Strategic Modelling and Business Dynamics: A Feedback Systems Approach

6.4. Strategy and Simulation of Growth Scenarios

The main purpose of the model is to investigate easyJet's $500 million gamble to purchase 12 brand new Boeing 737s. Will it be possible to fill them? A rough calculation suggests the airline needs 1 million fliers if it is to operate 12 fully loaded aircraft – which is a lot of people.^[] What combination of word-of-mouth and marketing will attract this number of potential passengers? How long will it take? What are the risks of price retaliation by rivals? These are good questions to explore using the what-if capability of simulation.

^[] Let's assume each aircraft carries 150 passengers and makes three round-trip flights a day. A fully loaded plane needs 900 passengers each day (150*3*2). A fully loaded fleet of 12 planes needs 10 800 passengers a day, or 3 888 000 passengers each year, which is very nearly 4 million. If we make the further assumption that each potential passenger is likely to fly the available routes twice a year on round-trip flights, then the start-up airline needs to attract a pool of almost 1 million fliers to ensure commercially viable load factors. This rough calculation is typical of the sort of judgemental numerical data required to populate an algebraic model. Perfect accuracy is not essential and often not possible. The best estimates of informed people, specified to order-of-magnitude accuracy (or better), are adequate, drawing on the informal but powerful knowledge base derived from experience.

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