Air Transport World

Reclaiming control. (new software to close gap between projected and actual revenues)

After years of work, airlines are starting to install new software at marks a significant step in boosting systemwide inventory and revenue control.

Developers use different names: Origin and destination (O&D) control, bid pricing, continuous nesting or a combination thereof, all designed to reduce a nagging airline problem--the gap between revenue projections and actual revenue.

This is achieved by internal control of booking requests across an airline's network, not just for legs or segments, whether (1) requests are internal or via an external point such as a CRS, or (2) trips include multiple domestic legs or are multicountry. The software compares requests with established "bid prices" and decides whether to accept or reject them based on their ability to maximize revenue systemwide. Ren Curry, Aeronomics chief scientist, thinks "these new systems are revolutionary because of the new information."

Does this sound familiar? Weren't the yield (aka inventory, or revenue) management programs of the 1980s supposed to boost revenue? Yes, within limits. Sabre Decision Technologies Vice President Barry Smith explains: "When the airlines' [internal] reservations systems were built, people flew one leg at a time." There was little confusion over who would occupy which seat and for how long, although multileg trips on their mostly linear flights could reduce airlines' revenue potential some.

But creation of even simple hubs vastly increased possible combinations of seat sales: Local, through or connecting passengers flying to a multiplicity of markets. Yield managers broadened assessments to include segments, i.e., single flight numbers over more than one leg. But Smith says: "Every time we tried to improve the yield system, we ran into limits," because of the diversity of CRS distribution and inventory sources, and technology limits that affected data processing volume and storage.

So yield managers settled for forecasting demand in ever-increasing detail for hundreds of markets and educated guesses--allocations--about how many seats should be sold in certain fare classes or buckets. …

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