Work Hard. Fly Right. SM Work Hard. Fly Right. SM A NETWORK ORGANIZATION AGIFORS Conference Honolulu, HI June 3 – 5, 2003 Mandeep Grewal MANAGING DIRECTOR – REVENUE MANAGEMENT

Work Hard. Fly Right. SM Agenda The way we were… What we became… Who we are today… A Network Organization The missing piece… Questions

Work Hard. Fly Right. SM Who we were… A distinct Revenue Management group A Domestic and International group Productive – “Yes” Optimal – “No” Domestic International

Work Hard. Fly Right. SM What was missing… Limited interaction Decisions in a vacuum Lack of comprehension of the impact of the 3 groups on each other Scheduling Pricing DomesticInternational

Work Hard. Fly Right. SM What we became…(in 1999) Pricing & Revenue Management Group (PRM) RM Pricing RM DomesticInternational Pricing

Work Hard. Fly Right. SM Benefits of a PRM Group Pricing Demand Stimulation Benefits: Greater understanding of the impact of the 2 groups on each other Quicker reaction and adjustments made to forecasts by RM to Pricing changes More coordination on implementation of strategies Pricing Demand Stimulation RM Demand Management

Work Hard. Fly Right. SM Questions being asked…(in 2001) Are we making the optimal revenue decisions for the company? Are we carrying the right flow versus local traffic across our system? Is Scheduling aware of what is driving the demand and how demand is being managed?

Work Hard. Fly Right. SM System focus? LGW EWR BOS MCO Maybe too much focus on the different entities…Domestic & International. More focus needed on understanding system flows

Work Hard. Fly Right. SM What was missing… Scheduling not always aware of the demand driver…the vicious cycle of demand & ASMs Pricing RM Scheduling

Work Hard. Fly Right. SM The challenge… Situation:High Loadfactors Scheduling Pricing Revenue Mgmt Add ASMs Different Pricing Strategy More aggressive mgmt

Work Hard. Fly Right. SM The vicious cycle… High LFs Revenue Spill Optimal Over-management Under-management

Work Hard. Fly Right. SM The ultimate question… “What supply is needed to meet the demand generated at the right price” Pricing Scheduling Revenue Mgmt

Work Hard. Fly Right. SM Network Group RM Pricing Scheduling ? Communication

Work Hard. Fly Right. SM Benefits Specialists but educated about other fields Coordinated RM efforts Local vs. Flow Domestic & International Pricing Consistent approaches in the Pricing world Published & Un-published Domestic & International More focus on strategic & tactical pricing to capitalize on high demand days

Work Hard. Fly Right. SM Benefits Scheduling Future Planning done with an in depth understanding of the demand drivers More optimal use of aircraft during times of peak travel through coordinated requests…not First Come First Serve  Increase in revenue and higher RASM

Work Hard. Fly Right. SM The ever evolving organization…

Work Hard. Fly Right. SM Network Group RM Pricing Scheduling Distribution Planning

Work Hard. Fly Right. SM Our current challenges… Poor economy & global situations Business traffic down Declining leisure yields Maintaining Revenues Keep Costs down

Work Hard. Fly Right. SM We are in a different era… Increase in inventory being sold through the internet and other lower distribution cost channels Seller Buyer Cheaper distribution costs Ability to shop Ease of buying Costs Revenue

Work Hard. Fly Right. SM Align our objectives RM Distribution channels How to get the best revenue (net of costs) Better mix How to get the best price More volume Airlines Pax Lower costs Lowest fares

Work Hard. Fly Right. SM Inventory control? Have to ensure that we maintain control of inventory As technology advances, we have to ensure that RM still decides what pax to accept/reject Need Distribution Planning to help achieve RM’s objective

Work Hard. Fly Right. SM Network Group RM Pricing Scheduling Distribution Planning

Work Hard. Fly Right. SM Questions?