Analyzing Total Demand for Specified Destinations : A Total Demand Analysis for an Airline Company

Abstract: The airline industry is a highly competitive market. Particularly after the major liberalization in the industry, the competition carried a step forward for all the concerned companies. Airline industry is a very dynamic market also; the expenses of a single operation may change substantially in a very short time period, which could be due to the fickle regulations or the fluctuation of oil prices. At any time, for a certain destination, a new airline company can start its operations and become a competitor, which can result in a market share loss for current operators. In such an environment, airline companies strive to maximize their revenues in every single flight. Load factors of a flight, classification, and pricing of airline tickets in a flight are determinative on the revenue of a single operation. In order to maximize revenue for its operations, companies should have a broad range of information about airline market conditions and passenger profile and preferences for every destination that they operate. Turkish Airlines, which is the largest airline company of Republic of Turkey and increasing its global awareness day by day, also strives to maximize its revenues per flight. In order to do so, Turkish Airlines needs to have suitable decisions regarding the capacity issues (determination of type and number of aircrafts, and flight frequencies) which will be then used worldwide in the different branches of company. These reasons lead to the increased need for the company to adopt practical total demand analysis in its operating destinations. The company aims to specify the factors, which are effective on the change of total demand for every destination. Turkish Airlines also strives to make most accurate demand forecasting in order to manage the peaks and troughs of the company’s flights. This project was brought to agenda in order to help this company to address this issue and was initiated with the purpose of making a total demand analysis for specified destinations. Destinations are from Stockholm to Athens, Thessalonica, New Delhi, Mumbai, Istanbul, Bangkok, and Dubai. This study is a quantitative study. Chosen demand factors, which constitute the total airline traffic between destination cities, are analyzed with respect to change in total demand. Various demand-forecasting methods are also applied in order to determine the best forecasting method for each destination, which is compatible with the quantitative approach. Results of the study are directly related to the airline market conditions of aforementioned destinations. Results are presented in four subheadings for every destination; overview of airline market, competition level of airline market, factors regarding the destination and demand forecasting for the destination. This study provides important information to Turkish Airlines regarding total demand analysis of specified destinations. Company learns the common factors (price, total amount of luggage, etc.) and the destination specific factors (language of crew, Frequent Flyer Programs, etc.) that are effective on the change of demand. Company may use this information in order to increase its market share (amount of passengers carried in a certain destination by Turkish Airlines from total demand) for specified destinations. With the help of this study, the company can make an accurate demand forecasting for Turkish Airlines’ future flights, which can be used in planning activities like determining the type of aircraft and flight frequency for a destination, and pricing of flight tickets through different passenger segments.