November 2017 SMU MSBA Presentation

Advanced Analytics at AA

Sample Projects

Analytics Careers @ AA

Who we look for....

Industry Characteristics

Low barriers to entry

High barriers to exit

High fixed costs

Low variable costs

Perishable product

Highly transparent pricing

Fluctuating demand

Network vs. low cost competition

Largest Network in the World

We do so much more than fly airplanes

• New routes slated: LAX to Beijing (November 2017), PHL to Prague (2018), PHL to Budapest (2018), and DFW to Reykjavik (2018)
• Investment with China Southern to expand Asia Pacific Network

"Analytics"

Analytics amplifies

Analytics is about making an organization do what it usually does, only better

Operations

Research

A Tradition of Analytics

Operations Research - started as an internal group in AA Finance

Sabre created

as legal entity

Most recent milestone...

Integration accomplishments

Bob Crandall

"The Patron Saint of Operations Research"

Laura Freeland

1996

1993

1980s

2000

2013

American Airlines Decision Technologies

Sabre divests from AMR

AA re-establishes

internal OR group

The OR and AA Group Today

Tom Cook

President

Single FOS Partition - SFP

integrating pilot crew management and flight movement systems

40+ analysts from 12 countries, 6 continents, 20 languages

60+ advanced degrees

20 patents and 75+ published articles

Characterized by....

Complexity

Uncertainty

Lots of data

Numerous options

Trade-offs

Big impact

To these problems

Revenue Management

Pricing

Finance

Flight Scheduling

Maintenance and Engineering

Marketing and Sales

Crew Scheduling

Airport Operations

Flight Operations

Customer Experience....

To answer questions like...

What frequency should we fly in a market?

How many spare aircraft parts should we order?

Where should we position them?

How many self-service devices

do we need at an airport?

Apply advanced analytical techniques...

To achieve these goals...

Optimization

Simulation

Probability

Statistics

Forecasting

Artificial Intelligence

Decision Analysis

Data Visualization

Data Mining

Machine Learning...

Increased revenues

Reduced costs

Improved dependability

Improved productivity

Faster cycle time

Improved throughput

Improved customer service

Types of jobs in

What we do

Revenue Management

and deliverables

Resulting in

Better Decisions

Analytical insights

Process improvements

Decision support tools

Recommendations

Impact to AA

Pricing Decisions

Other Airlines

action

Initiate or match

Match with premium

More / less restrictions

Ignore

AA Action

Impact to

Other Airlines

About AA

6,700 daily flights

350 destinations

50 countries

Advanced Analytics at American Airlines

About Us

Analytics at AA

Sample Projects

Analytics Careers at AA

Success Stories

Commercial

Fleet Planning

What type, and how many, aircraft should we buy?

When should we retire aircraft?

Planes - buying, leasing, retiring, configuring

What is the optimal cabin configuration?

Sales and

distribution

Network Planning

Network Design

Airline

Global

Distribution

System

Direct

Gate Planning

Fleet Assignment

What equipment type should we assign to each flight?

How do we attract and retain customers?

demand

capacity

stage length

operating cost

...

Which customers are key

influencers?

Where should we fly, when, how often, with what aircraft?

web analytics

Online

Travel Agency

Brick & Mortar

Travel Agency

Targeted marketing

Predictive attrition and churn modeling

Aircraft Routing

Crew Pairing

How should we plan to route aircraft?

Objectives

Meet maintenance requirements

Ensure dependability

Customer Insights

Personalized offers

Revenue Analysis

How do we measure up?

How is American’s revenue performance versus the competition?

AA

Competitors

Where are specific opportunities to drive a better revenue outcome?

- By Region

- By Market

- By Cabin of Service

- By Season

- By Customer segment

- By Sales channel

How can ancillary products create opportunities to increase revenue and create more customer choices?

Yield Management

Data Strategy

Pricing

How can American leverage new data mining techniques to create a competitive advantage in analytics?

Demand

Forecasting

The number of requests for each fare class

The number of cancellations and boardings

What new techniques in data visualization can enhance analysts’ decision making?

Rules

Segmenting the Market

Air Travel

Demand Curve

Can American use new data sources to enhance demand forecasts and optimizations?

Overbooking

A balancing act

What fares should we publish? With what restrictions?

selling the right product to the right customer at the right time for the right price

Empty

Seats

Denied

Boarding

Fares

What new fare products should we initiate to drive new revenue opportunities?

Competitive fare levels

versus other carriers

Service offered versus other carriers

Market share of each carrier

Length of haul

Existing price points

Fuel Surcharge

Demand / Season (Peak/Off peak)

Year/Year Pricing Trends

Distribution Channel

Each day, AA monitors an average of:

500,000 fares in 14,000 domestic O&D city pairs

Industry total of 5.0 million fares with 200,000 daily changes in AA competitive O&D’s

Domestic fares change 4 times per day, 362 days a year, and 24 times a day for international

What restrictions should apply to each fare product to differentiate customers into market segments?

Inventory

Optimization

Impact to AA

Leveraging changes in the environment to influence the value of a seat for each flight

Pricing Decisions

Other Airlines

action

Initiate or match

Match with premium

More / less restrictions

Ignore

AA Action

demand for tickets

prevailing fares

our capacity

our competitors' capacity

economic conditions

currency fluctuations

Impact to

Other Airlines

Operations

Tech Ops

Airports

Manpower planning

Gate management

Departure control

Connecting bags

Facility layout

Inventory mgmt

Engine removal forecasting

Job shop scheduling

Maint. planning

Aircraft routing

Crew Resources

Cargo

Operations Planning

Revenue management

Logistics

Block time optimization

Ground time estimation

Spare aircraft

Dependability analysis

Airfield operations

Manpower planning

Reserve demand forecasting

Pairing generation

Bid-line generation

Impact of Load Factor on Customer Delay

Flight

Operations Control

There is a difference between a flight-focused operation and a customer-focused operation

Disruption management

Flight-based and customer-based metrics align well when "the sun is shining"

Schoolhouse training

Simulator and instructor scheduling

Trip trading

Reserve assignment

But trade-offs have to be made when it is not

CDI allows us to make decisions about those trade-offs in an objective and consistent manner

We are embedding CDI into our operational decision support tools so we can make Better Decisions for our customers

X

Questions?

Types of disruptions

From The On-Time

Machine to

The On-Time

Customer

Types of jobs in analytics

How to get our attention (or not)

Strong technical skills

optimization

statistics

data science

machine learning

Communication skills

Consulting skills

Self motivated

Delivery focused

Types of interviews we do

When we call or get together....

Typical interview questions

How do we measure success in the operation?

• Captures impact of dependability on customer experience

• A measure of delay to customer's final destination
• Weighted by individual customer attributes
• Accounts for non-linear dis-satisfaction curve associated with customer delay

• Used by day of operation decision support tools