When adding a new route to the network of a domestic airline, it is necessary to evaluate a range of factors to ensure this route will be profitable. Although various factors might potentially affect domestic airlines’ decisions related to adding a new route, the costs of this initiative and expected benefits connected with passengers’ demand are the most critical ones. Thus, the major factors considered by domestic airlines planning a new route are associated costs, the number of potential passengers, competitiveness, the airport revenue, and seasonality, and they are discussed in detail in this paper.
The critical factor to discuss is the cost of adding new routes for a domestic airline. This category includes various costs: passenger-related costs, fuel expenses, aircraft leasing, and administrative costs, and human resources costs (Deveci, Demirel, & AhmetoÄŸlu, 2017; Wang, Sun, Zhu, & Zhu, 2015). Domestic airlines need to predict passenger costs in terms of meals, services, and entertainment. Fuel costs associated with the selected type of the fleet and distances influence domestic airlines’ decisions because high expenses make them increase ticket prices, becoming less attractive to customers (Fu, Lei, Wang, & Yan, 2015). According to Sha et al. (2015) and Chang, Lee, and Wu (2019), to address this issue, airlines apply mathematical and statistical models to predict aircraft leasing and administrative costs, including gate and distribution costs. Zhong (2018) agreed that the results of such analysis contribute to airlines’ decision-making because these models are accurate and take into account related factors. Additionally, attention is paid to forecasting crew salaries to add to assessing overall expenses associated with routes (Deveci et al., 2017). When the cost factor is analyzed, the next step to take is the focus on passengers.
To cover all the calculated costs and guarantee profitability for a domestic airline, it is necessary to predict the number of passengers using the route. Thus, the total demand for this route needs to be assessed (Colmenares-Quintero, Góez-Sánchez, & Colmenares-Quintero, 2018; Feriyanto, Saleh, Fauzi, Dzakiyullah, & Iwaputra, 2016). According to researchers, attention should be paid to transit passengers who will potentially select this flight and its connectivity to other flights because of increasing the overall number of passengers using certain domestic airlines significantly (Eltoukhy, Chan, & Chung, 2017; Field, 2016). In their turn, Chang et al. (2019) distinguish between direct and indirect (transit) passengers to be taken into consideration. Another group includes business passengers whose ticket prices are comparably high, and their number influences the choice of airplanes for the route. Flying regularly, these passengers can contribute to a company’s profits (Field, 2016). Therefore, the number and profiles of passengers to use a new route are among other major factors to influence the decision. After predicting the passengers’ demand, it is necessary to analyze the factor of competitiveness in the market regarding this route.
When planning a new route, a domestic airline company needs to refer to the experience of its competitors regarding the use of this route. If there are many similar routes provided by other domestic airlines, competitiveness is high, and it will be difficult to attract customers (Avram, 2018; Wang, Zhu, & Sun, 2016). In this case, the frequency of flights and specific periods not covered by other companies’ flights should be analysed. As a result, Deveci et al., (2017) and Zhong (2018) agree that, referring to competition in the industry, it will be possible to determine the most effective time period for a new flight to address customers’ expectations. This approach is especially important if the demand for this route is high (Sun, Gollnick, & Wandelt, 2017). This analysis allows for avoiding adding a potentially non-profitable route in the context of a highly competitive market. Furthermore, different routes have various levels of competition, and this aspect influences potential revenues for an airline. In addition to competitiveness, it is also necessary to examine the role of the airport passenger revenue in the process of opening a new route.
The decision regarding adding a new route also depends on the analysis of revenues of airports available in the selected cities. Different airports specialize in serving various flights with dissimilar categories of passengers. For example, some airports are usually used by low-cost airlines and charters. On the contrary, other airports mostly serve the needs of large airlines and business passengers (Eltoukhy et al., 2017; Lin & Fu, 2014). This factor directly influences the choice of an airport to cooperate with depending on its revenue and passenger demand (Redondi, Malighetti, & Paleari, 2015). Referring to the selected category of passengers to serve with the help of a new route, an airline company assesses airports in terms of their availability, appropriateness, and cost-efficiency (Field, 2016; Teoh & Khoo, 2016). This approach allows for selecting the most effective options for an airline to attract and retain more customers and provide them with high-quality services while minimizing costs (Deveci et al., 2017). After evaluating this important factor, it is also necessary to assess the aspect of seasonality concerning a new planned route.
Seasonality is viewed as another factor because some routes cannot be discussed as profitable for an airline from a long-term perspective. Certain routes can be popular only in summer or winter, depending on the destination type; thus, according to Avram (2018) and Zhong (2018), some airports are highly seasonal, which further determines traffic seasonality. It is more appropriate for airline companies to select routes that do not depend on the factor of seasonality to guarantee stable profits and avoid cyclical decreases in the passenger number and revenues (Fu et al., 2015). However, in contrast to Avram (2018), the analysis of potential costs and revenues can demonstrate that sometimes adding a seasonal route will contribute to profits of domestic airlines, especially low-cost carriers, as is noted by Kong, Zhang, Zhu, Zhao, and Su (2018). Therefore, this aspect needs to be discussed in its connection to other factors that have been presented in this paper.
The analysis of the recent literature on the problem of adding a new route by a domestic airline has indicated such essential factors to focus on and analyze as costs and the number of passengers to serve. Other criteria are competitiveness observed in the domestic market, the airport potential revenues, and the seasonal traffic. Managers and leaders in airline companies are expected to organize their decision-making and selection referring to the analysis that involves all these criteria. In this case, it is possible to assess the profitability and appropriateness or efficiency of a newly selected route from all possible perspectives.
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