The graph above shows the ATK per staff cost in HKD ?00. Obviously, it has been increasing over these 10 years.
Aircraft utilisation
Aircraft utilisation has been given above.
Operating Cost
Structure of operating costs
Direct Operating Costs (DOC)
1.Flight operations
.Maintenance and overhaul
.Depreciation and amortization
Flight operations include
?Flight crew salaries and expenses
?Fuel and oil
?Airport and en route charges
?Aircraft insurance
?Rental/lease of flight equipment/crews
Maintenance and overhaul include
?Engineering staff costs
?Spare parts consumed
?Maintenance administration (could be IOC)
Depreciation and amortization include
?Flight equipment
?Ground equipment and property (could be IOC)
?Extra depreciation (in excess of historic costs)
?Amortization of development costs and crew training
Indirect Operating Costs (IOC)
1.Station and ground expenses
.Passenger services
.Ticketing, sales and promotion
4.General and administration
5.Other operating costs
Station and ground expenses include
Ground staff
Buildings, equipment, transport
Handling fees paid to others
Passenger services
Cabin crew salaries and expenses (could be DOC)
Other passenger service costs
Passenger insurance
Profitability
Profitability is defined as financial gain.
There are three significant factors which have an effect on profitability
?Seat factor
?Unit Revenue
?Unit Cost
There are several methods to improve profit
?Decrease unit costs
?Raise passenger yield
?Increase seat factor
Airlines can decrease unit costs by
oIncreasing aircraft seating capacity
oOperating bigger and/or more efficient aircraft
oReducing overhead costs
oIncreasing productivity of labour and equipment
Airlines can raise passenger yield by
oIncreasing fares
oImproving mix of fares
Airlines can increase seat factors by
oReducing capacity
oEliminating or reducing competition
oImproving schedules. i.e. increase efficiency
Unit Costs
Unit costs are the usual form of economic and comparative analysis. It is the costs of producing a unit of production. Unit cost is found by dividing expenditure by ASK or ATK. The unit is cents/ASK or cents/ ATK.
SIA Annual Report 001 shows that, unit cost in 001 was 7. cents/ASK.
Revenue
Revenue of airlines consist are income from
?Passenger traffic
?Passenger yield
?Freight load
?Freight yield
Passenger traffic
Passenger traffic is measured in number of passengers or RPK.
Passenger yield
Passenger yield is calculated by dividing passenger revenue (in cents) by RPKs. The unit is cents/km or cents/RPK. According to SIA Annual Report 001, the passenger yield of SIA dropped from .4 to .0 from 000 to 001 (in cents/km). SIA carried 14,765,000 passengers.
Freight load
Freight load is measured in amount of tonnes of cargo and mail carried. According to Cathay Pacific Airways Annual Report 001, the cargo and mail load factor in 001 was 67.%.
Freight yield
Freight yield is calculated by dividing freight revenue by ATKs.
Other sources can be part of revenue such as activities of finance, leasing, and charters.
The total revenues of SIA from 7 to 01 are
Year001-0000-011-0018-17-8
Total revenue ($ million),447.8,51.,018.87,85.87,81.8
Total revenue had been increasing rapidly from 7 to 8. However, from 00-01, it was dropped down from $,51.M to $,447.8M.
Conclusion
Statistics in aviation are collected by airlines. Aircraft manufactures, government bodies, aviation organizations and airline annual reports give statistics in aviation. Airlines collect statistics because airlines can study the measurement of performance in operational, financial and combinations of both. Also, they can measure the demand and supply by statistics. Moreover, airlines can measure competition comparison and market sharing.
Finally, to compare airline costs, statistics in aircraft operating characteristics, efficiency of marketing, productivity, profitability and revenue are considered.
Bibliography
Rigas Doganis, 11 "Flying Off Course, The Economics of International Airlines? Routledge
Singapore Airlines Annual Report 01/ 0
Cathay Pacific Airways Limited Annual Report 001
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