A study of the practicality and profit enhancement potential of demand driven dispatch in airline hub operations

Abstract

This thesis explores the use of demand driven dispatch in the hub and spoke environment prevalent in the route networks of major airlines in the United States. Demand driven dispatch is an operational mode where aircraft assignments can be changed in response to variation in demand. A computer program simulated the functions of a revenue management system and an optimal aircraft assignment routine over the course of the passenger booking process. An isolated hub with service exclusively between the hub and 15 spoke cities was assumed. Two series of quantitative studies were done, one looking at the possible profit improvements at various demand levels with demand driven dispatch and the other examining the sensitivity of demand driven dispatch results to when the first and last optimal reassignment of hub aircraft was made in the booking process. In the first series, comparisons were made between results obtained from static aircraft assignments and fully dynamic demand driven dispatch assignments. Several scenarios were simulated. These involved various combinations of demand distribution, demand balance, and booking process assumptions. Booking process sensitivity studies were performed on a small subset of the scenario combinations. A discussion of practical issues which could affect implementation is also included. Results show that demand driven dispatch performance is fairly uniform regardless of the scenario with the best projected yearly profit increases for a major hub and spoke operator of $35-$40 million over the current fixed assignment practice. This occurred at load factors similar to airline historical levels of 65%. The profit increases at normal demand levels were achieved mostly through better aircraft utilization patterns (lower costs) and not revenue enhancement. At higher average load factors demand driven dispatch improvement was less significant but was always positive. Studies on when demand driven dispatch was applied during the booking process showed that major benefits could be gained by evaluating assignments even once as long as this assignment period preceded any significant level of high yield passenger booking requests.