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Lufthansa Systems takes revenue management one step further
ProfitLine/Yield O&D Market-sensitive Forecaster optimizes yield and availability
Airplane seats are perishable goods. As soon as a flight has left the gate unsold seats on board are worth nothing. Managing the complex relationship between price, demand, capacity and behavior of the passengers in a way that maximizes revenues is a difficult task. Lufthansa Systems’ revenue management tool ProfitLine/Yield is based on highly developed analysis, forecast and optimization methods. It is the result of many years of experience in the field of revenue management and pricing. The latest module is now being implemented at two major airlines.
At the heart of any modern revenue management system is its forecasting module. High-quality passenger forecasts directly affect airline revenues since they form the basis for booking control procedures. Lufthansa Systems has enhanced its proven ProfitLine/Yield revenue management solution and created the new ProfitLine/Yield O&D Market-sensitive Forecaster. This system provides better forecasts and optimization options, particularly in markets with competition from low-cost carriers.
There are two possible approaches to forecasting. The product-sensitive approach caters to passengers who book their flights based on product features, including departure times, direct flights instead of connections, and booking conditions. The market-sensitive approach considers those guests that make booking decisions based primarily on the ticket price. Airlines often follow the product-sensitive approach based on historical booking data. Now, the market-sensitive solution ProfitLine/Yield goes a step further. It uses the latest forecasting and optimization methods and takes data such as pricing information into account. As a result, the market-sensitive approach provides booking forecasts of an unsurpassed quality.
The ProfitLine/Yield O&D Market-sensitive Forecaster is the first step towards a complete market-sensitive O&D system. Following the O&D concept, airlines analyze the market on the basis of complete itineraries (origin & destination) rather than individual segments. Besides the two major airlines currently implementing the solution, a number of other airlines have expressed their interest in it. The solution is currently unmatched in the market. Its economic value is compelling: Initial benchmarks have shown that this system can generate additional revenues of up to 0.25% compared to the traditional ProfitLine/Yield O&D Forecaster, which is currently considered the best forecasting solution on the market for product-sensitive approaches.
The new module accounts for the fact that, thanks to stiff competition between airlines with different business models, travelers now face considerably more price and itinerary options than they did when the market was dominated by traditional carriers. The solution pays particular attention to low-fare airlines, which have become the toughest competitors. The Forecaster considers their market position so airlines can predict their own demand much more accurately and adjust their availability more precisely to the expected volume of passengers.
Revenue management is an important task not only for airlines. The same logic applies for rental cars, hotel rooms or cruise ships. A German economic daily recently suggested that even banks may pick up this technique in order to offer the right credit to the right customer at the right conditions and fees. However, airlines were the first to use it, so the airline industry will always be at the forefront of developments. It is good to know, then, that Lufthansa Systems will continue to be a reliable partner for airlines in this increasingly complex area.
Lufthansa Systems’ Sirax AirFinance Platform helps airlines to save millions through precision, speed and increased efficiency
Fare structures, code share agreements, and taxes and fees in aviation increase the complexity of an airline's revenue accounting. At the same time the intense competition in the aviation market makes fast and precise revenue accounting indispensable to an airline's management. Lufthansa Systems' Sirax AirFinance Platform fulfills all the demands made of a modern revenue accounting system by optimizing the whole process of back office accounting. With efficient methods for analysis and evaluation, the solution achieves an unprecedented degree in accounting precision and accuracy. This leads to higher data quality and as such to increased revenues.
The precise settlement of interline tickets alone can save a mid-size airline 1.5 million US Dollar per year. Avoiding overpayments in taxes and fees can save another 500,000 US Dollar. Furthermore, the highly automated system speeds up the accounting process and reduces operating cost by up to 45 % and total costs in revenue accounting by more than 35 %.
When calculating an airline ticket, numerous factors must be taken into account before it is clear how much an airline will actually receive for transporting a passenger on a particular leg of a journey. Sirax AirFinance Platform supports all revenue accounting processes for passenger and cargo airlines from sales data processing and matching to integrated credit card billing to financial accounting and management report.
The Sirax AirFinance Platform has a modular design. The Sirax module controls and manages an airline's revenue processes by performing a fully automatic check of ticket sales against actual flight data. Integrated sub-processes support the billing of interline flights between airlines. Sirax also helps to control processes that involve a variety of complex rates, codeshare agreements, alliances, as well as taxes and fees. It delivers precise, up-to-the-minute information for the management and the accounting division of an airline. This considerably reduces the losses that airlines suffer when interline billing with other airlines is overlooked or when rates are calculated too low due to changes in a passenger's ticket class. This alone means that the investment made in this new software can pay off within just one year.
Further modules of the Sirax AirFinance Platform help airlines to get cash quicker than before. SiraxLink allows for a weekly settlement with the IATA clearing house instead of the standard monthly clearing. With SiraxCredit the time until an airline receives credit card payments is cut by five days. For every million coupons sold this means some 550.000 US Dollar of profit from interest. In addition, SiraxPCI, which is a standard module of the solution, ensures compliance with the strict Payment Card Industry Data Security Standard (PCI DSS) at minimum cost.
Sirax AirFinance Platform is the first integrated platform to support and optimize the entire financial process of an airline from revenue accounting to cost controlling. Numerous large, international airlines - such as Air France-KLM and Scandinavia’s SAS Group - selected the comprehensive IT solution which can be easily adapted to specific customer needs. Worldwide more than 400 million coupons annually or twelve percent of all tickets are being processed with the help of Sirax. In Europe it has an even higher market share of 30 percent.
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