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

AGIFORS Bangkok, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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, 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!