Short-term profitability evaluation in Schedule Management (1/2)
A tactical profitability evaluation should be standard at any airline of any size and any business model. It is powerful support for schedule management departments to evaluate the profitability contribution for schedules that are near the publication or close-out date. The following blog will give more insights about this important commercial topic.
The schedule is an important part of the airline product
It is not always only about the inflight and ground product. Sometimes this fact is a little bit forgotten: Whatever the size of your airline or the complexity of your network is - an airline´s schedule - meaning destinations, itineraries (O&Ds) as well as (departure) timings and frequencies - has never been more critical to profitability than today. An airline’s flight schedule plays definitively as well a very crucial part as the “face to the customer”: It defines its product to the airline passenger and thus – even more important for the airline - its revenue potential.
That´s why in today’s ever more competitive and changing business environment, airlines need to be sure that the schedules they implement cover all four following challenges simultaneously:
- maximize revenue,
- reduce costs,
- create best in class customer travel experience, and
- build the basis for robust operations.
Schedule profitability often only long-term
When it comes to cost efficiency and revenue optimization, I sometimes wonder, that many airlines still do not have tools or strategies in place to evaluate their schedule by its profitability and/or compare the profitability of schedule changes or scenarios created.
In case airline do such profitability evaluations, it is found more or less only at larger airlines. They usually deploy strategic network planning tools to optimize the airline network for profitability in the long-term. However, these tools do not provide a more precise tactical profitability evaluation in the short term. Network planning tools normally work on standard weeks and passenger forecast figures based on historical booking data provided by GDS`s or ticketing data provided by IATA.
The need for a tactical profitability evaluation
For the best schedule profitability, airlines need to evaluate their schedules in mid- / short-term, meaning the schedule managers need to use more detailed and up-to-date data than its strategic network planning counterparts. I will explain below more detailed, what this means. This will support them in their daily tasks to maintain, manage, and optimize schedules by adding the cost and revenue perspective on the schedule to complement the usually more operationally focused horizon of typical schedule management tools. By adding up-to-date economic and market information into the schedule management decision-making process the schedule profitability will increase.
What is needed for a tactical profitability evaluation?
The following four components are necessary for fast and efficient short-term profitability evaluation:
- Flexible cost evaluation data
- Up-to-date revenue data
- Actual operational schedule data
- Fast and easy to understand output data
In part 2 of this blog sequence, I will provide you with a detailed description of each above mentioned component. Until then I look forward to hearing your feedback on this very important commercial topic.