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Exam (elaborations) TRL3703 (TRL3703) EXAM PACK MAYJUNE 2022
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TRL3703EXAM PACK
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Question 1
1.1 The importance of demand forecasting in the aviation industry
Forecasting is crucial to businesses because it enables them to make well-informed
business decisions and develop data-driven plans. It enables businesses to
determine the strategic allocation of resources, the necessity for corrective actions,
or the need to change present strategies to reflect new circumstances. Companies
must always plan ahead to guarantee they are prepared to meet future needs and
problems, and the aviation industry is no exception, especially during the current
pandemic crisis recession. The coronavirus epidemic, possibly the world's worst
pandemic in the past century, marked the year 2020. COVID-19 presented an
extraordinary challenge to the global airline industry, which will never be the same
after this tragedy. Many things have changed, and the huge decline in demand for
passenger air transportation (and, to a lesser extent, cargo air transport) as a result
of containment measures threatens the future of many businesses. The purpose of
demand forecasting is to assist businesses in predicting the future demand for their
products or services. This assists with various business issues, including financial
planning, pricing policy, marketing planning, capacity planning, future expansion,
manpower planning, and capital expenditures. To better emphasize the significance
of demand forecasting, we will list a few of the benefits firms can gain from demand
forecasting.
Budget construction
Every firm requires a detailed budget to pay all of its expenses while maintaining fair
profit margins. With demand forecasting, firms may reduce potential risks, enabling
them to make more effective financial decisions that influence their profit margins
and cash flow. Additionally, they can have a better understanding of how to allocate
, their resources. Among demand forecasting examples in aviation that assist with
budget construction, we could mention an airline studying the sales trend during a
peak period such as summer and planning how much they would allocate for leasing
additional aircraft to cover for a peak period or to cover for the additional staff they
will require in the same period based on the information provided by the demand
forecast.
Improving supply chain management
By examining past data, organizations may verify that their supply chain can meet
demand projections and reduce risk in the event of an unforeseen event. They can
improve their manufacturing procedures and inventory planning to match those of
their suppliers. In addition, market research enables firms to identify supply chain
options that may be better fit to their demand projection, hence enhancing supply
chain operations. This could be more challenging for airlines, as the majority of them
rely on two major aircraft suppliers, Airbus and Boeing. As discussed previously,
airlines can also lease aircraft to meet demand. If their demand prediction is
exceptionally accurate, they could negotiate better contracts.
Pricing strategy development
The capacity to develop strategic and operational strategies is not the only benefit of
demand forecasting. It also enables firms to analyze historical sales data to
determine how to price items and services based on demand. This is essential for
corporate growth, as demand forecasting enables businesses to better comprehend
the market and formulate a more competitive pricing plan. Through market research
and demand forecasting, low-cost airlines have devised innovative pricing schemes
based on their passengers' behavior. They are aware that, during off-season, they
may be very competitive by giving reduced costs and generating additional revenue
through additional services such as extra luggage, better seating, and car rental
sales.
1.2 The ways in which aviation industries can better prepare for such
unforeseeable ordeals like Coronavirus
The COVID-19 incident has reaffirmed some of the justifications for aviation industry
support that were previously used. Specifically, liquidity issues, rising debt loads, and
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