When we think of capacity issues at? airlines, it is often in the context of buying enough planes to meet forecast demand. But this article makes the important point that? "many fewer people fly in the winter than during school? breaks, major holidays and summer? vacations." In? fact, US Airlines filled just? 77% of their seats last? January, compared to? 87% in July.? Basically, for? decades, airlines have earned a lot of money in summer and then lost it in winter when they had too many? planes, gates, and employees.
What OM strategies can airlines use to break the? cycle? Here are The? Journal's four? ideas: (1) Schedule more airplanes for maintenance and renovations during winter? months; (2) Offer workers voluntary? leaves; (3) Fly the planes fewer? hours; and? (4) Trim the number of daily flights to many destinations.
With fuel prices hitting record highs? (fuel is more than? 1/3 of operating? expenses), "it becomes more and more important not to fly that airplane if? there's no? demand," says Alaska? Air's VP- Revenue Management. Delta has made a goal of providing? 20-25% less capacity in winter than in summerlong dash—a big oscillation by industry standards. But seasonal downsizing is tricky. Airlines? can't afford to park their planes in low? season, and union contracts? don't allow them to impose staff cuts.
Alaska Air smoothed out its schedule recently when it added flights to Hawaii from its Seattle hub in winter. Delta loads up on sports charter flights and adds more flights to the? Caribbean, Mexico, and Australia in the slow season. US Airways offers? red-eye flights from its Phoenix hub in? summer, squeezing more hours a day out of its? planes, then discontinues the flights in winter.? Ryanair, Europe's big discount? carrier, simply parks 80 of its 280 planes from November to March. It still bears the ownership? costs, but? doesn't have to fuel up. Critical Thinking?
1. Why are capacity decisions critical in the airline? industry?
A. Too many or too few? planes, gates, and employees can harm revenues and profits.
B. They are money makers in winter.
C. US Airlines filled just? 77% of their seats last fall.
D. All of the above.
2. How can airlines impact? capacity?
A. Fly the planes only on the routes that have the five highest demands.
B. Hire more workers each fall.
C. Conduct more routine maintenance in winter months.
D. All of the above.
3. Fuel prices impact capacity decisions because
A. they encourage airlines to provide less flights during summer.
B. they represent a high percent of operating expenses.
C. longer routes are always less profitable.
D. unions do not want to cut staff when prices drop.
4. Different airlines handle capacity adjustments by
A. adding flights to warmer destinations during winter.
B. squeezing more hours out of each plane per day.
C. parking planes in winter.
D. All of the above.