Mercator Blog

Topic: Revenue Management

Third-Party Services: The Next Growth Opportunity for Airlines

Organic growth is v ery limited in mature air travel markets. In fact, most U.S. airlines faced unit revenue declines in 2016 as capacity outstripped demand in many markets. The largest U.S. airlines have embraced “capacity discipline” to keep unit revenue in check – increasing capacity in 2017 at 1-2% and shrinking in sectors experiencing limited demand growth. Acquisitions are of course, another vehicle for airline growth. The U.S. market has seen tremendous M&A activity over the past decade. In fact, it is now commonly believed that anti-trust officials would block further acquisitions by any of the four carriers that now represent 80% of domestic capacity (American Airlines, United Airlines, Delta Airlines, and Southwest Airlines).

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Topics: Aviation, Revenue Management

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Developing Competition-Driven Dynamic Airline Pricing

Dynamic pricing must incorporate a competitive view. Many times, for example, a weak competitor will engage in “stealth” pricing, introducing lower fares for very short periods of time to gain a pricing advantage “under the radar,” not easily detected by most pricers. A fully optimized pricing strategy monitors competitor pricing on a real-time basis and responds “accordingly.”

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Topics: Aviation, Revenue Management

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Airline Revenue Management: Maximizing Customer Experience Through Demand Management

Revenue management is not just about higher fares. Some view revenue management as a zero-sum game pitting spreadsheet-armed analysts against unsuspecting customers, where airlines develop complex algorithms to get as much out of passengers as possible.

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The Role of Pricing in Look-to-Book Decisions: A Disaggregated Approach

Often for marketing purposes, travel merchandisers distinguish between “lookers”, customers who look at their product online, and “bookers”, those who actually end up purchasing the product. Such conversion rates might be between 1 and 5 percent, for example. One marketing goal is to decrease the ratio of lookers-to-bookers, driving more sales.

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Topics: Aviation, Revenue Management

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Why Branded Fares Aren't Just About Upsell

Airlines that offer branded fares love to talk about upsell. “30% of passengers choose to purchase one of the upsell bundles!” (Hurrah) They conclude by “Branded fares are working”. This, however, is not the best way to look at branded fares, and is typically not the main reason airlines are increasingly offering such re-bundling of ancillary services.

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What It Takes to Be a Leader in Airline Revenue Management

Wall Street has been famous for paying highly-analytical “rocket scientists” millions in annual compensation to identify lucrative trades and to place high value financial bets. Arguably, airlines have an equivalent function in revenue management where complex algorithms are used to maximize revenue need to be managed,

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Topics: Aviation, Revenue Management

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