Revenue Management Training - In-house or Distance Learning?

As a revenue management training and consulting company, we offer a variety of options when it comes to choosing training. While still fairly new, the development of computer-based training modules which are entertaining, educational, relevant and interactive has progressed dramatically over the past several years. Content has become more refined, and the interface more familiar and user friendly.

In comparing web-based learning to the traditional classroom model, a debate can be made favoring either learning model.

At first glance, it would appear that the Web-Based Learning Model, on a student by student basis, simply costs less. If we consider twelve students in need of revenue management certification training, we can expect to pay a minimum of $1,500.00 per student in tuition, to that, add travel, five days of lodging and meals - we can clearly see how the costs can quickly add up. And in-company training, presented by an outside company – can easily cost $25,000.00.

Web-based training often sells for as little as $250 per student, involves no travel, little or no “down time” on the part of the trainee, while their learning progress can often be effortlessly monitored by supervisors, administrators and even the students themselves.

Both options can result in a comprehension certificate. Both methods demonstrate to students the basic concepts and theories. Both methods ought to provide validated student evaluation and both
methods should produce qualified and quantified results.

I would be interested to hear your thoughts about revenue management training.

Train for revenue management system implementation

Idea and excerpts from "Train for ERP Implementation" by Jeff Carpenter, President and CEO, Caveo Learning, published in Training Magazine, Sept-Oct. 2011

Revenue management systems can integrate internal and external data across an entire organization, embracing everything from finance and accounting to customer reservations and automating all activity within a common software application.

Implementing a system like this is often a complex process, with many factors affecting the organization’s ability to achieve the revenue benefits promised in the original business case. Of these factors, training is second only to executive sponsorship and management involvement; however training often is overlooked or not considered an equal partner within the organizational transformation.

Here are the when, why, and how inadequate training can negatively affect the business goals behind your implementation and possibly cause the implementation to fail…and what you can do about it.

9-15 Months Before Go-Live or Pilot Phase

1. End-user training is mapped to each unique user profile, including how each user integrates and interacts within that workflow. Also, the training describes how users will bridge from the legacy system and the current situation to the new business processes.
2. Key decisions are based on the business rationale for the new system, not in defense of the development, process alignment, or implementation of the technology. Your organization is not implementing a software platform; it is investing in increased productivity, efficiency, and output from the end-users. Decisions, such as reassigning resources from training to development, should be based on the original business goals, not on meeting technology deadlines.
3. Training/learning measurements have been matched to overall ROI. If you haven’t done this, your training likely will cause delays and impede expected performance improvements.

3-9 Months Before Go-Live or Pilot Phase

1. Training activities reflect “real-world” experience. This helps users with specifics on how to bridge to the new platform and adopt new business processes.
2. Internal trainers and power users are identified and being trained on the new system. Often, due to delays or budgeting, internal training teams are not given adequate time to become experts in the system. Their familiarity is directly proportional to the training’s efficacy.
3. The new system is in place. There are many forms this can take (lesson libraries, cheat sheets, short-burst videos, etc.), but it’s critical to have a system to handle proactive refreshers, spot needs, employee attrition/absences, etc.

0-3 Months Before Go-Live or Pilot Phase

1. Metrics are set to evaluate training adoption and performance levels. These metrics measure how effectively new processes are being integrated into end-users’ daily work streams and how training is helping meet the original business case benefits and ROI.
2. A post-training communications plan is established. It’s important to be ready to deliver updates and success stories (to name two examples) to mitigate inevitable performance declines and lagging excitement level after the initial training.
3. Most day-to-day questions are answered by internal teams or power users. End-user questions escalating to the help desk is a common symptom that the resident knowledge base is lacking. Also, look for “workarounds” that skirt the upgraded business processes and procedures.

What If You Are Missing Any of These Elements?

If you are not confident your training is hitting the mark in all the above cases…act now! Secure the people (e.g., trainers, power users) and/or documentation (e.g., business process plans, data-filled exercise plans) to get back on track.

If you do not have the internal resources, training consultants can help. First, though, understand if you need configuration (system/screen-focused) or end-user (output/task-focused) training. Few training consultants are experts at both, so it’s best to first identify your needs and their strengths.

Finally, it is almost always smart to start with an assessment and a training plan, regardless of where you are in your implementation. And, of course, make sure any recommendations match the business case goals.

Helping analysts remember and use what they learned

Idea and excerpts from Old Habits Die Hard, by Time Hagen, of Sales Progress. Published in Training Magazine, Sept-Oct. 2011.

When technology and data are part of everyday life, it is important that everyone within a company is constantly learning and following best practices. Because if you aren’t, maybe your competitors are. Many organizations give tips, tools, and techniques that can help employees enhance their performance and increase revenue, but most of the time, articles are read and seminars are attended, and that is where the learning stops. The key to successful learning is training reinforcement.

Training reinforcement is the idea that learning should be continued after employees have attended a training program or workshop.

How many times have you seen employees return from training, highly motivated to put their newly acquired skills into action, just to watch them fall back into their old routine weeks later? 

Why Managers Should Coach

It does not make a whole lot of sense to spend so much money on training when people are going to forget what they learned weeks later. Managers needs to be in charge when it comes to helping employees remember what they learned.

Managers have to be involved from the beginning to the end. They need to understand where their employees need help, and then they need to find ways to help them improve in certain areas. Managers must be able to communicate and listen to their employees. They must be able to quantify the results and evaluate whether or not the training worked. 

If it was truly beneficial to the employees, then a manager should be able to see and measure the results. Before training even begins, managers should set benchmarks and attainable goals for their employees; that way, they can justify the money and time spent. When there is proof that there is progress, higher-level management will be more likely to continue giving the tools for success.

Coaching Methods

To create a sustainable learning environment, managers need to step up and involve themselves with reinforcing training. Hold team meetings so everyone can share what they learned that week or what they did to improve the bottom line. Another technique that works is one-on-one coaching. By sitting down with an employee, a manager can see exactly what their issues are, coach them through their problems, and keep track of any problems or setbacks the employee has. Plus, one-on-one meetings allow for instant feedback so the employee does not continue a bad habit over weeks or months. This encourages communication and builds teamwork.

In the end, it is important that businesses provide employees with the opportunity to keep learning and improving in their field, and it is even more vital that they continue that teaching back in the workplace. Companies and managers should engage in post-training and reinforcement in real-world situations.

Southwest introduces revised frequent flyer program targeting business passengers | ATW Online

Southwest introduces revised frequent flyer program targeting business passengers | ATW Online

Happy New Year!

I would like to wish everyone a very happy, healthy, and prosperous new year.
Sincerely, Gary Parker

RM Training Group Africa

I'm happy to announce that we have opened an office in Capetown, South Africa, to represent RM Training Group in the African continental region.

Mr. Corné de Waal, who will represent us there, has experience with Intercape, the largest privately owned intercity passenger transport service in Southern Africa.

His passion is revenue management and he has presented at numerous Revenue Management and Pricing conferences and for the past 3 years has been a visiting speaker at the University of Stellenbosch (Cape Town/South Africa) to address their post graduate students from the Transport and Logistics department, on the topic of Revenue Management.

As everywhere in the world, the volume of pricing decisions in Africa has significantly increased as the travel industry moves towards deregulation and globalization. The service industry needs to respond to the market swiftly in order to remain competitive.

RM Training Group recommends processes and best demonstrated practices as well as delivers practical commercial training at companies of all sizes around the world.

Revenue Management for Small Airlines

The airline industry is often thought of in terms of full-service carriers and low-cost carriers, but in reality it includes many types of carriers from regional, commuter, remote flying, to island hopping, to name a few.

The practice of revenue management was originally created by the full-service carriers to better compete with the low-cost carriers. Over time, the low-cost carriers have been evolving and to allow for growth, their service and product offerings have been increasing to a point where revenue management practices make perfect sense.

But, there still remain the thousands of small airlines in the world, who don't have sophisticated revenue management systems, but who would definitely benefit from customer segmentation and differential pricing.

After the recent economic downturn, there seems to be more interest as we see more and more small and new carriers employing revenue management practices and procedures to survive and grow.

The foundation of a carrier's RM group is information. To turn this wealth of data into useful information requires analysis and interpretation by individuals who have a broad understanding of the airline industry and current factors in the marketplace. In the current environment ‘downsizing’ can also put added pressure on airlines who are left with fewer experienced people.

In response to this, and in consideration of the high cost of in-house revenue management solutions and analytically skilled staff, we have formed RM Service Group. (www.rmservicegroup.com)

We offer a solution with outsourced revenue management services staffed with our own team of experts.

A company dedicated to revenue management and pricing, our expertise comes from the practical experience gained in the daily application of revenue management and pricing principles, faced with the challenges and opportunities of companies operating on the many levels of service from global to regional, from traditional to low-fare, and also value-based product offerings.

We welcome your thoughts and questions on this type of revenue management service, and if you see possibilities in your airline, we would love to talk with you.

Scheduled Online Seminar: Revenue Management - An Evolutionary Revelation

June 29, 2010   0900 EDT
A look at how the history of Revenue Management has shaped the present and insights to a more creative interpretation of Revenue Management and its future!

Presentation Outline

1. A little revenue management history
2. How our business environment has evolved
3. Fundamental requirements for our success today
4. Our customers and their changing values
5. What is the future of revenue management?

An excellent orientation to revenue management for companies researching revenue management. For new employees of revenue management, and for all employees in an organization trying to strengthen their revenue management philosophy, this online seminar is scheduled for June 29, presented by Gary Parker. Click on the title to register.

The Rubik's Cube Effect by Stephen Haines

I recently read an excellent article by Stephen Haines, CEO and founder of the Haines Centre for Strategic Management, which was published in Training Magazine. 

He uses the Rubik's Cube as an example of people trying to find solutions for strategic challenges   in the market place. He states that people often keep fixing one colour on one side, only to distort the other colours. Similarly, the complexity of today's world leads to unintended consequences. His answer, is a "helicopter view of life," which allows you to examine all sides of a situation.

In his article, Stephen goes on to say that people negatively impact others because they do not "understand the consequences" of what they do. In today's stressful environment, people narrow their vision. His recommendation is "systems thinking," which is about first looking at the big picture. Each move we make must consider all sides of your situation.

He poses the question: Who else to involve? Who are the key stakeholders? Stephen has put forward six steps to ensure there are no unintended consequences of your projects.

Step 1. Use a helicopter view of life and scan the future environment for possible implications for your project.

Step 2. Ask "Who else to involve?" Both internally and externally.

Step 3. Establish desired outcomes to create a vision of success.

Step 4. Develop specific goals.

Step 5. Predict the Rubik's Cube effect and the law of unintended consequences you are likely to encounter. Ask others too.

Step 6. Create core strategies and action plans for success.

He also proposes developing a matrix of unintended consequences versus proposed core strategies which often reveals the additional steps necessary.

I immediately saw a parallel in the airline revenue management environment, with my own experience addressing managements tendency to "micro-manage" in stressful times.

In times of panic, I find management focusing on individual flight departures or dates, which do not follow any patterns or trends, asking for additional investigation by Analysts. This typically requires a large amount of time spent for very little revenue gain. It also distracts from the general management of the "big picture". 

We get onto a treadmill with no end in sight. Over a short period of time, the lack of general maintenance has a much larger negative impact on the competitive position and the revenue performance. We start getting "out of control."

As Stephen suggested, we need to develop strategies and action plans which ensure that through the proper management and maintenance, we keep the machinery running smoothly and minimize any potential negative consequences. 

This includes systematic and disciplined approaches to the use of the technology, communications, reporting, analysis, evaluation, and actions, involving all the key participants.

I always appreciate your comments and ideas.

Innovative Air Cargo Revenue Management - Reinstating Air Cargo Profitability

By Dr. Ricardo Pilon

Introduction

Deregulation and increased competition provided the impetus for passenger airlines to adopt a more sophisticated approach towards marketing ever since the 1980s. The closing stages of regulated pricing brought about an initial era of fierce pricing competition; resulting in the apprehension that profitability could only be instigated through erudite market segmentation aimed at identifying those market segments that would have a higher willingness to pay while stimulating demand at discounted fare levels in other segments (Cross, 1997). Born was the new discipline of revenue management (RM), embraced by pioneers such as American Airlines, who applied differential pricing and yield-class based inventory control as part of the first generation of revenue management systems (RMS).

The success of revenue management has been documented widely and is often claimed to generate incremental revenues of between 3-8 per cent (Belobaba, 1987; Cross, 1997). Following airlines, other hospitality businesses such as hotels, car rental companies and cruise lines soon followed suit (Donaghy et al., 1997). However, the air cargo industry has generally been progressing unhurriedly with respect to automation and convoluted business technology. Despite the actuality that the cargo industry enjoys all the characteristics of industries that qualify for revenue management application, many obstacles and hurdles are often quoted as impeding its implementation (Jonker, 2006).

This Whitepaper proposes a new perspective of cargo revenue management using supporting tools that will allow passenger combination and all-cargo carriers to re-instate profitability through enhanced analytics and sophisticated pricing and capacity optimization.

The first part of this Whitepaper outlines the often-cited obstacles to cargo revenue management. The following section describes the requirements for cargo RM, followed by a proposed innovative approach to innovative revenue optimization business technology in the air cargo industry. A conclusion follows to recapitulate the feasibility and benefits in embracing revenue management for a sustainable cargo business.

Background

A number of general business realities as well as daily operational limitations hamper cargo revenue management. The air cargo activities of a combination carrier are multi-faceted and sternly entwined in a multitude of other elements of the carrier’s organization and operations.

The predominant focus many combination carriers put on their passenger business is oftentimes the root cause of a hindrance to achieving the full potential of cargo market and revenue opportunities. But the cargo value contribution could potentially exceed the average 15% of carrier revenues it generates today (ACW, 2005), notably in bottom-line results. Generally, divergent demand patterns between air cargo and passenger demand could help stabilize system-wide capacity utilization (be it main deck for combination aircraft or belly-hold capacity). So what tends to coerce this conflict and what is the foundation of air cargo still being considered a by-product today?

Some fundamental challenges to cargo revenue management are evident when comparing the attributes of capacity, demand, and profit optimization between the passenger and the cargo business.

· Demand: Unlike the passenger business where demand tends to be relatively stable and regular when corrected for seasonality, air cargo demand is highly unstable and irregular. Also, unlike the one-dimensional seat, the demand for cargo space is multi-dimensional with length, height, width, that is volume/weight and Unit Load Devices (ULD) position requirements. In addition, contrary to the passenger itinerary-based travel, air cargo is indifferent as to the itinerary traveled or routing as long as service-level agreements are respected. A key factor that distinguishes air cargo demand as well is the fact that by and large the market is accounted for by relatively few customers (intermediaries). This leads to shipment consolidation and has significant impact on contract negotiations and dependency on the part of air cargo operators. Finally, passengers – when they show up – tend to be flown as booked in terms of capacity requirements; whereas under- and over-tendering with regards to volume and weight tends to occur regularly, requiring precise overbooking.

· Capacity: The cargo capacity characteristics are comparatively far more complex and multifaceted than the single-dimensional seat requirements of passengers. The multi-dimensional cargo capacity characteristics include length, height, width, ULD positions whereas the overall capacity depends on many other factors that impact on its available volume and weight. These include the passenger, baggage, mail, fuel, crew and catering loads in addition to unforeseen weather conditions, potential ad-hoc passenger connection requirements, and so forth. The highly variable nature of cargo capacity is further underscored by different aircraft types, flown missions, the availability of all-cargo and charter aircraft, or belly-hold space in combination carriers, or procurable trucked air cargo capacity.

Returns on investment in systems are lower in absolute terms for cargo. While some carriers have taken the cargo business seriously, revenues from air cargo typically represent only a fraction of the size of the overall business, so a revenue uplift of 3-8 percent means less. For the cargo business, installing a revenue management system generally requires the re-engineering of a myriad of complex (manual) processes and inter-dependent systems and thus costs much more, in absolute terms, and returns much less in incremental revenue (Kliewer et al, 2002). Also, air cargo managers have typically gained remarkable experience and make intuitive decisions that have for the most part gone unformulated and undocumented. In sum, frequently quoted as being “too complex”, some argue that the implementation of revenue management systems for air cargo optimization is simply not feasible.

Cargo Revenue Management Requirements

The previous statement is flawed as air cargo enjoys all the characteristics of industries that qualify for revenue management application. Cargo capacity is a perishable commodity as it cannot be stored. This notion of time inherently represents value in a market where many segments depend on service level agreements as part of a larger supply-chain propelled by global trade. Also, owing to relatively low variable costs (fuel requirements, handling costs), yield enhancements generated from improved pricing and capacity control almost solely ends up in bottom-line profits.

However, the success of RM in air cargo centers on systemic process re-engineering in marketing and sales, rate establishment and capacity control. Only by achieving a clear understanding of the demand for air cargo products or services at a micro-market level can a carrier maximize its revenue by optimizing price and availability of the product. It thus represents an area in which marketing and technology, supported by mathematics is closely tied together. The need for systems and technology arises as the amount of information that is available and needs to be processed increases over time. The amount of data would be impossible to process manually.

RM is increasingly focusing on dynamic pricing, where product prices are established in accordance with demand from multiple customer segments to maximize revenue or profit. As a result, prices are adjusted dynamically, depending on the inventory availability and time left in the selling season. This compels companies to be able to change prices quickly to reflect new business conditions. Systems are required to use real-time information and formulas to calculate prices. Prices need to be set across products, markets, and channels in order to meet demand. The above works well for spot market capacity (free-sell), and requires air cargo carriers to review the revenue effectiveness of the common practice of allocating space in advance under contract (so called “allotments”). However, clear opportunities exist for decision-support tools allowing optimal rate determination for allotments as well.

A full-scale cargo revenue management system would allow companies to avoid missing out on revenues and profits, by preventing:

· Discounting rates when unnecessary

· Neglecting up-selling opportunities to customers who want to buy value-added services

· Wasting money on irrelevant promotions to the wrong customers

· Misallocating inventory to unprofitable products, segments, or channels

· Failing to create product packages that enhance value (differentiated products)

· Maintaining excessive inventory levels blocked for sale (reserved space, allotments)

· Unprofitable behavior driven around long-term contracts

· Neglecting high-value customers.

In order to be successful, cargo RM needs to apply disciplined tactics that predict consumer behavior at the micro-market level, optimizing product availability and price to maximize revenue growth. The technique allows for the setting of the price of goods and services based on factors such as current product demand, anticipated demand, real-time inventory, and the customer’s willingness to pay.

As a result, the three main areas of cargo revenue management around which business technology should be built are:

1. Clear market segmentation around differentiated products

2. Forecasting demand for different products, points-of-sales, and (reaction to) price levels

3. Adjusting capacity availability or price to accept the highest-yielding mix of products across the network at any given point in time.

Business Technology for Air Cargo Revenue Optimization

So as to develop an effective solution for cargo revenue management requirements, it is of crucial importance to relate the “what” to the “how to”. The “what” requires a clear definition and often depends on data availability of the reservation systems that are used as well as current business processes. Innovative RMS’ also likely require business process reengineering, and may thus impact profoundly on the organization. Oftentimes, the amount of data that is required does not represent valid information necessary to make (automated) decisions. One must also take into account that customers can adopt new and ever-changing behaviors depending on the market or business environment.

The overall systems objective is to control reservations and sales through traffic-flow or network control (local demand versus overall network optimization supported by demand forecasting and rate optimization, including discount allocation and availability restrictions (protect inventory for higher-yielding demand), as well as overbooking (allocating more inventory than physically available in order to account for cancellations and no-shows).

Designing an Innovative Cargo Revenue Management System

From a user standpoint, the following modules could be envisioned as part of an all-encompassing cargo revenue management solution:

· Historical Performance Review: Allows revenue analysts to conduct a full analysis of past economic performance at a very detailed level. This would include past network and leg capacity utilization (weight, volume), booking cycles and average yield information per origin-destination (OD), product category, commodity, customer, etc. Rate-demand curves further allow users to obtain valuable inputs into rate elasticity that aids pricing analysts to optimize rate lines.

· Capacity Forecasting: Cargo capacity forecasting is based on passenger load forecasts, baggage and mail load estimations, fuel requirements, as well as crew, catering and other configurable loads. Passenger final load forecasts could be obtained from the passenger revenue management system, while baggage and mail loads could be estimated using historical data obtained from departure control systems for each flight number and calendar date/day. Fuel requirements and updated cargo capacity in terms of weight can be calculated dynamically as per the cargo demand forecaster, since fuel requirements depend on total take-off weight and sector length. Evidently, capacity forecasting is sensitive to aircraft type and mission flown and could be adjusted for contingency factors such as the propensity for ad-hoc passenger requirements (probabilistic forecasting of misconnections per season, etc.).

· Demand Forecasting: Using a variety of forecasting methods, demand for air cargo space would be forecast from the ground up, i.e. per category, commodity, product, customer/point of sale, SCC, all based on historical data. A future feature could be to obtain rate-elasticity based demand forecasts. Weighting factors could be applied to the data of multiple previous years, while demand forecast updates during the booking cycle of a flight could also be configured in terms of the weight of historical versus current booking data. Overbooking levels could be set based on user-configurable risk-averse levels related to historically-observed no-show rates as well as cancellations, under- and over-tendering behaviour for each station. In addition, the probability of shipment acceptance without booking is also forecast and included in the final demand forecast.

· Tariff Management: Users would be able to review historical rate performance using price-demand curves and use what-if analyses to simulate the potential impact of new rate lines on overall revenue performance. Different than today’s industry practice of using commodity rates with weight brackets for date ranges, cargo carriers would be able to implement calendar day/date-based pricing (at the individual flight level). This represents a significant revenue enhancement and could only be performed using automated business technology. Using information obtained from the optimizer, which sets hurdle or dynamic bid prices, the system would also determine whether rates established by users satisfy the hurdle rate criterion.

· Schedule Allotment Creation: Schedule allotments are created based on the historical economic performance as well as yield-based demand forecast of each customer/station for each category and commodity. Allotments are assigned subject to a number of conditions such as the regularity of supply from the station for the category and commodity, the observed show-up rate as well as under- and over-tendering, minimum yield requirements, as well as overall system contribution (network optimization). For differentiated products (time-sensitive, live animals, etc.), a yield-class based approach is suggested and as such, allotments are allocated as such.

· Revenue Planning: This function would allow users to perform a full revenue plan based on an optimized mix of allotments vs. spot capacity for each category and commodity across the cargo network. Inherently, sales targets could be derived from the revenue plan based on the minimum yield levels that have been established by the demand forecaster and optimizer, although they could be adjusted manually. Prior to being released as the active version, revenue plans can be prepared and adjusted for macro-economic factors such as exchange rate fluctuations, commodity price indices, competitive reaction, as well as anticipated GDP and market growth.

· Flight Capacity Optimization: This module would be part of revenue and booking analysts’ day-to-day work list. It allows the analysis, acceptance or rejection of all shipment requests that have been received in an automated as well as manual fashion through spot rate requests that require user intervention. The suggested optimization approach is based on the concept of each request’s “shipment value”, which is a weighted-average value based on shipment yield, revenue, and customer importance. Furthermore, automated acceptance would be based on a validation of the shipment value against the yield-performance profile of each flight, while respecting the service level agreements. The over-arching objective of flight capacity optimization is to ensure that low-value shipments are assigned to lower-demand flights and that capacity on high-demand flights is protected for higher-value shipments. Requests for which the spot rate does not satisfy the minimum yield requirement are queued for user follow-up with supported alert functions (priority list, based on departure date, customer, or any other configurable parameter).

· Dynamic Allotment Management: Booking behavior of allocated allotments that concern non-contracted space could be monitored for potential release and redistribution to other stations based on updated forecasts and re-optimized network space allocation. This would occur on the basis of initial allotment versus current and projected booking levels relative to forecast threshold values, allowing the estimation of unutilized capacity at flight departure.

· Queue Management & Alerts: The queue management function would permit the handling of shipments on the standby list, disruption list, but also allow users to identify shipments that can be considered for pre-carriage in order to maximize capacity that otherwise is anticipated to go unutilized. The logic used by the system to handle and assign shipments to flights would be similar to the flight capacity optimization approach described earlier. That is to say, the system would identify flights for which the shipment value matches the economic value of the flight while still respecting (contracted or requested) service level agreements. Furthermore, alerts can be generated by the system so as to signal users that the flight (booking) performance is such that it merits attention (“warning”) or immediate action (“critical”). Alerts would go hand in hand with rule-based controls that users could set up with regards to capacity control and dynamic pricing.

Conclusion

While the implementation of automated revenue management business technology is still relatively scarce in the air cargo industry, a noteworthy opportunity exists to introduce a systematic approach to revenue optimization supported by business technology consisting of decision-making as well as automated optimization tools. This Whitepaper has described a vision towards next generation cargo revenue management that goes beyond today’s practices and includes potential future requirements that would be financially rewarding for both combination as well as all-cargo carriers.

The rewards of cargo revenue management systems would include greater transparency of cargo’s contribution to corporate results as well as significantly improved cargo revenue from increased yields, better utilized uplift capacity and enhanced sales performance. Notable additional benefits would include improved customer satisfaction from better services and network over and above an expected cost reduction from streamlined processes.

The current generation of legacy cargo reservation systems and general lack of sophisticated cargo revenue management systems falls short of supporting the above goals. In conclusion, now that the industry’s financial results appear to be strengthening, the timing is ripe to invest in sophisticated cargo revenue management solutions so as to enjoy maximized profits.

Bibliography

ACW (2005), Air Cargo World online, www.aircargoworld, October 2005.

Belobaba, P. (1987), Air Travel Demand and Airline Seat Inventory Management, Ph.D. dissertation, Massachusetts Institute of Technology, Boston, USA.

Cross, R. G. (1997), Revenue Management, Broadway Books, New York, USA.

Donaghy, K., McMahon-Beattie, U. and McDowell, D. (1997), ‘Yield Management Practices’, in Yeoman, I. and Ingold, A. (eds), Yield Management Strategies for the Services Industries, Casell, London, pp. 183-201.

Garvett, D. and Hilton, K. (1999), ‘What drives airline profits? A first look’, in The Handbook of Airline Finance, McGraw-Hill, New York, pp. 181.

Jonker, E. (2006), Internship report, Business Mathematics and Informatics, Vrije Universiteit, Faculteit der Exacte Wetenschappen, Amsterdam, The Netherlands.

Kimes, S.E. (1989), ‘Yield management: a tool for capacity-constrained service firms’, Journal of Operations Management, 8, 4, pp. 348-363.

Kliewer, G., Grothklags, S. and Weber, K. (2002), ‘Improving revenue by system integration and cooperative optimization’, Proceedings of the AGIFORS RYMSG Annual Meeting 2002, 16-19 April, AGIFORS, Berlin, Germany.

A Typical Work Week – Day by Day

A Revenue Analyst is responsible for the revenue optimization of the flights under their control. In order to do that requires a disciplined and systematic approach to the tasks on a daily and weekly basis.

I have documented a typical week below to highlight the tasks, analysis, and evaluation required. In addition, there are a number of team players, and communication is key to keeping all the components in synch and strategies aligned.

It is especially critical to be action oriented and to follow-up on those actions with ongoing performance evaluation and adjustment.

Monday

Monday is a data preparation day. I look at historical data for the last six weeks which gives me my final booked numbers by flight, day-of-week, and booking class. I also look at spoilage and denied boarding performance, as well as business mix components on my flights. I can categorize my flights with this information, using definitions based on BLF and booking class distribution. The categories include: Prime, High, Medium, and Low. This information helps me to set-up the inventory controls on my flights, and to manage them on a weekly basis. These controls are documented and communicated to my Manager as well, in order to ensure our strategies are aligned.

I also look forward with reports on advance bookings, seat allocations, remaining booking class availability, and overbooking levels. I compare my allocation distribution year-over-year, considering my fare structure and changes to the previous year. Our advance booking reports by route give us an indication of our distribution by booking class along with average fares and then estimated revenues. Our forward looking analysis is a validation that all is as expected based on the budget or plan.

One of the biggest challenges is bringing historical and forward looking data together in order to identify patterns and trends going forward in key performance indicators like: Spill, stifle, revenue dilution, spoilage, and denied boardings. Capturing and correcting any of these potential KPIs prior to flight departure can really improve performance.

Tuesday

Today I download the latest schedule reports looking for changes to my scheduled capacity and frequencies. I look at three things: Additions, deletions, and changes to the schedule. With that information, I evaluate how the changes will impact my passenger demand and if I will “spill” demand on alternate flights or even to the competition. I also identify passenger protection recommendations to the schedule change group who move the bookings off cancelled flights onto alternate remaining flights based on my suggestions.

I identify any issues that I have with the schedule going forward and request evaluations. Any trends or patterns that highlight opportunities are also identified for evaluation.

Upcoming holidays and special events are also evaluated on a weekly basis to ensure that bookings are coming in as expected and that we have appropriate capacity in place. Flight additions or cancellations are usually looked at a couple of months in advance and then monitored as the date approaches. Inventory controls are adjusted to capture revenue opportunity and to ensure that days where demand is soft are open for sale.

Wednesday

I have weekly competitive web fare comparison reports scheduled to be available on Wednesdays. I print these reports and meet with my team Market Manager and Pricing Analyst to discuss our position and any opportunities or threats. We make adjustments to the fares or inventory as required. This analysis and evaluation can be increased to daily if there is dynamic competitive action taking place in the market.

Thursday

On Thursday, our entire team meets for a Route Management meeting. We review current and future booking levels, the fare structures, and any schedule changes. We also talk about competitive pricing, schedules, and market share changes. Current trends or patterns in booking levels as well as distribution are examined and evaluated. Changes in fare structures and inventory management are actioned as required coming out of this meeting.

Friday

A close look at overbooking levels for the next thirty days in comparison to the no-show levels for the last sixty days is conducted at a flight and day-of-week level. Any flights with an oversell level below the no-show level are investigated for a possible increase. The reverse is also examined for oversell levels that are causing excessive denied boardings.

I try to have all my flights updated based on the week’s analysis, evaluation, and any action steps identified at the Route Management meeting. In this way, on Monday morning, when I create new reports, all my actions should be evident and I can follow-up on the results.

In Summary

This review of a typical work week is definitely not exhaustive, but only an overview of some of the tasks conducted by a Revenue Analyst. I would be very happy to hear your comments or suggestions of other tasks or approaches to ensure all opportunity is captured and any risks are minimized.

A Well-Planned Retirement

Outside England's Bristol Zoo there is a parking lot for 150 cars and 8 buses. For 25 years, its parking fees were managed by a very pleasant attendant. The fees were £1 for cars ($1.40), £5 for busses (about $7). Then, one day, after 25 solid years of never missing a day of work, he just didn't show up; so the Zoo Management called the City Council and asked it to send them another parking agent.

The Council did some research and replied that the parking lot was the Zoo's own responsibility. The Zoo advised the Council that the attendant was a City employee. The City Council responded that the lot attendant had never been on the City payroll.

Meanwhile, sitting in his villa somewhere on the coast of Spain (or some such scenario), is a man who'd apparently had a ticket machine installed completely on his own; and then had simply begun to show up every day, commencing to collect and keep the parking fees, estimated at about $560 per day -- for 25 years. Assuming 7 days a week, this amounts to just over $7 million dollars!

And no one even knows his name.

From The London Times