At this point, most airlines would have been running to full capacities, raking in profits on almost all routes. However, Covid-19 had other plans for us. The pandemic which struck havoc in late 2019 has left most airlines reeling in debts.
The start of 2021 has seen some recovery in terms of flight occupancy but it is a long, bumpy road. Ciaran Brannigan, Ex-director of Revenue, Ryanair gives us a lowdown of the situation and what can be done to accelerate recovery.
Impact of Covid-19 on revenue management and pricing
Historical data rendered unusable
For starters, the pandemic has rendered all available historic data irrelevant to the Revenue Managers (RMs). They can now no longer rely on past seasonal trends to price upcoming trips. Additionally, the traditional pricing segmentation based on time to departure is not working towards stimulating demand, as the booking windows have now been condensed to a very short period, with a large number of flights being booked just days or hours before departure.
Governmental restrictions and regulations
Governments across the world are proactively updating the standard rules and operating protocols about travel in and out of their country, as well as within their country, based on the prevailing severity of Covid. Certain countries have regulations formed even at the micro-level, meaning travel to one part of the country is straightforward whereas another city might have additional restrictions. RMs need to be aware of this ever-changing set of protocols and will need to plan their actions accordingly.
Data acquisition challenges
“Revenue Managers are facing a massive challenge concerning data available for decision making. Traditional methods of data collection and analysis are no longer sufficient while preparing a plan of action. To aid quick recovery, RMs need to supplement existing data with a range of diversified data taken from previously unexplored sources, such as local OTAs, competitor data, etc., acquired several times a day as opposed to weekly, monthly, or half-yearly as was the case earlier.” opines Ciaran.
In this regard, it is essential to leverage the knowledge of all teams within the organization, with the RMs and pricing teams working hand in hand to align with the overall commercial goals of the airline. Network planning teams, by reissuing schedules as frequently as weekly instead of the traditional biannual release can with the help of RM teams identify which routes are profitable and enjoying higher occupancy, thereby allowing more aircraft to fly on those routes while reducing flights on non-performing routes.
Long term evolution of RM and pricing
As observed from pandemics in the past centuries, although the recovery trajectory is slow, it is inevitable. In our current situation too, signs of recovery are evident as the year progresses. However, the shape of recovery is likely to be extremely volatile and bumpy, requiring RM teams to be flexible in their decisions and action plans.
Localized outbreaks and governmental curbs could set back the recovery process in certain markets. By being dynamic and constantly updated with such information, the RM teams can quickly address such potential concerns, devising an alternative plan of action.
RMs need to revisit the information that is available to them in their Revenue Management System, as this data could pertain to internal and historic statistics that may not be relevant in the current scenario.
Moving forward, teams will need to discard the siloed approach to data and work in tandem for data collection and analysis. Data which earlier was periodically obtained and which is currently obtained intra-day is likely to see a shift to live sourcing in the future, where every new booking or emerging trend is recorded and quantified instantaneously on the Revenue Management System, allowing for quick, dynamic, impromptu decisions. As the booking windows get shorter, the data must be fresh as possible.
Due to the lack of stable booking trends and patterns, competitive data is really important. This will need to be supplemented with external as well as internal data to help understand customer behavior in terms of decision-making, breakpoints or hurdles.
All airlines are now shifting capacity to where they feel recovery will start first. Most airlines see capacity moving towards beaches and similar leisure destinations where Covid fears are lesser. If every airline adds flights to that destination, it could lead to an oversupply situation, resulting in lower occupancy for everyone – Every RM’s nightmare!
To address this, RMs can use competitor data combined with information obtained by partnering with OTAs and Metasearch engines that can give detailed insights on customer booking patterns.
Making the most out of regulatory environment data
“The biggest changes in demand have been noticed when governments have changed regulations, be it either around ease of access or shutdown of certain markets. Being up-to-date on these trends is key as it can determine the success or failure of a route,” says Ciaran.
In this regard, opening up dialogues with local people or organizations that can give you a lowdown of the prevailing circumstances in their respective countries can help in determining profitable routes.
All in all, 2021 is a make-or-break year for the airline industry, and Revenue Management teams have a major role to play in how things shape out for their respective airlines.