What is Airline Revenue Management?
Revenue management is about getting the highest possible profit from the market by applying dynamic pricing and Inventory tools. Starting in the early eighties revenue management became a critical tool for airline business and later an accepted discipline that increases revenue in other industries such as, car rental, cruise line, railroad, and television broadcast. It is widely used by the airline industry in order to maximize their revenues by pricing each segment and to insure the competition advantage.
In the airline industry the main objective is to predict the market demand on each flight/date, to meet the costumer's willingness to pay at a certain time and to insure the highest possible load factor. These goals can't be fulfilled without an enormous statistical data and complete overview of competitor actions. |
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The need for pricing and availability
The prerequisite for the revenue management philosophy is changing. Moving from a segment pricing model to pricing with less conditions is challenging the way airlines perform their seat availability. The competition is increasing on all markets and it's more than ever important to generate "just a little more revenue" on every flight.
Today, all airlines have implemented some type of pricing methodology. Some airlines have employed analysts to examine the market situation and to attempt to juggle the mix of full fare and discount availability. Still others have implemented simple spreadsheet approaches to analyzing flight and price performance.
The ultimate benefit of revenue management and correct pricing is increased revenue. Each flight departure is managed to insure that it generates the maximum possible revenue from the ideal mix of both high and low yield passengers.
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