As in many industries, pricing in airlines is often considered a headquarters function, a process that may require detailed customer segmentation, complex demand forecast algorithms and optimisation routines.

For airlines, however, revenue management (RM) has so many linkages to operations that close coordination is mandatory for true optimisation. RM has implications for virtually all passenger interfacing employees; in fact, if operations doesn’t get factored properly in RM decision-making, pricing goals are unlikely to be achieved.

Here are eight reasons why:

1. Flight closing by airport agents  

First of all, RM relies on airport personnel for accurate data. Even with increased automation, ‘closing’ flights and ensuring proper accounting for those onboard, is an operations function that ends up being the basis for RM system forecasts and optimisation. Accurate and timely data, which is dependent on operational processes, is critical to successful RM performance.

2. Overbooking

Overbooking is critically dependent on operations. The ‘cost’ of overbooking is built into the algorithms for determining how much RM should overbook any specific flight. And that ‘cost’ is dependent on efficient management of over sales by airport personnel. Some airlines avoid overbooking completely due to a concern that passengers will prefer an airline that never must inconvenience any passengers at the gate with: ‘Sorry, we don’t have enough seats’. Some airlines, on the other hand, manage overbooking seamlessly with an abundance of passengers volunteering to take a later flight. There is a need for regular communication between RM and operations regarding overbooking procedures – what isn’t working? Both departments should be receiving regular reporting on over sales and the causes of large variances.

3. Ancillary fees 

Pricing departments have become more creative, charging varying amounts for checked vs. carry-on bags, for bags reserved before the flight vs. bag fees paid in advance. Boarding passes may be printed at the airport, potentially for a fee. Fares may include a free drink or video onboard. These all require systems for implementation and disciplined procedures – so airport agents and flight attendants can properly implement and enforce these fares and fees and deliver the extra services that are paid for.

4. Flight changes/standby

RM has ‘expertly’ allocated seats across fare levels by flight but passengers subsequently change their minds or their schedules. As part of the ancillary revolution, change fees have reached $200 and, on some airlines, same-day standby is not permitted. This all sounds good from headquarters -more revenue opportunity! However, dealing with passengers face-to-face can be more challenging. Operations can manage these changes in a way that minimises revenue leakage while maintaining good customer relations – or, mishandled, they can make these fees a series of PR disasters.

5. O&D management 

RM often prioritises certain O&D’s on connect flights based on overall network contribution – we give more inventory to an O&D with strong demand and high revenue.

Read full article at:  Eye for Travel