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Work Hard. Fly Right. SM
Work Hard. Fly Right. SM
A NETWORK ORGANIZATIONA NETWORK ORGANIZATION
AGIFORS ConferenceHonolulu, HI
June 3 – 5, 2003
Mandeep Grewal MANAGING DIRECTOR – REVENUE MANAGEMENT
Work Hard. Fly Right. SM
Agenda
• The way we were…
• What we became…
• Who we are today…
• A Network Organization
• The missing piece…
• Questions
Work Hard. Fly Right. SM
Who we were…
• A distinct Revenue Management group
• A Domestic and International group
• Productive – “Yes”
• Optimal – “No”
Domestic International
Work Hard. Fly Right. SM
What was missing…
• Limited interaction
• Decisions in a vacuum
• Lack of comprehension of the impact of the 3 groups on each other
Scheduling
Pricing
Domestic International
Work Hard. Fly Right. SM
What we became…(in 1999)
Pricing & Revenue Management Group (PRM)
RM Pricing RM
Domestic International
Pricing
Work Hard. Fly Right. SM
Benefits of a PRM Group
PricingDemand Stimulation
Benefits:
•Greater understanding of the impact of the 2 groups on each other
•Quicker reaction and adjustments made to forecasts by RM to Pricing changes
•More coordination on implementation of strategies
PricingDemand Stimulation
RM
Demand Management
Work Hard. Fly Right. SM
Questions being asked…(in 2001)
• Are we making the optimal revenue decisions for the company?
• Are we carrying the right flow versus local traffic across our system?
• Is Scheduling aware of what is driving the demand and how demand is being managed?
Work Hard. Fly Right. SM
System focus?LGW
EWR
BOS
MCO
•Maybe too much focus on the different entities…Domestic & International. •More focus needed on understanding system flows
Work Hard. Fly Right. SM
What was missing…
• Scheduling not always aware of the demand driver…the vicious cycle of demand & ASMs
Pricing
RM
Scheduling
Work Hard. Fly Right. SM
The challenge…
Situation: High Loadfactors
Scheduling
Pricing
Revenue Mgmt
Add ASMs
Different Pricing Strategy
More aggressive mgmt
Work Hard. Fly Right. SM
The vicious cycle…High LFsRevenue Spill
Optimal
Over-management
Under-management
Work Hard. Fly Right. SM
The ultimate question…
“What supply is needed to meet the demand generated at the right price”
Pricing
Scheduling
Revenue Mgmt
Work Hard. Fly Right. SM
Network Group
RM
Pricing
Scheduling
?
Communication
Work Hard. Fly Right. SM
Benefits
Specialists but educated about other fields
• Coordinated RM efforts• Local vs. Flow• Domestic & International
• Pricing• Consistent approaches in the Pricing world• Published & Un-published• Domestic & International• More focus on strategic & tactical pricing to capitalize on high
demand days
Work Hard. Fly Right. SM
Benefits
• Scheduling
• Future Planning done with an in depth understanding of the demand drivers
• More optimal use of aircraft during times of peak travel through coordinated requests…not First Come First Serve
Increase in revenue and higher RASM
Work Hard. Fly Right. SM
The ever evolving organization…
Work Hard. Fly Right. SM
Network Group
RM
Pricing
Scheduling
DistributionPlanning
Work Hard. Fly Right. SM
Our current challenges…
• Poor economy & global situations
• Business traffic down
• Declining leisure yields
Maintaining Revenues
Keep Costsdown
Work Hard. Fly Right. SM
We are in a different era…
• Increase in inventory being sold through the internet and other lower distribution cost channels
Seller Buyer
Cheaper distributioncosts
Ability to shopEase of buying
Cost
s
Revenu
e
Work Hard. Fly Right. SM
Align our objectives
RMDistribution
channels
How to get the best revenue(net of costs)Better mix
How to get the best priceMore volume
Airlines Pax
Lower costs Lowest fares
Work Hard. Fly Right. SM
Inventory control?
• Have to ensure that we maintain control of inventory
• As technology advances, we have to ensure that RM still decides what pax to accept/reject
• Need Distribution Planning to help achieve RM’s objective
Work Hard. Fly Right. SM
Network Group
RM
PricingScheduling
DistributionPlanning
Work Hard. Fly Right. SM
Questions?
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