A thesis submitted in partial fulfillment of the requirements for the degree of Master of Engineering. School of Engineering and Technology

Thesis (M.Eng.) - Asian Institute of Technology, 1981

An air transportation network of Nepal was designed as an aid to a public sector airline company whose objective is to maximize customer satisfaction under -the company's budgetary restraint. The study was done in two parts. First, using the gravity model concept, a Demand Forecasting Model (DFM) was developed to forecast the intercity air traffic demand of the country. The model with traffic generating factor, intercity distance, market proximity factor, administrative factor, tourist movement factor and road connectivity factor was found to significantly explain 85% of the variation of intercity air traffic of Nepal. Secondly, an optimization model, the Network Design Model (NDM), was formulated to design the air transportation network, and a heuristic algorithm was developed to solve the Network Design Model. An air transportation network of Nepal which satisfies all the demand forecast by DFM, was designed using the heuristic algorithm of NDM. This network appeared to be very expensive with respect to the existing budget. It was concluded that the forecast air traffic demand was higher than in reality, due to the possibility of the "multiflow" sample used to estimate parameters of the Demand Forecasting Model. The Network Design Model does not consider the very important fact that the deletion of a link from a Network would reduce air traffic demand on that particular link. In addition to this, the optimum solution of the NDM cannot be computed, and one has to depend solely on the heuristic solution. It was concluded that the Network Design Model is not useful at this stage and further research is necessary in this field . Finally, an air transportation network of Nepal was designed with direct links to satisfy 80% of the forecast intercity air traffic demand.