Innovation and precision: New Tools for optimized network planning
The quality of a revenue management system is determined by the performance of its forecasting tools, which predict demand on flight routes. The ProfitLine/Yield O&D Forecaster developed by Lufthansa Systems is setting new standards in this field. It forms the core of the revenue management system environment for Lufthansa, which has successfully used our system since December 2003. New components have now made the Forecaster even more powerful.
The predictions made by the ProfiLine/Yield O&D Forecaster are based on highly complex algorithms and are of a precision that was long thought to be unattainable. This accuracy pays off, because the better an airline can estimate demand on a route, the more precisely it can plan and control its flights and increase its revenues.
Of course, such a complex system is never really complete. Instead, it grows along with the requirements of its users. For example, the Lufthansa Systems’ revenue management experts are currently developing a special event module for the O&D Forecaster on behalf of Lufthansa. School holidays, trade fairs and sporting events, for instance, have a significant impact on the demand for certain flights and must be taken into account by a demand forecaster. Lufthansa Systems has employed innovative methods to develop functionalities which will soon provide a much more detailed view of events.
The new Market-Sensitive O&D Forecaster component also increases the value of the Forecaster. The component combines price- and product-related forecasting methods. This approach addresses the fact that both quality-oriented and, above all, price-conscious passengers book flights with network airlines. The former group of passengers places priority on the quality of the product, which includes aspects such as departure time, connection times, service and comfort. The latter group makes booking decisions based primarily on the price and how it compares to the prices of competitors. The Market-Sensitive O&D Forecaster determines the proportion of both passenger types and uses special methods to forecast the demand from each. While product-oriented prognoses are made using the traditional methods of the O&D Forecaster, so-called price elasticity models are used for price-oriented prognoses. These make it possible to predict how many passengers would accept any given price.
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