While unit revenues have come under pressure throughout the entire travel industry in the last decades, revenue management has become an integral and decisive part of a commercial airline organization. Technical and organizational strengths and weaknesses in this field usually translate directly into competitive advantages and – or disadvantages.
Moreover, these are associated with an immediate rise or decline in the profitability of an airline. In extreme cases, a continuous underinvestment into revenue management systems, approaches and organizations may even drive the entire company into severe difficulties. Some of the recent airline insolvencies have to some extent been accelerated by misaligned processes in revenue management, in combination with high manual workloads because of too little investment into modern revenue management solutions. Hence, more than ever before revenue management is a decisive lever for the commercial performance of an airline.
Technological innovations and a constant change of airline business models towards selling ancillary services and retailing will further increase the relevance but also the challenges for revenue management professionals.
Revenue management is often the last resort within an airline’s organization to optimize and affect the commercial performance on a short-term perspective. While the strategy and capacity planning process start with a lead-time of many months or years – revenue management on the other side is the ultimate commercial unit to affect the short-term development of revenues significantly. An effective and modern revenue management organization will always be strongly integrated into the wider commercial areas and closely interact with sales and marketing teams. Otherwise, there is the risk of lowering prices more than required in periods of weak demand, as sales and marketing on the one hand and revenue management processes on the other are not fully aligned and coordinated.
The latest global revenue forecast of IATA for 2020 and 2021 exhibits first signs of recovery, but with levels still being 29% below the pre-crisis values. To participate in this slight improvement of demand, it will be essential to be optimally prepared in revenue management processes, systems and organizations.