People Express Management Flight Simulator

- Developed by Prof John Sterman, MIT using STELLA

based on the true story of People Express Airlines

- It functions like aircraft simulator

- It allows player to take command of firm and pilot it from

startup to success

- Player can make strategic and operational decisions and

receive feedback at each simulated time period.

- It is comprised of 3 parts : Microworld (simulation

model), Information System and Simulator Control.
 Microworld

Competitors Customers

• Competitor Fares - Demand and Market Share

• Competitor Service - Perception of Service
Scope and Quality
• Competitor Quality - Reaction to Relative Fares
- Response to Marketing

People Express

Financial
• Fares
• Balance Sheet
• Income Statement
• Cash Flow, External
Financing
• Stock Price

Fleet Service
• Aircraft Acquisition - Hiring
• Capacity - Employees, Turnover
• Passengers Flown - Productivity of CSM
• Load Factor - Quality of Service
• Fleet Operating - Cost of Service
Costs
Information System

- Reports

• Breakeven Analysis - Breakeven revenues, load

factor, passengers

• Capacity and Load - Fleet size and operating costs,

load information

• Employment - Employees, turnover, productivity

• Financial Statements - Balance sheet, income

statement, cash flow

• Market Research - Demand, competitor information

• Stock Price and Earning Reports - Stock price,

earnings per share, cumulative profits

• Summary Report - Overview of firm, market and

competitors

- Graphs
Simulator Controls

• Each game lasts up to 10 years. Five decisions for each quarter :

1. Aircraft How many aircraft to add Eg 0 means 0 aircraft for next quarter.
Acquisition to the fleet Negative value is for selling

2. Hiring How many people to hire Eg 9 means 9 person to be hired for

next quarter.

3. Marketing What fraction of Eg 0.1 means 10% of revenues allocated

revenues for marketing for marketing for next quarter.

4. Fares What average fare to Eg 0.09 means $0.09/seat-mile.

charge Competitors’ ave fare = $0.16/seat-mile.

5. Target Scope What services to offer Eg 0.6 means no frills service. Value of
of Service 1.0 is full service.

• Click “Step” after decisions are entered.

• Click any report or graph to view status
• Click “Explore, Go Back Once” if change to previous decision is to be made. “Go
Back Once” as many periods as you wish. Click “Explore, Restart” if new game is
to be played.
• Click “File, Save Exploration” if game results are to be saved.
Base Case Strategy

1. Lease 3 little aircraft for a few years until enough money is made to buy a plane
of its own.

2. This means

• no addition to the fleet

• no addition to staff but just to replace turnover to maintain staff level of 165

• low prices

• moderately aggressive marketing

3. Continue with this strategy till 4th quarter of 1983.

4. Review the base case strategy using the Graphs feature by clicking on the name
of the graph
DEVELOPING YOUR OWN STRATEGY

1. Select a strategy before playing.

2. Play several explorations quickly rather than one slow exploration.

3. Stick to your strategy in each exploration.

4. Vary one aspect of your strategy in the next exploration.

5. First exploration :

• Keep prices low = $0.09/seat-mile

• Target scope of service
• Expand fleet
• Hiring people
• Market
= 0.6
= aggressively at 100%/year
= at comparable rate
= aggressively at 12% then
10%

6. Next exploration : Vary one of the factors.

7. Evaluate the role of factor you varied to understand the dynamics of firm and
market.