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Work Hard. Fly Right. SM

A NETWORK ORGANIZATION. AGIFORS Conference Honolulu, 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.

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Work Hard. Fly Right. SM

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  1. A NETWORK ORGANIZATION AGIFORS Conference Honolulu, HI June 3 – 5, 2003 Mandeep Grewal MANAGING DIRECTOR – REVENUE MANAGEMENT Work Hard. Fly Right. SM

  2. Agenda • The way we were… • What we became… • Who we are today… • A Network Organization • The missing piece… • Questions

  3. Who we were… • A distinct Revenue Management group • A Domestic and International group • Productive – “Yes” • Optimal – “No” International Domestic

  4. What was missing… • Limited interaction • Decisions in a vacuum • Lack of comprehension of the impact of the 3 groups on each other Pricing Domestic International Scheduling

  5. What we became…(in 1999) Pricing & Revenue Management Group(PRM) Domestic International RM RM Pricing Pricing

  6. Pricing Demand Stimulation Benefits of a PRM Group Pricing Demand Stimulation RM Demand Management • 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

  7. 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?

  8. System focus? LGW BOS EWR MCO • Maybe too much focus on the different entities…Domestic & • International. • More focus needed on understanding system flows

  9. What was missing… • Scheduling not always aware of the demand driver…the vicious cycle of demand & ASMs Scheduling Pricing RM

  10. The challenge… Situation: High Loadfactors Scheduling Add ASMs Pricing Different Pricing Strategy Revenue Mgmt More aggressive mgmt

  11. The vicious cycle… High LFs Revenue Spill Under-management Optimal Over-management

  12. The ultimate question… Scheduling “What supply is needed to meet the demand generated at the right price” Revenue Mgmt Pricing

  13. Network Group RM Scheduling Communication Pricing ?

  14. 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

  15. 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

  16. The ever evolving organization…

  17. Network Group RM Scheduling Distribution Planning Pricing

  18. Our current challenges… • Poor economy & global situations • Business traffic down • Declining leisure yields Keep Costs down Maintaining Revenues

  19. We are in a different era… • Increase in inventory being sold through the internet and other lower distribution cost channels Buyer Seller Revenue Costs Ability to shop Ease of buying Cheaper distribution costs

  20. Align our objectives Distribution channels RM Lower costs Lowest fares Pax Airlines How to get the best price More volume How to get the best revenue (net of costs) Better mix

  21. 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

  22. Network Group RM Scheduling Pricing Distribution Planning

  23. Questions?

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