Airline Revenue

Perspectivas

Have you flown off course with your approach to revenue management?

Opportunities for the airline and transport sectors

Airlines have invested heavily in developing sophisticated systems for forecasting demand and managing inventory and pricing. But technology is only an enabler of a broader strategy.

Executive summary

Airlines are often held up as the epitome of best practice in pricing and revenue management. The industry has invested heavily in developing sophisticated systems for forecasting demand, managing the availability of inventory, and monitoring and responding to competitors’ prices in the market. This serves them well in the search for competitive advantage and higher yields.

But technology – no matter how good – is only an enabler of a broader strategy. It is an extension of the skills that reside in the flight analysts, pricing teams and commercial executives who must deliver revenue outcomes.

While there is no doubt that technology has helped enable pricing and revenue management teams to respond more quickly, it is likely that the value of these historic or planned investments has been, or will be, under-realized. The investment needs first to be in taking a more holistic view of pricing and revenue management, in which airlines step back to consider their commercial strategies and how these translate into the strategies, architecture and operations of the pricing and revenue management functions.

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There is a single question that an airline needs to be able to answer when thinking about its pricing and revenue management function: “What is the airline’s overarching commercial strategy and how does this frame the actions required to sustain and/or improve revenue and yields?”

This report discusses the four pillars of an airline’s commercial strategy:

Pillar 1: Does your organization have an explicit commercial strategy that can be translated into clear and meaningful actions for pricing and revenue management?

Pillar 2: Do the processes that underpin your pricing, inventory management and demand forecasting enable revenue organization?

Pillar 3: Have you balanced the investment in skills and capabilities of your workforce to keep up with your technical systems?

Pillar 4: Are KPIs and accountabilities aligned to commercial strategy to enable revenue management teams to focus on profitability?

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