How a small airline copes with Change as a way of life

How a small airline copes with Change as a way of life 2001 Agifors Reservation and Yield Management Conference Thomas Kingsbury Blackcreek, Ltd.

As an OR person • I tend to focus on the high tech stuff • Do we have the perfect Forecasting tool? • Are we using the right Allocation method? • How is the overbooking? • Exactly what is our precision? • So does the airline • The first question when a system is installed is, “How accurate are the forecasts?” AGIFORS Bangkok, 2001

The focus • We need to focus on what makes the system work for the airline • Is the data from the Reservation system correct (GIGO)? • Is the RM system doing what we want it to do? (What, exactly, do we want it to do?) • Is the RM system keeping up with the changes within the airline? • How does the RM system continue to function? • Change is the only constant in the airline business AGIFORS Bangkok, 2001

What should the system do? • One airline said it had been looking for an RM system for 5 years -- still trying to buy ‘the perfect system’ (which doesn’t exist) • What are the airline’s goals? • More profit? • Higher load factor? • Keep everyone happy; the frequent flyers, group sales, marketing, and ‘the most important customer’? • Sell the right product at the right price to the right person at the right time? AGIFORS Bangkok, 2001

An off-the-shelf system can work • Most small airlines do not have the time, expertise, or money to develop their own RM system • Most smaller airlines use a system developed by or for another airline • Will this system work for you? • Does your airline know what it is getting? • How much ‘blue sky’ is involved? AGIFORS Bangkok, 2001

Any RM system has the potential to help an airline to: • Clean up and review its data • Determine its goals • Open internal communications • Determine what makes it profitable (The President/CEO still says ‘We have to increase the Load Factor!’) AGIFORS Bangkok, 2001

A vendor system • The airline has to know: • What it wants • What the system does • What the system requires in the way of • Market analysts • Support • Data • Management • Dedication AGIFORS Bangkok, 2001

A vendor system • How changeable is the RM system? • Is the system manageable? • Who ‘owns’ the system? • Can the airline make changes to the system? • Is it well documented? • Will it stay up-to-date? • Does it work error-free? • Who fixes the ‘bugs’? • What is the cost -- fees and operating costs? AGIFORS Bangkok, 2001

A changing airline • The airline business changes drastically and rapidly. Does the RM system? • Who specifies the changes? • Who makes the changes? • Who tests the changes? • Who suffers when the changes don’t work? • Is there a dedicated team to work with change? AGIFORS Bangkok, 2001

Many changes to an RM system • The RM system must keep pace with the airline. Recent changes include: • Alliances • Internet sales to a specific campaign class • Code share -- multiple types • Flexible aircraft/moveable curtains • Y2K (remember that?) • Opening up lower classes AGIFORS Bangkok, 2001

Conceptual changes to the airline • Who is in charge here, anyway? • The market analysts? • The OR department? • The IT department? • The vendor? • The marketing department? • The group department? • Nobody/everybody? AGIFORS Bangkok, 2001

Changes -- Alliance and classes • Classes were changed • Descriptions, uses, and nesting order • Nesting was not in average fare order -- fares are averaged by class over the past 4 months • A change had to be made in the Reservation system to change the nesting order by flight/market AGIFORS Bangkok, 2001

Low load factors • With low load factors, the lower classes were automatically closed when the system was first installed • Too many complaints, so an automatic method was installed to open all classes in this situation AGIFORS Bangkok, 2001

Moveable curtain • The moveable curtain was introduced and had to be controlled/optimized • The configuration allows for 6 seats/row in coach and 5 seats/row in business • Then the planes were re-configured • How to solve this? A table of possible configurations was created AGIFORS Bangkok, 2001

Code sharing (1) • There are different types of code shares: • Hard blocks • Free sale • Soft blocks • When operating the flight, the Res system displays the airline capacity only (without the blocked CS seats) AGIFORS Bangkok, 2001

Code Sharing (2) • The moveable curtain and code share/blocked seats have to be combined? • But moveable curtain flights must contain the entire capacity to match the configurations • The RM system optimized all possible settings that met the protection parameters (blocked seats and materialization of booked passengers) • RM then selected the setting with the highest revenue AGIFORS Bangkok, 2001

Internet sales • A change to sell discounted seats for the following weekend over the internet • Seats are sold in one class only • A limited number of seats are allocated for the quick buy program • A limited number of markets and flights • How to restrict sales within the Res system? • The class was removed from nesting • Minimum and maximum limits were set to specify the number of seats to be sold AGIFORS Bangkok, 2001

Additional changes • Flights with domestic and international legs have different classes • Write a separate program to work with it • Code share agreements change • Old hard block agreements become Free Sale • There is new demand on these classes/flights • What to do about it? AGIFORS Bangkok, 2001

A change machine • An airline is a change machine • The RM system has to change with the airline • The airline’s concepts have to change • And the forecasts still have to be as good as possible! AGIFORS Bangkok, 2001

How a small airline copes with Change as a way of life