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A Regional Airline interconnecting the Middle East Mohammed Salem Awad Senior Consultant Felix Airways 2 nd -4 th Nov. 2009 Amman Jordan

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Outline <ul><li>Introduction </li></ul><ul><li>Lessons learnt from a successful low cost airline. </li></ul><ul><li>Doing Business Right – Domestic – Regional – LCC !!!!!!!! </li></ul><ul><li>Middle East Competitive Environments </li></ul><ul><li>Aircraft Manufacturer Costs </li></ul><ul><li>Operators Cost Experience </li></ul><ul><li>Evaluation of the Demand Pattern </li></ul><ul><li>Fleet Management Strategy </li></ul><ul><li>Summary </li></ul>

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Introduction <ul><li>Felix Airways – Background </li></ul><ul><ul><li>Started : Oct 2008 </li></ul></ul><ul><ul><li>Network : Domestic Operation </li></ul></ul><ul><ul><li>Fleet : 2 CRJ 200 , 2 CRJ 700 </li></ul></ul><ul><li>Challenges and Threats : </li></ul><ul><ul><li>Yemen Economy – PPP – GDP </li></ul></ul><ul><ul><li>Competition with Land Transportation Companies </li></ul></ul><ul><ul><li>Yemenia – Operation </li></ul></ul><ul><ul><li>World Financial Crisis </li></ul></ul><ul><ul><li>Low Domestic Yield </li></ul></ul>

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Lessons Learnt <ul><li>Lessons Learnt from a Successful Low Cost Airlines </li></ul><ul><ul><li>Economy of Scale : </li></ul></ul><ul><ul><ul><li>Doing the business in large scale this will derive the cost down </li></ul></ul></ul><ul><ul><li>Sale Concentration on Aircraft and not passengers only </li></ul></ul><ul><ul><ul><li>The philosophy of LCC is to gain as much as you can of revenue per Aircraft. </li></ul></ul></ul><ul><ul><li>Developing Multi Hubs Operation </li></ul></ul><ul><ul><ul><li>To Over ride the restriction of long haul operation LCC, They develop a multi hubs in their regions </li></ul></ul></ul><ul><ul><li>Package Business Concept – A series Business Chain. </li></ul></ul><ul><ul><ul><li>Earning form airlines is too low, so travelling act as business tool to derive the other business </li></ul></ul></ul><ul><ul><ul><li>As Hotels, Travel Agencies Tours, Truism, cars, </li></ul></ul></ul>

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Doing Business Right <ul><li>Doing Business Right – Domestic – Regional – LCC </li></ul><ul><ul><li>Felix Airways: </li></ul></ul><ul><ul><ul><li>Started As Domestic Operation – Low yield environment </li></ul></ul></ul><ul><ul><li>Changing In the Strategy : </li></ul></ul><ul><ul><ul><li>Adapting the right model </li></ul></ul></ul><ul><ul><ul><li>Addressing Regional Operation </li></ul></ul></ul><ul><ul><ul><li>Minimizing the effect of World Financial Crisis </li></ul></ul></ul><ul><ul><ul><li>Tracking High Yield Routes </li></ul></ul></ul><ul><ul><ul><li>Operate to Secondary Airports </li></ul></ul></ul>

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Middle East Competitive Environments <ul><li>Surviving in the Middle East Competitive Environments </li></ul><ul><ul><li>Positioning the company in the Market </li></ul></ul><ul><ul><li>Enhancing the partnership with Yemenia </li></ul></ul><ul><ul><li>Support liberation and deregulation in the region in a fair mutual business. </li></ul></ul><ul><ul><li>Out sourcing the most costly business parts to achieve more effective results. </li></ul></ul><ul><ul><li>Addressing the profitable segments. </li></ul></ul><ul><ul><li>Encourage innovation and support positive ideas. </li></ul></ul>

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Aircraft Manufacturer Costs <ul><li>Typical Aircraft Manufacturer Costs </li></ul>who is right ?

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Aircraft Manufacturer Costs <ul><li>Cost per trip and Cost per seat Matrix </li></ul>Profit and Market Opportunity Matrix Vs

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Aircraft Manufacturer Costs Profit and Market Opportunity Matrix ( Yemenia and Felix airways experience ) Assign the Right Aircraft Operate the most profitable Route

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Operators Cost Experience <ul><li>Operators Cost Experience </li></ul><ul><li>getting the right cost picture ! </li></ul><ul><li>Studying Airlines having same type of Aircraft. </li></ul><ul><li>In case of different fleet Situation, reflect the Max and Min Fleet Capacities. </li></ul>

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Evaluation of the Demand Pattern <ul><li>Evaluation of the Demand Pattern </li></ul><ul><ul><li>Consider the travelling Demand Pattern of SAH-ADE Sector on daily bases for one week. </li></ul></ul>90 Seat 180 Seat

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Evaluation of the Demand Pattern <ul><li>Evaluation of the Demand Pattern </li></ul><ul><ul><li>In 50-120 Seat Market :( Domestic Market ) Regional Aircraft can meet the demand fairly but if the demand is high, higher aircraft capacity is preferred. </li></ul></ul><ul><ul><li>If Higher aircraft capacity used, it will subjected to low load factor with a higher respective cost. </li></ul></ul><ul><ul><li>In 100-220 Seat Market : ( Regional Market ) aircraft of A320/B737NG can be fit fairly to meet this demand pattern, </li></ul></ul><ul><ul><li>If lower aircraft capacity used, it will subjected to high load factor with high frequencies, leading to increase the variable cost. </li></ul></ul>How to adapt the Right Demand Pattern

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Evaluation of the Demand Pattern <ul><li>U Curve Technique </li></ul>

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Evaluation of the Demand Pattern <ul><li>Optimization in Aviation – </li></ul><ul><ul><li>U Curve Technique </li></ul></ul><ul><ul><ul><li>Number of Seats of Aircraft: </li></ul></ul></ul>

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Evaluation of the Demand Pattern <ul><li>U Curve Technique </li></ul>

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Evaluation of the Demand Pattern <ul><li>By Using U Curve Technique </li></ul>Optimum Operating Curve

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Evaluation of the Demand Pattern <ul><li>Evaluation of the Demand Pattern ( Domestic ) </li></ul><ul><ul><li>For 70 – 100 Seat the typical cost of ASK = 0.022 USD </li></ul></ul>

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Evaluation of the Demand Pattern <ul><li>Evaluation of the Demand Pattern ( Regional ) </li></ul><ul><ul><li>For 120 – 170 Seat Market the typical cost of ASK = 0.02 - 0.06 USD </li></ul></ul>

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Fleet Management Strategy <ul><li>Fleet Management Strategy ( Point to point Model ) </li></ul><ul><ul><li>Fleet Standardization and Commonality. </li></ul></ul><ul><ul><li>Medium Range and Modern One </li></ul></ul><ul><ul><li>One Set Configuration. </li></ul></ul>

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Summary <ul><li>In point to point operating model, Airline can be define by three factors : Passengers, Fare and Distance, While Cost is implemented as step function. </li></ul><ul><li>Optimum operating Curve is the only picture that painted by Airline figures, it is the hidden thumb that define the airline. </li></ul><ul><li>Felix Airways examine these methods to derive and control the costs by Top – Bottom approach. </li></ul><ul><li>Airlines interesting to minimise costs, but experience shows, they should addressing profit, to meet their obligations. </li></ul>

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<ul><li>Contact </li></ul>[email_address]

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<ul><li>Thank You </li></ul>