Capacity management in a directionally imbalanced environment : transpacific air freight

Pao Yue-kong Library Electronic Theses Database

Capacity management in a directionally imbalanced environment : transpacific air freight

 

Author: Leung, Hung-fai Albert
Title: Capacity management in a directionally imbalanced environment : transpacific air freight
Degree: D.B.A.
Year: 2006
Subject: Hong Kong Polytechnic University -- Dissertations.
Aeronautics, Commercial -- Freight -- Management.
Department: Graduate School of Business
Pages: v, 257 leaves : ill. ; 30 cm.
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2066140
URI: http://theses.lib.polyu.edu.hk/handle/200/596
Abstract: Most research on airline industry focus on seat inventory, yield management, passage pricing, flight scheduling, and strategic alliance and are predominantly directed to the passenger side of airline business. While international and domestic flights, cargo and passenger alike, are operated in a round trip manner, thus outbound capacity is identical to inbound, few researches discuss and examine the interactive and correlative impacts of outbound and inbound operations in any discipline. With a combined freightage market value in excess of US$ 5 billion in 2005, transpacific air freight traffic, in weight and volume, has been directionally imbalanced well in favor of easlbound for decades. Airlines' transpacific easlbound air freight rates are much higher than that of westbound as a result of strong market demands. The added capacity capitalizing on the booming eastbound air freight traffic particularly from China in the recent years has made the situation much worse driving the ailing westbound rates further downward, a dilemma every airline faces. This paper presents two models to deal with the dilemma. The first model aims at managing the supply and deployment of transpacific westbound air freight capacity by adopting deadheading strategy, which results in reducing the availability of westbound capacity for revenue purpose by as much as 40% and increasing the number of round trip a plane can operate in a year. The outcomes hint that scheduling and routing flexibility could enhance capital and operation productivity that the airline industry has been hunting for in the ongoing high operating cost environment. For the purpose of increasing westbound demands, the second model is designed to identify and evaluate the economical and financial impacts of various parameters on inventory and transportation cost via ocean freight and air. The results suggest that the dynamic of these parameters could diminish the cost difference between these two transportation modes and even transform the inter-relationship at and beyond certain levels, indicating the practical and credible possibility of converting ocean freight into air.

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