Maximising the Value of Every Seat
The whole economic structure of the industry is being challenged by the rapid development of low cost carriers in all regions of the world. Consequently customer behaviour and expectations are changing and this is leading all airlines to fundamentally reconsider the ways in which they do business. Central to any such appraisal is the pricing and yield management strategy.
It is essential that the value of every seat is maximised. While this is not a new principle, established methods and long held assumptions are no longer appropriate and new solutions must be implemented to achieve this goal. Airlines must consider two key questions:
- To what extent the fare structure should retain the traditional approach based on segmentation (e.g. through minimum stay rules) or whether it should be based directly on demand by charging higher prices for peak flights?
- How can the transition to a demand led solution be managed and implemented?
The answers to these questions will vary significantly according to the geography, size of the airline, along with the characteristics of the key markets and the nature of existing and potential competition.
The MSP Solutions Approach
MSP Solutions have specialist expertise in airline pricing and yield management and understand the critical importance of developing a coherent yield strategy, which must also be linked to the branding and distribution strategies of the airline. MSP experience embraces work with airlines of all sizes and includes practical experience of transition processes.
Top level development of the strategy includes market analysis using modelling techniques. This is supported by detailed knowledge of technical issues such as fares filing, distribution, interlining and prorating.
The Benefits to Our Clients
Using MSP, our clients benefit from our detailed knowledge of airline pricing and yield management. A typical audit project would include recommendations as follows:
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Short term improvements that can be implemented immediately or within three months with little or no investment and simple changes to procedures.
- Medium term developments that can be implemented within 12 months, probably with moderate investment but with substantial changes to procedures.
- Long term changes that will require over 12 months for implementation and which could involve significant investment and complex changes to procedures. These may include major steps such as new IT requirements or even fundamental reappraisal of the business plan.
MSP can also develop implementation programmes for the recommendations, which can be supported by practical advice.