Too early, too quickly: Impact of short-term decisions in fleet renewal programs

In the air transport industry, decisions are made based on perceptions and predictions. Airlines order aircrafts when they believe the conditions to upgrade their fleet are appropriate in terms of profitability and market opportunities. However, the financial performance of an airline can be easily affected by several variables. Many types of delays are decisive in the income and expense structure of the organization. Fleet renewal, for instance, is a very lengthy process, since deliveries usually take five years from the date the order is placed. This paper uses System Dynamics to evaluate the performance of different strategies concerning fleet renewal in a commercial airline, taking into account the complex interdependence between variables and the delays involved in the process. The simulation model is absolutely based on real information retrieved from databases of aviation authorities and actual airlines in Colombia.