The Divergence of Revenue Management

August 20, 2013

 The sophisticated practice of revenue management remains a key function within any airline organization. Revenue managers have applied data science to ‘big data’ to forecast demand and optimize price since the 1980s. However, over the past decade a dichotomy has presented itself between current revenue management techniques and merchandizing practices such as fare families and ancillary pricing.
Today, airlines are offering a large portfolio of products across any number of channels and touch points. This means the number of merchandizing decisions for an airline to manage for effective retailing has increased exponentially.
Innovations in airline retail offers can deliver upwards of 40% in gross revenues from high margin ancillary opportunities. This is largely across direct channels, which can represent approximately 40% of airline inventories. There is wide agreement across the travel industry that this is just the tip of the iceberg as far as revenues are concerned. And to break through to even higher revenues, industry stakeholders are redefining ancillary revenues as core revenues and look to remove distribution and management barriers for total value retail management.
Remarkably few airlines take a unified retail approach to dynamic pricing and optimization across an airline’s entire product portfolio today. This means significant revenues are being left on the table due to the lack of shopping and pricing optimization for airfare plus all ancillary products, fare families (bundles), subscription products, and other commodity-type items…

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Brian Borg
Head of Airline Retail, Datalex