29 January 2009

Game Update

Here's a bit of an update on that airline management simulation I'm participating against 350 competitors...

I've played it for almost ten days now in real time. The game time (25 real time minutes per game day) runs from June 1992 to June 2005, and right now it's December 1994. My airline, Mercy Airlines, was a relative latecomer, being founded in May 1993, but between my good decisions and some luck, Mercy is doing extremely well.

I had entered 1994 with 9 mostly junk planes, but now I have a nice fleet of 30 mostly new planes, with another 12 or so on order; newer planes cost less to run, so I'm saving a bundle. My tactic of filling in my competitors' gaps paid off very well, and I have monopolies on many routes, enhancing my profits. With the profits I now have, I am able to buy more new and nearly-new planes to expand my empire farther; now, Mercy planes go as far as Orlando, over 7,000 miles away from my Seoul Incheon hub.

And most importantly, Sarah will love the fact that I am paying my staff very well. The HR department listens to the unions, automatically overhires staff by 6%, and gives them frequent pay raises. And the good thing is that due to my good management and luck, I can actually afford this. My staff is running at 100% morale and 103% efficiency; combined with my newer planes, this gives Mercy a better public image and allows me to charge higher fares than badly run competitors.

I'm even fortunate in that I was invited to join an airline alliance - the best one, in fact. In this game, alliances boost my passenger volume by 5% or so, while costing me 0.8% of my ticket revenues. My alliance has many well-funded, friendly large members, and it works well as a team to dominate various routes and drive out competing alliances. Having the support of a good alliance is boosting Mercy even more.

I'm glad that I've been getting a good look at this simplified version of the airline economics. I now see what makes a great airline great - and what makes many airlines, including formerly great ones, falter under cut-rate leadership. Sarah's airline, United, certainly falls into the latter category, as it once was an innovator but now is so battered that it hasn't bought a new plane in years. Sure, as long as Sarah puts on a good face, United will continue to fly, but there is only a limit as to how long Sarah can tolerate worsening working conditions and cut-rate management.

I'll continue to observe the industry in the game, as I continue into the game and grow Mercy even more. (Currently, I am ordering two Boeing 767s every month - which will allow me to start really flying those high-profit routes to Europe, Australia, and the Americas, but there is a 2 1/2-year wait for delivery.) And hopefully with a better understanding of the airline economics, I can give Sarah, and her stint at United, a more realistic flavor.

Unfortunately, the game is so addictive that I am running out of time to write! I still need to work on my dinner interviews with Sarah and Kirsten, one in Hong Kong and one in Los Angeles...

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