Revenue Management

The airline industry is a highly competitive, dynamic industry that calls for an equally dynamic process for setting pricing throughout the complete booking window of a flight.  The goal is always to maximize revenue by balancing the optimization of load factor (generate demand and fill seats) and maximum optimization of yields (quality of the fare paid) across all flights in each airline’s unique network.

Revenue Management is often a time-consuming function requiring sophisticated tools and considerable manpower to manage it. This might not be practical for smaller airlines. However, leveraging Embark’s technical and industry experience allows you to maximize revenue and profitability without hiring the staff internally to do it.

Revenue Management

Revenue Forecasting

Producing a revenue forecast is the first step of a revenue management engagement with Embark.  It is important to be able to set a reasonable revenue target based on market demand, seat share and stimulation estimates.  Our team at Embark has experience with a variety of different airlines, including smaller regional airlines to major Network carriers.  Drawing on this experience, as well as industry and internal data, Embark can produce accurate revenue estimates to guide enterprise wide decision making. Our partner airlines can then plan and set expectations for revenue performance for the upcoming year as well as measure the effectiveness of commercial initiatives.

Pricing

Embark provides a broad range of pricing experience from small regional airlines to large commercial organizations. Pricing strategies are impacted by numerous external factors, and developing a successful pricing approach for each route is crucial to an airlines overall success. Embark analyzes macroeconomic trends, market demand, and competitor activity to build an partner airline’s pricing strategy.  An optimal pricing strategy will maximize revenue by providing the best possible pricing scheme for demand stimulation and competitive market share.

Pricing Strategy

Inventory Management

Once pricing strategy is in place, Inventory Management decides what mix of fares will be available for purchase.  Inventory management tools allow an airline to decide fare availability based on market, season, holiday, day of week, departure time, booking date and demand trends to ensure optimal revenue is achieved on a flight.  To maximize revenue, inventory management must constantly balance the tradeoff between yield and load factor. The inventory component of an organization prevents high demand flights from selling low yield fares and keeps low demand flights from taking off empty.

An Example of Inventory Management

Embark’s partner airlines have seen material improvement in their revenue performance. For airlines that have not had a strong Revenue Management discipline, we’ve been able to achieve gains of over 20%.

Reporting/Tracking KPIs

Once you have developed a Revenue Forecast and implemented a Pricing and Inventory strategy, Embark can work with your databases to generate critical reports to help monitor and track performance. These reports include: fare usage, advance purchase patterns, sales performance, and most important advance bookings. A sound advance booking report becomes our partner airline’s ‘bible’ providing weekly guidance on bookings and market trends. This report is used to help make capacity decisions as well as identify ‘soft spots’ or distressed inventory to support marketing fare sales or promotions.