kenzamethodology prepared & presented by daniel sallier - adp
TRANSCRIPT
KenzaKenzamethodologymethodology
Prepared & presented byDaniel SALLIER - ADP
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2ContentContent
Method assumptions 3Traffic characterisation 4General or business oriented market 5Principles of the computation process 7Starting market 8Maturing market 9Mature market 10Leisure oriented market 11
Market typology 14How different countries compare 15Same threshold of income, different market 16
Market diagnostic 17Which fare policy? 18Who is travelling and how often? 19Can a fare decrease stimulates the market? 20What about the market turnover? 21Sector growth limitation 22
Conclusions 23
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Method Method assumptionsassumptions
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2Traffic characterisationTraffic characterisation
• General, business or leisure oriented traffic ;
• Ethnic traffic ;
• Other specific traffic.
Before analysing or forecasting traffic, its characteristic should be determined :
The method described in this document can only be applied for the first type of traffic.
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2General or business oriented marketGeneral or business oriented market
• Only a part of the population has a social status which allows them to travel for leisure or business reasons ;
• This social status is characterised by income level ;
• The return ticket price determines a minimum threshold of income below which the number of people travelling by air is virtually insignificant ;
• The threshold of income and the cumulative distribution of incomes within the population, determines the number of passengers ;
• The region is presumed to be homogenous in terms of economical and population growth as well as distribution of income within the populations.
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2General or business oriented market General or business oriented market (continued)(continued)
0 1 2 3 4 5Normalised income (x GDP per capita)
0%
10%
20%
30%
40%
50%
60%
70%
80%
100%
90%Cumulative distribution
of income
Threshold ofincome beforefare decrease
Part of the populationwhich can travel after
fare decrease
% of population
Threshold ofincome afterfare decrease
Part of the populationwhich can travel before
fare decrease
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2Principles of the computation processPrinciples of the computation process
Average return
ticket price
Time
No of flights per year
ConstantConstant
Thresholdratio
Time
Average normalised ticket
price
GDP per capita
Time
Normalised income
threshold
Time
No of passengers
ortraffic growth
rate
Time
Yield
Time
Stage length
Time
Penetration
Time
Global traffic turnover or
turnovergrowth rate
Time
GDP
Time
Population
Time
Number oftravelers
Time
Cumulative distribution of
income
Normalised income
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2Starting market : no elasticity to ticket priceStarting market : no elasticity to ticket price
0 1 2 3 4 5Normalised income (x GDP per capita)
0%
10%
20%
30%
40%
50%
60%
70%
80%
100%
90%
Threshold ofincome beforefare decrease
% of population
Changes in fares orthe economical situation,do not affect significantly
the level of demand
Threshold ofincome afterfare decrease
Quality of service drives competition
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2Maturing market : slight elasticity to ticket Maturing market : slight elasticity to ticket priceprice
0 1 2 3 4 5Normalised income (x GDP per capita)
0%
10%
20%
30%
40%
50%
60%
70%
80%
100%
90%
Threshold ofincome beforefare decrease
% of population
Threshold ofincome afterfare decrease
Fares start to drive the competition
Changes in fares orthe economical situationslightly affect the level of
demand
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2Mature market : highly sensitive to ticket Mature market : highly sensitive to ticket priceprice
0 1 2 3 4 5Normalised income (x GDP per capita)
0%
10%
20%
30%
40%
50%
60%
70%
80%
100%
90%
Threshold ofincome beforefare decrease
% of population
Slight changes in fares or the economical situation,
may dramatically affect the level of demand
Fares & economical situation drive the market and the competition
Threshold ofincome afterfare decrease
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2Leisure oriented marketLeisure oriented market
• The package price includes transportation and accommodation. It determines the lower threshold of income below which the number of people travelling by air is virtually insignificant ;
• The package price determines the upper threshold of income upon which people travelling by air, prefer more "exotic" and expensive destination ;
• The thresholds of income and the cumulative distribution of incomes within the population, determines the number of passengers ;
• It is implicitly assumed that for a given package price, tourist destinations have kept and will keep their market share constant.
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2Leisure oriented market Leisure oriented market (continued)(continued)
0 1 2 3 4 5Normalised income (x GDP per capita)
0%
10%
20%
30%
40%
50%
60%
70%
80%
100%
90%
Cumulative distributionof income
Part of the populationwhich can travel after
fare decrease
Thresholds ofincome beforefare decrease
% of population
Part of the populationwhich can travel before
fare decrease
Thresholds ofincome afterfare decrease
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2Leisure oriented market : maturity = Leisure oriented market : maturity = saturationsaturation
Normalised income (x GDP per capita)0 1
40%
50%
60%
70%
80%
100%
90%
% of population
Lower fares,same market level,lower profitability.
Fare competition destroys the market
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Market typologyMarket typology
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2How different countries compareHow different countries compare
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
% of population
Normalised Income (x GDP per capita)
BRAZIL
GDP/capita computedon the reduced population
FRANCE
INDIA
GDP/capita computedon the reduced population
UK
USA
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2Same threshold of income, different market Same threshold of income, different market sizesize
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
% of population
Normalised Income (x GDP per capita)
FRANCE
UK
Same normalisedthreshold of income
Potential BritishMarket : 19 % of
population
Potential FrenchMarket : 11 % of
population
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Market diagnosticMarket diagnostic
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2Which fare policy?Which fare policy?
Normalised income (x GDP per capita)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0.0 0.5 1.0 1.5 2.0
Threshold of incomein 1994
Decreasing fares cannot stimulate traffic
Mexican domestic market
Threshold of income in 1994
Slight increase of fares depresses traffic, but can be
more profitable
0.0 0.580%
90%
100%
% of population
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2Who is traveling and how often?Who is traveling and how often?
Mexican domestic market
Maximum penetration(% of total population)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1984 1990 2000
Only the veryrich can travel...
M of travelers
0
1
2
3
4
5
6
7
1984 1990 2000
10
20
30
40
50
60
70
80M of passengers
01984 1990 2000
... and theytravel very often
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2Can a fare decrease stimulates the market?
M of passengers
0
5
10
15
20
25
30
35
40
45
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
Yield = US¢ 12 per Km
Yield = US¢ 9 per Km
Brazilian domestic market
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2What about the market turnover?What about the market turnover?
1973 1978 1983 1988 1993 1998 2003
Crore
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
Similar turnover growth in the next future
irrespective of the fare or GDP growth
Indian domestic market
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2Sector growth limitation :Sector growth limitation :a matter of demand elasticitya matter of demand elasticity
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
0 100 200 300 400 500 600 700Average income produced by a passenger (return flight)
(Constant Euro 2000)
De
ma
nd
ela
sti
cit
yto
th
e f
are
De
ma
nd
ela
sti
cit
yto
th
e G
DP
Area of economical saturation
Area of economical stimulation
Area of geared effect of the GDP growth
Area of no geared effect of the GDP growth
€200 to €230
Structural change in the economical dynamic of
demand
French domestic market
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ConclusionsConclusions
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2Beyond the math, physics!Beyond the math, physics!
The Kenza methodology is mostly dedicated at the analysis and forecasting of a market of which the outputs can be scaled down at the level of a route or an airline's network later on.
The Kenza methodology provides pieces of information about the physical behaviour of the market :
• number of travellers;
• part of the population which is likely to travel;
• variable elasticity of the demand over the time;
• weight of the underground economy;
• turnover and profit margin evolution of the sector;
• …
The Kenza methodology is only one of the approaches ADP is using and developing in order to gain a better expertise of the air transport sector.
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2Why Kenza?Why Kenza?
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Daniel SALLIERStatistics, Forecasting & Simulations Director
ADP – DCSPRStrategy Department
Orly Sud 10394396 ORLY AEROGARE CEDEX
FRANCE
tel. : Int'l + 33 1 70 03 45 68fax. : Int'l + 33 1 49 75 75 89e-mail : [email protected]
© ADP, April 2002Printed in France