27 May 2017

Airline Revenue Management Strategy 101: It's All About Alignment

Revenue management has been long been touted as a strategic tool but what exactly is the “strategy” that is being referred to?  When it was initially introduced, the airlines which invested in revenue management technology pursued a quantitative and analytical approach that differentiated them from airlines with simpler pricing. But are “analytical” and “quantitative” still defined as a “strategy” that differentiates an airline from its competitors?

The answer is no. Airline revenue management has become a largely tactical, yet essential tool in many markets, and sophisticated vendors now provide off-the-shelf revenue management solutions.  Now, for most airlines, revenue management is not a competitive advantage. Instead, the broader airline leadership team – or the CEO - must clearly define the airline’s vision, by which the entire team is guided and must work towards in order create and sustain competitive advantages.

No longer can revenue management be a “strategy” on its own. It is definitely not considered a tactic to let revenue management “black box” analytics determine which customers are served – independent of a corporate vision, of schedules, sales, loyalty, and customer service. Instead, airline revenue management should in fact be used to implement the defined corporate strategy. 

On the other hand, revenue management is an important tool for validating the overall airline strategy. Since its principal role is to allocate demand over scarce capacity, revenue management is constantly monitoring demand. The function is in an ideal position to see if the other strategic initiatives are driving demand as expected, and whether it achieves alignment with the airline’s corporate priorities.

Revenue Management: The Validation Role

Airlines today differentiate themselves on three primary dimensions:

  1. Schedule
  2. Product
  3. Pricing/Ancillary

Revenue management can validate each of these strategic differentiators.

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Full Article: Mercator News Room

Source : Mercator News Room

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