60 1 st Logistics International Conference Belgrade, Serbia 28 - 30 November 2013 TWO-STAGE AIRLINE FLEET PLANNING MODEL Slavica Z. Dožić * University of Belgrade, Faculty of Transport and Traffic Engineering, s.dozic@sf.bg.ac.rs Milica Đ. Kalić University of Belgrade, Faculty of Transport and Traffic Engineering, m.kalic@sf.bg.ac.rs Abstract: Fleet planning is a process of strategic importance for an airline. Airlines have a tendency to match their capacities and passenger demand for corresponding market conditions, which has a direct impact on airline profitability and costs. It is necessary to consider many different factors in order to make a good fleet plan. This paper proposes the sequential two-stage model for fleet planning. The first stage refers to determination of an approximate fleet mix in terms of aircraft size which is obtained by fuzzy logic. The outputs from this stage are two sets of routes: one presenting routes covered by small aircraft and another one presenting routes covered by medium size aircraft. At the same time, these outputs represent inputs for the second stage in which the fleet sizing problem is solved using heuristic procedure. The sequential two-stage model is exemplified with the incumbent airline with its base at Belgrade Airport. Keywords: airline fleet planning, fleet mix, fleet sizing, fuzzy logic. * Corresponding author 1. INTRODUCTION AND LITERATURE REVIEW One of the main goals of an airline is to match its capacity and passenger demand for corresponding market conditions, which has a direct impact on the increase of airline profitability and reduction of airline costs. Since acquisition of a new aircraft requires a huge investment, it is evident that a small savings of a few percent, is not negligible for an airline. In order to achieve even such a small savings, adoption of an appropriate methodological approach is essential. Generally, fleet planning process is very complex for an airline. It is necessary to consider many different factors, such as aircraft economies, commonality, aircraft performances, finance, market evaluation, etc. With regard to time perspectives in fleet planning, it is obvious that the market and environment in which an airline operates are predictable for a relatively short time and uncertainty increases with time. Strategic planning is fundamental to overcome the gap between the growing flexibility of resources and growing uncertainty of the market. Many authors have dealt with the fleet planning problem in different ways. Most of them research the close connection between airline frequencies and aircraft size considering more or less similar factors. The factors that have influence on airline flight frequencies and aircraft size on US airline routes taking into consideration market demographics, airport characteristics, airline characteristics and route characteristics are commented in [8]. Regression analysis is used [2] to point out that route characteristics, such as distance, level of demand and competition, strongly influence the selection of aircraft size, while airport characteristics (number of runways, hub or not hub) do not influence aircraft selection. A nested logit model is developped [10] in order to investigate influence of aircraft size, frequencies, seat availability and fare in airlines’ demand and market share in duopoly markets. They demonstrate that an airline achieves greater market share by increasing frequencies rather than increasing seat availability per flight. The paper [7] focuses on operating effects of leasing rather than financial effects. It indicates that an airline which needs additional capacity in short time period may not reach advantageous agreements with manufacturers (higher prices and waiting for delivery), while large leasing company can provide aircraft from manufacturers in shorter time period and at lower prices. They can lease aircraft from a leasing company in order to adjust the airline’s capacity and demand. Dynamic programming in decision-making process related to the number of aircraft to be bought, leased and retired is proposed in [4]. [3] indicates the environmental implications with regards to airlines’ selection of aircraft size.