4.3 Accounting for provisions

The capacity of an airline is determined by the size of its fleet and the total number of seats and/or cargo capacity it can provide. Airlines must balance the size of the fleet with the number of routes they operate. Their route development plan must ensure that they use the available aircraft efficiently and profitably. If they cannot provide sufficient capacity and frequency it could leave the market open to competitors to capture market share. Equally, over-providing capacity will be a drain on airline finances and inefficient use of the fleet.

When deciding upon capacity on routes, airlines must consider passenger traffic forecasts, seasonality, existing competitors, and potential future competitors. These factors, as well as the type of passenger, influence the timing and frequency of flights.

Airlines will model the economics of routes to determine timing and frequency. Frequency is important to business travellers with travel plans that are flexible. They also prefer to maximise business hours with flights at the beginning and the end of the day. Flights in the middle of the day are generally not attractive to business travellers. VFR and leisure passengers are less sensitive to timing and frequency.

Airlines like to get their aircraft in the sky as quickly as possible each day to maximise the number of rotations they can complete. Early mornings and later at night are the peak times at many airports with based aircraft.

Airlines with sufficient fleet capacity may seek to enter established markets to take a share of existing traffic. They may also stimulate demand in existing markets. LCCs have been able to create new demand by launching entirely new routes.

New generation of aircraft, such as the B787 has changed the economics of long-haul flying. Operating costs have been reduced resulting in routes between secondary destinations being economical and profitable. This has changed the dynamics between hub airports and secondary airports.