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BCG’s Zero-Based Scaling (ZBS) Tool for Airlines

As air travel markets reopen and passengers begin returning to the skies, airline network teams will face truly unprecedented challenges. That’s where BCG’s Zero-Based Scaling tool can help.

As we look to the future, airlines will have to forecast demand without the benefit of historical data and make operational plans that will likely need to be changed many times before execution. What’s more, they will have to anticipate the behavior of competitors and overhaul networks under conditions of great uncertainty and volatility.

In effect, airlines will need to redesign themselves from scratch to win in the new reality—and they must start now. Because only digital tools will suffice for this task, BCG released Zero-Based Scaling (ZBS) to help network teams build the necessary capabilities. This new decision support tool has two modules:

  • Zero-Based Demand (ZBD) is a demand-forecasting tool based on advanced machine-learning models. It works with external signals—such as web traffic, consumer sentiment, and government travel restrictions—as well as with company data.
  • Zero-Based Network (ZBN) is a network optimization model that optimizes for free cash flow across the network (instead of by route) while taking operational feasibility into account. It is powered by a groundbreaking new solver engine, based on reinforcement learning, that enables users to resolve in minutes problems that once took days or were not solvable at all. This fast run time, in turn, enables new ways of working for network teams, using much more dynamic and interactive collaboration models.

What ZBS Does

ZBS addresses four critical challenges to network redesign:

  • Uncertain demand combined with legacy demand models created on the basis of historical data
  • Challenging competitor and network effects, given that feeder routes open at different times and competitor responses are unknown
  • The difficulty of assessing route profitability because of sensitivity to feeder routes and the need for a granular view of near-term direct operating costs
  • Constantly changing demand and competitor responses, which require the development of operationally feasible schedules on a timeline that is faster than normal

To help airlines address these challenges, ZBD develops origin and destination (O&D) demand scenarios on the basis of consumer sentiment and the ability to fly. It then translates O&D level demand into airline-specific demand. ZBN assesses O&D and route-level profitability to dynamically create and adjust the network and maximize profitability. Together, these two modules of ZBS provide three key benefits:

  • The ability to capture more demand
  • The ability to adjust operations to fit expected demand
  • An operational agility to capture dynamic changes

How ZBS Works

ZBS uses advanced AI and optimization techniques similar in sophistication to the suite of cutting-edge tools that BCG has implemented in airline operations through the firm’s partnership with KLM. Created by BCG developers with deep expertise and experience in these areas, ZBS builds on the firm’s already successful digital airline ops tools and is currently being implemented by three airlines with high impact.

BCG can implement ZBS remotely, given current travel restrictions, with a clear and proven work plan that requires only limited participation from your teams.

Our digital airline team is looking forward to engaging with network teams that face these challenges. Please contact Fernando Bosch to learn more.

 

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