Simulation
| Simulation parameters | |||
|---|---|---|---|
| Aircraft | A300 | A370 | A440 |
| Number of passengers (max) | 300 | 370 | 440 |
| Fixed cost per trip | 33,000 | 38,850 | 39,600 |
| Marginal cost per passenger | 50 | 40 | 35 |
| Avg cost (if full) | 160.0 | 145.0 | 125.0 |
| AirBlue | |
| Select plane | |
| Number of seats | {{ simCtl.selectedPlane1.seats}} |
| Price (1..300): | |
| Demand at prices | {{simCtl.demand1| number}} |
| Seats sold | {{simCtl.sales1| number}} |
| Unsold seats | {{simCtl.selectedPlane1.seats - simCtl.sales1}} |
| Load factor | {{simCtl.load1}} % |
| Average cost | $ {{simCtl.averageCost1 }} |
| Marginal cost | $ {{simCtl.selectedPlane1.marginal_cost }} |
| Profit per ticket | $ {{simCtl.profitPerTicket1}} |
| Revenue | $ {{simCtl.revenue1| number}} |
| Cost | $ {{simCtl.costs1| number}} |
| Profit | $ {{simCtl.profit1| number}} |
| AirGreen | |
| Select plane | |
| Number of seats | {{ simCtl.selectedPlane2.seats}} |
| Price (1..300): | |
| Demand at prices | {{simCtl.demand2| number}} |
| Seats sold | {{simCtl.sales2| number}} |
| Unsold seats | {{simCtl.selectedPlane2.seats - simCtl.sales2}} |
| Load factor | {{simCtl.load2}} % |
| Average cost | $ {{simCtl.averageCost2 }} |
| Marginal cost | $ {{simCtl.selectedPlane2.marginal_cost }} |
| Profit per ticket | $ {{simCtl.profitPerTicket2}} |
| Revenue | $ {{simCtl.revenue2| number}} |
| Cost | $ {{simCtl.costs2| number}} |
| Profit | $ {{simCtl.profit2| number}} |
Instructions
(This is only a simulation, designed to help players determine their best choice in the multiplayer game, which can be created in the industrial organization section.)
Competition in the airline industry is sometimes fierce. In this simulation you get to make the major decisions for operating an airline: choosing which aircraft to operate to a given destination, and what price to charge.
Imagine you are the route manager for a single destination, say, Melbourne–Jakarta. Only two airlines offer flights on this route: AirBlue (your company) and AirGreen (your competitor). It is well known in the industry that both airlines have the same types of aircraft available to operate on this route: A300, A370, and A440. Each aircraft type is equally configured, and both airlines incur the same cost as the other for each type. Due to the operating requirements (viz., staffing: captain, 1st officer, number of flight attendance; fuel; landing fees; etc.) each aircraft incurs a given fixed cost per trip to Jakarta. In addition, there is a nominal marginal cost per passenger — between $35 and $50 per passenger, depending on the efficiency of the aircraft.
The table below summarises the fixed, marginal and average cost (when all seats are occupied) for each aircraft. The A440 is the newest, largest, and most fuel-efficient plane. The average cost at full capacity as well as the marginal cost per passenger are the lowest for this aircraft. The A300 is the oldest plane, with less capacity and highest per-passenger operating cost at fully capacity. Here are the details:
| Simulation parameters | |||
|---|---|---|---|
| Aircraft | A300 | A370 | A440 |
| Number of passengers (max) | 300 | 370 | 440 |
| Fixed cost per trip | 33,000 | 38,850 | 39,600 |
| Marginal cost per passenger | 50 | 40 | 35 |
| Avg cost (if full) | 160.0 | 145.0 | 125.0 |
Some customers shop online for the cheapest tickets, while others have a preference for one of the airlines. As you enter different ticket prices into the forecasting tool below you will notice that by charging a lower price than your competitor, you will sell more tickets than the competitor, while the competitor is still able to attract some of the less price sensitive passengers; and vice versa.
Your goal is to maximise your profit from the route to Jakarta by selecting the aircraft type and setting a price. The choice of the aircraft affects your operating cost and the capacity available on the route. The ticket prices charged by each airline determines the demand both for your and for your competitor’s flights. This demand — and the availability of seats by each airline, determine your total sales and thus your profits...
(Sven E. Feldmann and Boğaçhan Çelen, Melbourne Business School, 2018)