Air Transport Management

Session 5: Forecasting Techniques

Dr. Rohafiz binti Sabar

Transport and Logistics Department
College of Business
Room 2005 D/l: 04-9287048
email: rohafiz@uum.edu.my

July 2009 Transport and Logistics Department 1

• Time horizon: 1 month to 40 years ahead
• Short-term operational planning to long-term infrastructure needs

• Relevance of market share: increasingly important

• Airports are competing for business more and more, especially for
low cost carrier and transfer markets. We thus may need to forecast for a
whole city airport system rather than just our own airport.

• Key units forecast: passengers, air transport movements

Airport Forecasting

 Public interest: high

 Impact on the community tends to generate lots of press
coverage.
• Internal business interest : high
• Forecasts are fundamental to airport business, your
colleagues will all have their own views and agendas
• E.g. Operational vs Retail view of the world
• Ability to influence demand: also increasing
• May depend on size of airport (therefore number of routes)
and nature of operator’s business. Consider likelihood of
subsidy for new starters.
Airport Forecasting Issues

 Forecasts are usually wrong!

 The commentary accompanying an airport forecast is vital.

 Always remember that your work needs to be understood by a broad

audience.
What are we forecasting?

 Annual, monthly, daily, hourly passenger numbers

 Annual, monthly, daily cargo and mail volumes
 Annual aircraft movements (PATMs1, CATMs2,
positioning, military, GA3)
 Stand demand – number and type
 Seasonality – Peak hour, day, week, month, season
 Average loads
 Transfer passenger proportion
1: Passenger Air Transport movements 2: Cargo Air Transport movements 3: General Aviation
What other things have I
been asked to forecast?
 Car park demand
 Employment numbers
 Airport fleet mix
 Passenger numbers
 Low cost carrier infrastructure requirements
Why are we forecasting?
1 : Infrastructure planning

 Master plans
 Runways (new or extension), taxiways, stands
 Terminals (new or extension), check-in facilities,
immigration hall, customs, baggage reclaim
carousels, forecourt facilities, apron areas, car
parks, roads, office space, hotels, conference
facilities, cargo sheds
Why are we forecasting?
2 : Business planning - INCOME

 Aeronautical charges • Non aeronautical charges

• Retail income – shops
 Landing fees • Retail income - catering
 Aircraft parking • Car parking
charges • Property rental

 Passenger charges
Why are we forecasting?

3: Business planning - EXPENDITURE

• Manning levels (e.g cleaners, tug drivers, porters, BIA4,
HMRC5)
• Overtime budgets (e.g. security)
• Queue management requirements
• Regulation penalties
• Annual and monthly phasing for capital expenditure for
new infrastructure

4: Border and Immigration Agency (UK) 5: Her Majesty’s Revenue and Customs (UK)
Why are we forecasting?
4: Environmental issues

• Aircraft noise
• Aircraft emissions
• Airport energy consumption
• Airport waste generation
• Vehicular traffic generation
• Surface access modes
 Methodology
 Start with annual passenger forecasts …
 Short-term may be based on trend analysis or judgement
 Longer-term an econometric model may be more suitable
 Business travel is a function of Gross Domestic Product
(GDP)
 Leisure travel is a function of consumer expenditure, if no
data then use GDP as a proxy
 Convert to annual movement forecasts
 Based on past trends on aircraft size (pax/ATM) …
- or on past trends on average loads
 Examine seasonality to determine peaks
 Peak month, peak day, peak hour (arrival / departure)
Converting annual pax to busy hours
Total Annual Passengers TPHP as a Percentage of
Total Annual Passengers
20 million or more 0.030
10 - 20 million 0.035
1 - 10 million 0.040
500,000 to 1 million 0.050
100,000 to 499,999 0.065
under 100,000 0.120
Source: US FAA

TPHP: Typical Peak Hour Passengers

Example: if airport has 3 million
annual passengers peak hour
estimate would be:
3,000,000 * 0.04% = 1,200 passengers
‘Top-down’ forecasting
 An airport may develop a complex computer model
for forecasting total demand in a country or region
 Then determine what share of the total traffic each
airport would be expected to get
 Based on availability of services
 Known catchment area characteristics
 Access options and costs for each airport
 Total cost of travel

 Models may be useful for testing changes in

assumptions
 May be difficult to present to outside audience e.g. Manchester
Airport 2nd runway inquiry
‘Bottom Up’ forecasting (1)
 Look at each route or market and make
assumptions about future growth rates based on:

 Size of market
 Maturity of market
 Existing and future competition
 Frequency
 Aircraft size
 Historical trends
 Econometric data
‘Bottom Up’ forecasting (2)
 Determine opportunities in market

 When might new routes be started?

 Which carriers might operate them?
 What frequency will be required to make route viable?
 What aircraft size is likely to be used?
 How will the route develop?
 Any deregulation or renegotiation of bilaterals?
‘Bottom Up’ forecasting (3)
 Determine risks in the market

 Which routes may fail and when might they prove unviable and be
withdrawn?
 Which carriers might withdraw them?
 Which carriers may cease operations?
 What aircraft size is likely to be used?
 Political, economic and climate related risk to operations and traffic
 Terrorist attack
 War
 Security restrictions
 Fear
‘Bottom Up’ forecasting (4)
 All airports are different so their markets need to be
segmented and the potential of each one
considered.

 Domestic vs international
 Low cost carriers
 Schengen vs non-Schengen vs Others
 Scheduled vs charter
 Point-to-point v transfer/transit traffic
 Business v leisure
 Type of leisure traffic : Inclusive tour v VFR6 v independent
 Market shares of largest airlines
 Average load
6: Visiting friends and relatives
 Lo
nd
on
H
ea

10%
15%
20%
25%
30%
35%

0%
5%
th
row
Vienna 2006

Lo Vi
en
nd
on n a
G
at
wi
c k
St
an
Lo st
ed
nd
Passengers UK and

on
Lu
to
M n
an
ch
es
te
Bi
rm r
in
g ha
Lo m
nd
on
C
ity
Vienna Airport
Source : CAA,
Traffic Segmentation

Source : CAA 2005

Generator or receiver of
traffic?
 Understand directionality of traffic flows
 If generator of traffic then need to understand the
catchment area, what drives demand and how it
might change.
 If receiver of traffic then what is the attraction and
how it might change
- International financial centre like Frankfurt or
industry specific city like Aberdeen (oil) or
Bangalore (IT and telecoms)
Pax Origin

Source : CAA 2005

Importance of home based
carriers
 What happens when ‘home’ carrier has problems?

 Zurich when Swissair failed

 Brussels when Sabena collapsed
 Atlanta when Eastern folded

• What happens when ‘home’ or dominant carrier changes

ownership?
- What opportunities and threats does Austrian government
sale of 43% holding of Austrian Airlines present to VIE?
Domestic traffic
 What share of airport’s traffic is domestic?
 Some large US airports – close to 100%
 Denver 93%, Las Vegas 93%, Phoenix 93%, Atlanta 90%, Dallas/FW 86%,
Los Angeles 70%
 Hong Kong and Singapore – 0%
 Aircraft size is usually smaller than for international
services
 Frequency is important as traffic is usually more business focussed
 Competition from other modes
 High-speed trains in France (TGV), Germany (ICE), Japan and Spain
(AVE)
 Impact of Hatfield rail crash on UK domestic flights
 Impact of 9/11 on domestic flights
Airport competition
 Increasing awareness that airport competition exists at
various levels:
 Regional
 Bristol v Cardiff
 Dusseldorf v Cologne/Bonn vs Frankfurt vs Hahn
 Dubai vs Abu Dhabi vs Bahrain vs Doha
 New York JFK v Newark vs La Guardia

 National
 Manchester v London
 Frankfurt v Munich

 International
 Heathrow v Schiphol v Frankfurt v Paris CDG
 Hong Kong v Singapore v Bangkok
Capacity Constraints
 Operational
 Runway length
 Approach & departure routings
 ATC
 Physical capacity
 Runway
 Terminal
 Apron space
 Access
 Taxiways
 Imposed constraints
 Curfew periods
 Environmental limits
 ATM ceiling
Impact of one off events
ATHENS MONTHLY INTERNATIONAL TRAFFIC

1.2

2003
1
2002

0.8
Pax (000s)

0.6

0.4

0.2

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Recovery from events – BAA London traffic