Taming the Business Cycles in Commercial Aviation: Trade-space analysis of strategic alternatives using simulation modeling
Name
esd-wp-2008-15.pdf
Size
1.86 MB
Format
Adobe PDF
Checksum (MD5)
15e02e633978db4168bd445aeff4b2e1
Author(s)
Sgouridis, Sgouris
Sussman, Joseph M.
Weil, Henry Birdseye
Bozdogan, Kirkor
Date Issued
May 2008
Publisher
Massachusetts Institute of Technology. Engineering Systems Division
Series/Report no.
ESD Working Papers;ESD-WP-2008-15
Abstract
We investigate the effectiveness of strategic alternatives that are designed to dampen the cyclicality manifest in the commercial aviation related industries. The constituent enterprises of the commercial aviation system exhibit managerial and operational independence and have diverse value functions that often viewed the enterprises to view their competition as a zero-sum game. We argue that this need not always be the case; in the commercial aviation system both airline and airframe manufacturers constituents would benefit from a steadier influx of aircraft that counters the current situation that is characterized by relatively stable demand growth rate for air travel while airline profitability and aircraft ordering fluctuate intensely. In order to identify and evaluate the symbiotic potential, we use a system dynamics model of commercial aviation. After testing several individual strategic alternatives, we find that capacity management is key to cycle moderation for non-collusive strategies. Comparing faster aircraft deliveries to semi-fixed production schedules among other alternatives shows only the latter alternative to be Pareto efficient.
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