Development of an Airline Revenue Capability Model for Aircraft Design

Abstract

Typically value based approaches to the design of civil and commercial aircraft, be they net present value, surplus value, or any other utility based approach focus solely on the difference in cost between the alternatives, neglecting changes in revenue which might occur between the two concepts. Alternatively, if they do have a revenue focus, it is based upon simple relationships between payload capacity and revenue, assuming a either a fixed profit margin or fixed yield. This approach works well when comparing two similar or closely related concepts, but falls apart when investigating more radically different systems, e.g. a cruise efficient short take-off and landing concept. By using a value based approach it is relatively simple to structure a decision model to incorporate changing revenue capability. However, the ability to investigate differences in design is very much dependent upon the revenue model and assumptions that are made. If the revenue elasticity is the same for the two concepts then there is no benefit in using a variable revenue approach. However, in the cases where the elasticity is different, the revenue approach offers the potential to more properly investigate some fundamentally different alternative concepts.

Value-Driven Design Framework for Competitive Aviation Markets

“…This is required to sum the future cash flows over the PLC to the present day value. The means of determining the discount multipliers for each entity is given in Equation 2, provided by Sutcliffe and Hollingsworth [29].…”

Value-Driven Design of non-commercial systems through bargain modeling

“…They can also be used to rankorder feasible design alternatives in non-iterative design practices. A lot of effort in the VDD community has been tailored to creating value functions for aerospace systems [7,[22][23][24][25][26][27]].…”

“…Cutting out their transactions and assuming they act as one entity, this is the difference between the buyers' revenue streams and the sellers' cost streams. For example, the surplus value of a commercial transport aircraft is the difference between passenger ticket sales over time and the cost to create the aircraft [26]. The surplus is divvied into the individual companies' profits well after conceptual design.…”

“…The individual stakeholder profits are then divvied up later through rationing, bargaining, etc. Past research has explored the use of surplus-related, monetary-based value functions to design systems such as aircraft and gas-turbine engines[22,25,26,[33][34][35].…”