Vose SoftwareModelChoice decision tree · Aviation
Airline New Route Decision
Launch a new route with a daily wide-body, a daily narrow-body, a test three times a week, or not at all?
From the model’s decision tree
Best first decision: Daily Narrow-Body
The expected value of each first option when every later decision is also made well (the tree rolled back).
| First decision | Expected value | |
|---|---|---|
| Daily Wide-Body Service | −$2,130,000 | |
| Daily Narrow-Body | $3,650,000 | ✔ best |
| 3x Weekly (Test) | $2,040,000 | |
| Don't Launch Route | $0 |
| Measure | Value |
|---|---|
| Expected value of the best strategy | $3,650,000 |
| Chance of a loss on the best strategy | 25.0% |
| Best outcome on the best strategy | $12,000,000 |
| Worst outcome on the best strategy | −$11,000,000 |
S-curve (cumulative probability) of Daily Narrow-Body from the saved simulation.
The decision
A regional airline is considering launching service on a new long-haul route between two growing cities. The airline must choose the scale of commitment: full daily service with a wide-body aircraft, daily narrow-body service, or a 3x weekly test route to gauge demand before scaling up.
Objective
Maximize expected 3-year profit. This model shows the value of a test-and-learn approach vs. full commitment, with fuel price as an additional risk layer.
The options
- Option 1: Daily Wide-Body Service ($18M startup)
Maximum capacity, premium cabin. High upside but expensive if demand is weak. If demand is low, choose: downgrade aircraft, add codeshare partner, or cancel. Fuel price is a major variable on long-haul routes.
- Option 2: Daily Narrow-Body ($8M startup)
Lower risk, proven demand needed. Limited premium revenue but lower breakeven.
- Option 3: 3x Weekly Test Route ($4M startup)
Lowest commitment. Observe demand for 6 months, then decide whether to scale to daily service or stay at reduced frequency.
The decision tree
The tree has 3 decisions, 8 chance events and 22 outcomes. The best path is open: at every decision the best choice is marked, and the expected value beside each branch counts every cash flow from the start. Open any other branch to see what follows it.
DecisionChance event+$ cash flow on the branch
Daily Wide-Body Service −$18,000,000expected −$2,130,000
Chance: Demand Level (Wide-Body)20% High Demandexpected $16,750,000
Chance: Fuel Price (High Demand)- 30% Low Fuel +$45,000,000payoff $27,000,000
- 45% Normal Fuel +$35,000,000payoff $17,000,000
- 25% High Fuel +$22,000,000payoff $4,000,000
45% Medium Demandexpected −$400,000
Chance: Fuel Price (Medium Demand)- 30% Low Fuel +$25,000,000payoff $7,000,000
- 45% Normal Fuel +$18,000,000payoff $0
- 25% High Fuel +$8,000,000payoff −$10,000,000
25% Low Demandexpected −$12,000,000
Decision: Low Demand ResponseDowngrade to Narrow-Body −$2,000,000expected −$14,000,000
Chance: Downgrades Outcome- 50% Recovers +$10,000,000payoff −$10,000,000
- 50% Still Weak +$2,000,000payoff −$18,000,000
Add Codeshare Partnerexpected −$12,000,000 ✔ best
Chance: Codeshare Outcome- 60% Fills Seats +$8,000,000payoff −$10,000,000
- 40% Marginal Help +$3,000,000payoff −$15,000,000
- Cancel Route −$2,000,000payoff −$20,000,000
- 10% Route Fails −$5,000,000payoff −$23,000,000
Daily Narrow-Body −$8,000,000expected $3,650,000 ✔ best
Chance: Demand Level (Narrow-Body)- 25% High Demand +$20,000,000payoff $12,000,000
- 50% Medium Demand +$12,000,000payoff $4,000,000
- 20% Low Demand +$4,000,000payoff −$4,000,000
- 5% Route Fails −$3,000,000payoff −$11,000,000
3x Weekly (Test) −$4,000,000expected $2,040,000
Chance: Test Route Demand30% Strong Demand Signalexpected $7,800,000
Decision: Scale Up DecisionUpgrade to Daily −$6,000,000expected $7,800,000 ✔ best
Chance: Daily Service Outcome- 65% Growth Continues +$22,000,000payoff $12,000,000
- 35% Plateaus +$10,000,000payoff $0
- Stay 3x Weekly +$8,000,000payoff $4,000,000
- 45% Moderate Signal +$5,000,000payoff $1,000,000
- 25% Weak Signal +$1,000,000payoff −$3,000,000
- Don't Launch Routepayoff $0
Change the numbers. Open the workbook with ModelChoice, change a probability or a cost in the tree, and the best decision updates at once.
Key assumptions
| Assumption | Value | Notes |
|---|---|---|
| Wide-Body Startup Cost | $18,000,000 | Aircraft lease, crew, marketing, slots |
| Narrow-Body Startup Cost | $8,000,000 | Smaller aircraft, same route |
| Test Route Cost | $4,000,000 | 3 flights/week, 6 month trial |
| Upgrade Cost (Test to Daily) | $6,000,000 | Additional capacity after test |
| Downgrade Cost | $2,000,000 | Fleet swap, schedule changes |
| Wide-Body High Demand Revenue | $45M | 20% probability, low fuel scenario |
| Route Failure Probability | 5-10% | Higher for wide-body due to overcapacity |
| Fuel Price Impact | varies | High fuel reduces margins by 30-50% |
The figures are illustrative: the companies and numbers are invented for teaching.
Try it in ModelChoice
- Strategy Table. Compare all route strategies including test-then-upgrade
- Sensitivity Analysis. How sensitive is wide-body to fuel price and demand?
- Risk Profile. Is the test route's lower variance worth the lower expected return?
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Further reading
Download the workbook and open it with ModelChoice. The free trial opens every example.
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An illustrative example: the figures are invented for teaching. Last updated 9 October 2026.