How to Boost the Productivity of Your Airline's Revenue Management Team

     

Blog-Header-images-How-to-Boost-the-Productivity-of-Your-Airlines-Revenue-Management-Team.png

Is your airline’s revenue management team “productive”? Are your revenue management analysts overworked or spinning their wheels? How do you measure productivity in revenue management? 

Additional revenue can be measured – how much spill or spoilage has occurred? But of course, this is impacted by the marketplace (for example, with more low fares) and generally dwarfs the direct cost of the airline’s revenue management department. Since the incremental revenue from an effective revenue management department can be 5-6% (even from a department of less than 10 people), most revenue management departments are incredibly productive in this sense. 5% on a $1 billion airline is $50m annually, while the cost of the revenue management department itself may be $1m or less.  Now that’s a terrific return.

But before you hire more inventory controllers, is this the best way to measure productivity?

Another productivity measurement method is one that’s more basic, and looks at how many daily flights are handled by each analyst. Since typically, departments are organized around flights, this has some logic to it and is easy to measure (less difficult than the incremental revenue produced). Every analyst manages a collection of flights, each of which extends out for the next 360 days. How many daily or weekly flights are “a lot”? How many are “too much”? Can analysts effectively handle 100 flights a day? How about 200 or 300?

Naturally, it isn’t that simple. Productivity varies between airlines based on:

Process

Airlines differ in terms of the responsibilities given to revenue management analysts. Some analysts may be focused on managing the daily queue of alerts; others may need to work more closely with sales; and some analysts may also be responsible for reports, analysis, or pricing.

Systems

Airlines differ both in terms of what revenue management systems they use, and for those who use the same system, how they exploit system features. How do you use alerts? Do you automate most business rules in your system? Do you have an O&D revenue management system that requires O&D demand forecasting? Do you use some form of “low fare manager”? Do you supplement your revenue management system with a competitive fare tracking system – and is that automatically linked to your revenue management system?

Markets

Most importantly, different markets require various levels of analyst intervention. High-load factor flights and highly volatile demand patterns also need more attention. A changing marketplace – new capacity, changing competition, changing fares – all translate into a greater need to override an automated system.

People

Finally, depending on the above needs, different skills are required from revenue management analysts. Larger airlines may find that they can efficiently separate some of the essential functions into groups of specialists, where smaller airlines will need analysts who can do most of the tasks “pretty well.” Often, technical knowledge of the system trumps the other important skills.

I have worked with airlines that range in productivity from just over 10 daily flights per analyst to over 100 flights. To achieve 100 flights, an airline needs scale – a large airline with fairly homogeneous markets. However, below is a comparison of the numerous factors that can lead to very different productivity between two small-to-medium sized carriers, one of which is more domestic focused, and one of which operates an international hub:

 

 Domestic Airline

 International Airline

System

 Highly automated, reliable

 Unreliable, mostly manual overrides

People

 Analytical, data-driven, some  specialization

 Market oriented

Process

 Meetings, reports, KPIs, manages forecast  trends                          

 Responds to alerts (CSIs), workload includes handling sales  inquiries and working customer queues

Markets

 Fairly homogeneous, high frequency,    mostly local traffic

 Complex, international, low frequency, mostly connect traffic at  hubs

Productivity

 50 daily flights per analyst

 12 daily flights per analyst


Using these parameters, it is impossible for the international airline to approach the domestic airline in revenue management productivity based on daily flights per analyst. An analyst at the international airline that is assigned to manage 50 daily flights – or 30+ markets each with differing competition and unique market factors – would likely not be able to effectively manage the revenue management system.

So the benefits of benchmarking productivity across airlines is limited. In the end, each airline has its own market needs and manpower challenges. Perhaps the best approach to revenue management productivity involves:

  • Ensure the RM system is well-calibrated and can generally work well with limited intervention

  • Clearly define processes (alerts, monitoring demand, interventions, reports), including how to best work with other departments, be explicit about the expectations the airline has of its analysts, and monitor their performance accordingly; invest in recurrent training

  • Strive for consistent improvements in productivity through regular review of processes

  • Periodically conduct a more comprehensive review of processes in light of changes in airline strategy and changes in markets served

The productivity of an airline revenue management department is really a measure of how effectively the department exploits the revenue management system – how it chooses to override the system, how it communicates system recommendations to other departments, how it enforces rules and policies, and how it manages “exceptions”. Effectiveness can be measured by incremental revenue – which is driven by many factors besides the performance of revenue management analysts – or more simplistically, by flights managed per analyst. But given the unique characteristics of each airline’s markets and each airline’s competitive positioning, the manpower and processes required to most effectively use the system varies widely by airline.  Ultimately, effective exploitation of the system depends on the system, the process, the markets, and the underlying skills of the analysts.  


Learn more about the characteristics that every airline revenue management leader should possess. 

Comments

Subscribe Here!