Maximize Your Revenue On Each And Every Flight
Growing your customer traffic is one lever, but it is not enough to ensure that you are maximizing your revenue (Growing Customer Traffic Business Issue). Having the right customers at the right price is just as important. Are your flights as profitable as they could be?
According to IATA, from 1970 to 2010 the airline industry overall generated just a 0.1 percent profit margin1. For 2012, IATA recently estimated that global airline revenues would be approximately US$633 billion, with a profit of US$3 billion equating to a 0.5 percent net margin2.
With small changes in passenger profitability, fuel, crew costs and other related variables resulting in significant impacts on profitability, airlines are looking for ways to fill each flight with the right customers to ensure additional revenue and profitability.
There are three areas you can examine today to help you maximize the revenue gained from each flight.
- Pricing – Using competitive price evaluation techniques to ensure you are not missing pricing opportunities or giving away market share to competitors.
- Revenue Management – Using more advanced forecasting techniques to better manage availability and pricing.
- Revenue Integrity – Maintain cleaner inventory to maximize the possible revenue per flight.
Learn more about the solutions available to help you increase your revenue.
1 IATA Vision 2050 Report
2 IATA March 2012 Industry Outlook
Three Ways To Manage Your Growth
What are the specific opportunities that could take your airline’s revenue to the next level?
The three areas below can have a big impact on your total revenue. In addition to increasing customer traffic, having the right customers at the right price is critical in growing total revenue and profitability.
- Competitive Price Evaluation – Tailor your pricing based on market segment, market strength, and product comparison to achieve an optimal pricing strategy.
- Customer Choice-based Revenue Management – Further optimize forecasting accuracy by modeling customer choice behavior in order to better estimate customer’s willingness to pay.
- Real-time Revenue Integrity – Maintain clean inventory at all times to maximize the possible revenue per flight.
Competitive Price Evaluation
Optimal pricing does not always mean that you are looking for the highest paying customer. There are many instances where you can fill empty seats on a lower load factor flight with lower paying customers yet still drive overall profitability. A closer review of your pricing policies can help determine what opportunities exist for your airline to improve revenue and profitability.
One of the foundational elements to conducting more extensive competitive price evaluation is to have access to your competitor's fares. Using a solution such as Sabre® AirVision™ Fares Manager to more easily collect and analyze competitor fares is a critical element towards optimizing your pricing for profitability.
There are then three competitive pricing factors that should be considered:
Competitor – How do my competitors react when a pricing change happens? This will vary by market, but understanding how aggressive they are to pricing changes will provide visibility into how they may respond to future pricing changes.
Customer – What are the customer segments I am trying to target? Understanding which customer segments you want to target will help provide direction on how to best respond to competitive pricing changes.
Market – The Sabre Airline Solutions® consulting team has expertise in pricing department organizational design, interline and codeshare pricing, fare class realignment, as well as key pricing strategies and tactics.
Customer Choice-based Revenue Management
Accurately forecasting and optimizing passenger demand is a key element towards booking a more profitable passenger and achieving higher flight profitability. If done well, a customer choice-based revenue management process can lead to incremental revenue gains of 3% - 4% over traditional revenue management techniques.
The challenge is that there are multiple choices available to the customer during the booking process, which makes replicating the decision making process very difficult. Just as Origin and Destination (O&D) and low cost carriers have altered how revenue management is performed within an airline, a new process we call choice-based revenue management will be the next major advancement for the industry.
As customers are shopping, they are presented with a number of alternatives. What time is the departure and arrival? How many connections are made? What is the price currently being offered? By being able to accurately predict customer behavior based on these and other variables, airlines are able to more accurately forecast their demand.
Learn how you can maximize your revenue by leveraging this revolutionary new technology inside Sabre® AirVision™ Revenue Manager.
Real-time Revenue Integrity
Revenue integrity is the business process for managing revenue leakage. It involves reducing the disparity between real and “bad” bookings from unintentional, accidental and deliberate booking rule abuse. The challenge for airlines is how to find and correct these problem bookings accurately and quickly.
You can grow revenue by increasing seat availability at the peak of demand by using the only real-time revenue integrity solution, Sabre® AirVision™ Revenue Integrity. The real-time processing of this solution identifies bad bookings as they occur, ensuring they can be released back to inventory sooner while demand is still high and they can be repurchased.
Learn how you can grow incremental revenue by maintaining clean inventory at all times with Revenue Integrity.
Sabre Airline Solutions® partnered with Columbia University to evaluate the incremental revenue gains from the choice-based revenue management models over the other popular modeling techniques used in the marketplace.
Identify the incremental revenue benefit from choice-based O&D revenue management models over the popular techniques currently being used in the marketplace.
We simulated over 3000 scenarios to evaluate model performance under numerous market conditions.
- Choice-based models showed an incremental 0.75% revenue gain over the next best technique being used in practice today.
- The revenue gain came from accurately protecting the higher fare classes based on the sell-up and authorizations of the lower fare classes.
Get Started Today
We can help you drive revenue and take your airline to the next level. Contact us for an assessment of how you can better grow your airline's revenue.
Tel: +1 682 605 6750
Tel: +65 6215 9500
Europe, Middle East, Africa
Tel: +44 208 538 8539
Learn new ways to drive and manage your revenue growth.