Born in the airline industry in the mid-1980s, Revenue Management has always been ahead of the curve in a practice that has since spread widely to other sectors. Far from resting on its laurels, the airline industry continues to innovate to maintain its leadership.
Here is an overview of the main MR trends in this cutting-edge sector.
Branded Fares
The pricing structure tends to be generalised around the notion of Branded Fares. This is a range of fares with 3 to 4 price families (Fares Families) offering several fares that can be sold at the same time, around a packaged offer including flexibility and a certain number of options and services: excess baggage, choice of seat, fast check-in, etc. Most of these offers were previously offered as add-ons only. Fare differentials between ranges are generally constant. The challenge is to develop ancillary revenues.
NDC (New Distribution Capability)
This is an ongoing or future project for airlines. The challenges of NDC are multiple: provide customers with more accurate and detailed information on product and service offerings, better control the distribution and associated tariff offers, reduce distribution costs by limiting or even eliminating intermediaries. Important technical challenge.
Personalization of the offer
This is one of the challenges of RM in a better articulation between pricing and operational marketing. Modern MR tools interface and exploit data from web traffic to push more relevant offers and improve conversion rates.
Network optimization
This was one of the weakest areas of forecasting and optimization in airline-specific RMS. New modules have now been developed by some editors, allowing them to forecast better and manage the demand for connections, or the demand expressed on multi-destination routes or turnarounds. This is an important issue for major airlines that operate hubs.
Use of AI
As in other sectors, R&D is active among all MR solution publishers in order to make the most of the available data. It is not only a question of better forecasting demand. It is also about being able to predict changes in purchasing behaviour. For example, the risk of cancellation according to the customer’s profile or propensity to consume additional products.
To conclude, the market solutions are numerous and the level of RM practices is quite mature. The additional revenue and margin points to be found are small but necessary in the face of rising costs, the widespread use of videoconferencing impacting business travel, and environmental awareness (even “airline bashing”), which can weigh on leisure traffic.
A fine example of a sector at the cutting edge that continues to move forward…
Keywords: Airline, Revenue Management, fare structure, Pricing, RMS
