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Essay / Research Paper Abstract
This 3-page paper provides an overview of business forecasting methods used by KLM-Air France and other airlines. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: AS43_MTairfforc.doc
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Unformatted sample text from the term paper:
financial returns (Wall, 2010). The article pointed out that Air France-KLM believed a "stronger-than-anticipated" revenue environment for new guidance, meaning the airlines balance sheet would likely be operating in the
black by year-end (versus the break-even estimates it had noted in previous reports) (Wall, 2010). Definitely good news - but how does
Air France-KLM know this before the ink is dry on the final year-end financial statements? Finding forecasting methods specific to KLM-Air France was impossible. However, there are some very good
articles written about business forecasts for the airline industry in general. What we can do is discuss those articles, discuss the forecasting methods, and then apply them, in a theoretical
fashion, to what Air France is doing. Through their forecasting methods, airlines work with revenue management tools - in other words, they attempt
to ensure that the right type of capacity is sold to the right customer, at the right price and at the right time (Mukhopadhyay et al, 2007; Smith et al,
1992). This particular process furthermore involves "rationally pricing and controlling reservations of perishable assets across market segments to maximize value" (Mukhopadhyay et al, 2007, p. 310). Where such RM becomes
tricky, however, is in predicting what passengers will pay and when theyll pay it. According to Mukhopadhyay and his colleagues, passenger air
carriers rely on two approaches when it comes to revenue management and forecasting. They will manipulate inventory release (in other words, number of seats) at specific price points, or theyll
manipulate the price at different times. Inventory release relies on fixed airfares, with managers making decisions either selling or closing different fare classes as demand evolves. This is why, for
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