FLYR’s $150m funding round for an airline revenue management system raised some eyebrows. I have four takeaways from the latest interview which help understand the evolutions at stake and their potential:
? Evolution from Revenue Management to “Revenue Operations”: Airlines have become the experts at deciding what is the right price to display for a given seat at a given time. They need to become as good at connecting these decisions with advertising decisions, with product bundling decisions, or with distribution decisions. All the decisions impacting revenue need to be coordinated.
? Evolution from a seat’s price & availability to “Offers”: Airlines have focused on the seat as the perishable asset to control and price. They need to reflect on what they have to sell (product bundle) and at what price. The product is not only the seat anymore, it is “itemized” or “atomized” into a lot of services (a.k.a. ancillaries). The offer engine optimizes decisions for the “total revenue”, not only the seat revenue.
? Evolution from historical flight data to all commercial data: Airlines have relied on a flight’s historical data to build their forecast and make revenue decisions. Not only the pandemic made most historical data irrelevant, but technology makes it easier to identify relevant patterns across an airline’s network. AI can help find patterns and optimize decisions.
? Evolution from monolithic systems to unconstrained frontend layers: The airlines’ ability to make offers and revenue decisions is limited by the underlying systems, called PSS. One approach consists in disconnecting the PSS and build an unconstrained merchandizing layer on top of it. But disconnecting the backend infrastructure from the frontend customer experience will remain limited, as long as all the offers must be retrofitted into legacy formats (PNRs, booking classes) for the servicing and settlement. Another approach is required, to be continued ?