Q&A: why do airlines need revenue management systems?

Ilaria Grasso Macola 7 August 2020 (Last Updated August 10th, 2020 08:47)

Malaysia Airlines is the latest company to adopt revenue management tools to get back to pre-Covid profit levels. We spoke to the airline and the system provider to understand how these systems work and why they are so needed.

Q&A: why do airlines need revenue management systems?
Malaysia Airlines is using PROS revenue management system. Credit: PROS.

ORMalaysian Airlines, like the rest of the aviation sector, was hit hard by the global travel ban imposed to prevent the spread of coronavirus.

In the last couple of months, the company has implemented a series of steps to bring the business back to pre-Covid levels, including advancing a new digital transformation strategy.

Malaysia Airlines has in fact adopted AI provider PROS’ Revenue Management Advantage (RM Advantage) system to optimise its offers in a market shaped by the economic downturns caused by the pandemic.

PROS solution strategy director Aditi Mehta and Malaysia Airlines group CEO Izham Ismail explain why airline companies need to use revenue management tools to get back to pre-Covid revenue levels.


Ilaria Grasso Macola (IGM): When and why did you start using PROS RM Advantage?

Aditi Mehta (AM): Malaysia Airlines implemented the PROS RM Advantage airline revenue management tool in July this year (2020). PROS and Malaysia Airlines collaborated to ensure forecast accuracy, calibrate system decisions market by market, and enable revenue management analysts to quickly dive into their market data and make sound business decisions. PROS RM Advantage is proven to drive incremental revenue while creating efficiencies in the way the business operates.

 

IGM: What do you expect to gain from using PROS RM Advantage?

Izham Ismail (II): We operate in a tough environment where yields are always pressing downward. With PROS RM Advantage, we want to continue making remarkable improvements in our performance despite the challenges of overcapacity and notoriously thin margins, further strengthening our commitment to digital transformation strategies to meet passenger needs while attaining our growth goals.

 

IGM: On a practical level, how does it work?

AM: RM Advantage, an edition of PROS Revenue Management, features the latest in technology and revenue management best practices and workflows.It features AI-based forecasting and optimisation designed to deliver the optimal price, even in the most volatile of markets.

The tool not only has powerful forecasting and optimisation tools, but its workflows are designed based on deep user research with revenue management analysts to understand how they operate, the data they need, and how to ensure they can do their work in the most efficient manner. Analysts can deep dive into the market data, quickly see trends, apply changes and market influences, and recalibrate their forecasts to drive revenue.

 

IGM: What are the advantages and disadvantages of using this system?

AM: As it is based on AI, the system increases efficiency and protects revenue, forecasting market trends and behaviours such as seasonal demand patterns.

Another advantage of PROS RM is that it can identify customers’ willingness-to-pay to address various types of demand, minimising revenue dilution.

In terms of any disadvantages to the tool, as with any AI-powered solution that amasses a wealth of important data. If the team wielding the tool isn’t equipped or doesn’t know how to put the data into action, the power of the solution is halted.

 

IGM: Is there a correlation between the impact of the coronavirus pandemic and Malaysia Airlines’ decision to use the system?

AM: Due to the pandemic, airlines around the world are looking to their revenue management systems to help guide them through the recovery period.

First and foremost, airlines will be reviewing their pricing strategy, then setting availability or capacity strategy according to the corporate strategy, and then preserving data quality for forecasting and continuing to monitor and adjust forecasts for long-range periods.

The PROS Revenue Management Advantage software is a key tool to help airlines manage their data through bad periods and fine-tune their forecasts going forward. PROS is also using data to predict what recovery will look like in different regions of the world and the signs of recovery that an airline can use to quickly adjust.