USA: +1 508 290 1604 
Sign in
Case –QATAR AIRWAYSUPGRADES ITS FLEET WITH THE 777X
Qatar Airways is the national carrier of Qatar, one of the small, oil-rich states on the Persian Gulf. It operates from Hamad International Airport in Doha. The last several years have seen an explosive growth of new airlines emerging from this corner of the Middle East, notably Emirates and Etihad. Their advantages include:
- Government support (or outright subsidies, sometimes indirectly, for example- by providing airport facilities)
- Lower cost operations
- New aircraft featuring better fuel efficiency and upgraded passenger amenities
- Strategic hubs that offer excellent international connections between the huge air travel markets of West Europe and Asia, South Pacific and Africa
Qatar Airways 777-300ER
So, it is entirely predictable that Qatar- with an expansionist market strategy- seeks to be an early buyer of new aircraft designs with further improvements in fuel efficiency. As of 2015, Qatar hasdorder commitments for 340 additional aircraft, including 100 of Boeing’s newest 777X (plus additional earlier generation 777s from previous orders). This updated design is not scheduled for commercial service until 2022 (after a one plus year delay).
Each aircraft is expected to cost about $200 million, and Qatar will be a major operator of this aircraft type. In order to best balance the addition of new aircraft entering service with passenger demand, the contract calls for delivery of one plane at the beginning (i.e. day one) of each calendar quarter for the first two years as of Jan, 2022 and accelerated deliveries- to be determined- thereafter.
The management team decided to assess the economics of the new aircraft by studying Capacity performance, Financial metrics and Passenger acceptance. For Capacity, the industry Utilization measure is “Load Factor” or % of Available Seats Occupied. While a full plane might be economically attractive, Qatarfelt that its service suffered at Load Factors > 85%, and therefore planned on a 15% cushion as ideal. The notion of efficiency of Capacity is not really relevant, since an available seat between point A to B cannot perform any better than another seat between these points. (Also, for purposes of this analysis, we will not consider the impact of “free” travel through frequent flyer awards or employee benefits.)
Capacity
Boeing’s 777X is an updated design of the most popular, two-engine long haul jet in the world. New technologies of composite materials (first introduced on the 787 Dreamliner), new wing design, upgraded electronics, and new generation engines provide more capacity, lower costs per available seat-mile, and symbolized the image that Qatar sought as its competitive advantage. In order to simplify planning and analysis, Qatar had not yet selected it final seat configuration for Economy, Business, andFirst Class cabins – there was no “economy plus”, a trend growing among U.S. carriers due to the increasingly downgraded conditions of coach travel. In fact, Qatar offered a Coach product that equaled or exceeded “economy plus” of most U.S. and European competitors. Since the selection of seating configuration and interior design specifics could be delayed until 12 months prior to delivery, the carrier prepared Load Factor analysis based on planned, overall seating for 400 passengers.
(Instructor Comment: Interestingly, despite highly regarded in-flight service, Qatar has not chosen to “brand” its cabins as many regional competitors- such as Etihad- do.)
Based on commitments from Boeing, Qatarbuilt its planning model based on revenue service for the first aircraft as of January, 2022 (though actual delivery was scheduled 2 -3 months earlier to allow for delay and employee training). Of course, the larger challenge was to assess passenger growth five years forwardwhen the order was first placed. The management team felt that regardless of actual routes or flight frequency, at this very early stage the best forecast of passenger demand could not be broken down by trip detail, so each aircraft was treated as a single unit of available seats and a forecast of how many would be filled. This estimate/average would be extrapolated across ALL flight segments for the month. The underlying assumption was that any actual combination of itineraries and flights would approximate this same average for one 777X over all its actual flying time for each in-service month.
The starting point for revenue service of January 2022 was expected to be an average load of 300 passengers. There was no attempt to breakdown the passenger count by class of service. Also, the expectation was that this passenger count would grow by 10% a month for the first four and last four months of every year.For the middle four months of peak summer travel, the estimate for passenger growth was 20%. (Hint: The passenger count is per aircraft independent of the number of available seats. Also, do not apply any additional growth factor to the very first month of operation- Jan 2022.)This ambitious growth projection can be explained by the experience of Qatar’s biggest competitor- Emirates. Emirates had over-committed to the jumbo Airbus 380, so it increasingly became a ferry service for guest workers and a partner to holiday tour groups, which risked eroding the loyalty of its premium passengers.Qatar anticipated winning business from Emirates in addition to organic growth of air travel in general.
The Action Plan
Management was committed to maintaining the service image of Qatar Airways on its existing fleet during the transition years to the new generation 777X. So, Qatar decided to completely re-furbish its existing 777 fleet of 37 aircraft. The company was owned by members of the Royal family of Qatar and the government itself was a major investor. This was structured as a holding company that acted as an umbrella for various travel related, but independent companies. One such affiliate was Qatar Maintenance (QM) that offered full-service capabilities at a dedicated hangar on the premises of the Hamad International airport. The independence of these companies meant that QM could solicit business from other airlines and, on the other hand, Qatar was not obligated to keep its own maintenance requirements in-house (although it was expected to give this affiliate an option to bid on all such work).
The following Table represented a first pass by QM to solicit the contract for the 777 Upgrade program. At this early stage of the bid process, the focus was on the time lines, which seemed to be the bigger concern for the airline than costs.
Table 1 – Cabin Upgrade
| Activity | Description | Predecessor | Time
(Weeks) |
| A | Engineering structural analysis | – | 12 |
| B | Preliminary Configuration & Design | – | 9 |
| C | Select seat configuration and design | B | 12 |
| D | Vendor Certification for Airworthiness | B | 10 |
| E | Finalize specs on kitchen facilities | B | 24 |
| F | Coordinate plan with Boeing & suppliers | A | 10 |
| G | Finalize vendor, pricing, specs for design | C | 24 |
| H | Assemble materials for installation | D | 27 |
| I | FAA certification | A | 15 |
| J | Installation on first aircraft | E, G, H | 4 |
| K | Air trial (Qatar to top 5 markets) | F, I, J | 6 |
The Passenger Experience
Qatar focused its operations on customer service and providing an exceptional flying experience, even inEconomy. This emphasized all aspects of travel- check in, boarding procedures, drink and meal service, and reliable, timely operations. When the Customer Service department conducted surveys in the United States upon its earlier entry into this market, they were surprised by the priorities American flyers focus on. After years of poor service in cramped planes, these travel inconveniences almost became an accepted norm. But the one service area that passengers specifically cited as an irritant was long lines at the check-in counter.
Much of this reflected mandatory security and FAA requirements to have fairly extensive information about each international traveler. Also, some passengers were interlining with other carriers and took more time with questions about baggage handling and how to connect at Doha. Qatar’s route network for North America was developed to offer non-stop flights into the well-located hub at Doha for connections throughout Asia. Since many Qatar flyers had little or no experience on this airline, the check in process at security conscious U.S. airports could be time-consuming. In order to control the first experience customers would have with the airline, which was usually the check-in for the flight, Qatar insisted on staffing with its own employees rather than contract services offered at most international airports throughout the world.
Qatar envisioned its first 777X to enter service from Washington D.C. (Dulles Airport) to Qatar. There would be only one flight each day in each direction, which simplified planning. The recent upgrade to Dulles Airport’s International Terminal provided ample space with no constraint on accommodating passenger lines or other space requirements. The service focus meant that QatarOVERstaffed to handle premium cabin customers. The planning department had extensive experience staffing for these frequent flyers, but the widely varying requirements of Coach passengers were a far larger challenge.
Qatar planners started with an arbitrary assumption that each flight from Dulles of the new 777X would have no more than 300 coach passengers. Research and prior experience indicated that 50% of these coach passengers would check in at originating airports elsewhere in North America, requiring noadditional check-in services at Dulles. Also, an estimated, additional 50 passengers would handle requirements online or have no checked bags, thereby needing no check-in services either.
For the remaining population that required check-in services, experience elsewhere suggested that passenger arrivals for check in would average 90 per hour following a Poisson distribution. Service requirements for these customers varied widely but were expected to average an estimated 4 minutes each, approximating an Exponential distribution.
|
ASSIGNMENT
Page 1- Cover
ASSIGNMENT & FORMAT
Page 5- Exhibit: Customer Service
Qatar hired a research firm to quantify the time tolerance of passengers waiting to check-in.A target Service Level established was an average Waiting Time of no more than 22 minutes, which was deemed a reasonable tradeoff between customer expectations and the cost of providing service.
Prepare a Queuing analysis of the process, providing a printout of the solution with the appropriate number of customer service agents highlighted. (Hint: Start at the Home Page of the Q2010.xlsx file and choose the appropriate model by clicking on the bottom, labeled “Sheet”. Also, remember to print ONLY page 1 of the model.) (3 points)
Note that point values include consideration for presentation (format, organization, clarity) in addition to content accuracy.
