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The Magnificent World of the Airlines

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Nowadays traveling by plane is more affordable than ever before. Has it always been like that? We are going to look in the past, briefly talk about the ticket price evolution over the last decades, the disruptive appearance of the low cost airlines. After that we are going to take a look at the systems which form the backbone of the commercial aviation, so we can answer the question on what is actually happening under the hood during the ticket purchasing process. Does it have anything to do with economics, supply and demand?

Published in: Technology
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The Magnificent World of the Airlines

  1. 1. The Magnificent World of the Airlines
  2. 2. About the Author Vitaly Sekunov • 8 years in Airline Industry • Business Analyst • Project Manager • Product Owner • VBA + SQL Developer
  3. 3. Evolution of Ticket Prices
  4. 4. In the past: elite customers paying a lot Low Cost Airlines vs Legacy Airlines
  5. 5. How much is Actually “a Lot”?
  6. 6. 68$ => 575$ according to today’s rate (* 8.5)
  7. 7. Low Cost Airlines vs Legacy Airlines Now: the situation is changing Price Year Legacy Low costs
  8. 8. How do You Buy a Ticket?
  9. 9. I would Like to Travel to … Booking is created Airline Systems
  10. 10. “Prices on the Website are Never Real!” Booking is created Airline Systems Cached prices
  11. 11. Airline Systems
  12. 12. Reservation System It is a system that contains all information about the passengers travelling with a given airline.
  13. 13. Global Distribution System An airline distributing via Global Distribution System allows every travel agent in the world to sell its tickets.
  14. 14. Can Travel Agents Sell Cheaper than an Airline Website?
  15. 15. Inventory System Booking Class is a bucket that contains different fares. Y S M B … 2 4 3 1 … SeatsBooking Class 500€ 450€ 400€ 350€ Inventory indicates how many seats in each Booking Class are available for sale.
  16. 16. Who Optimizes that?
  17. 17. What is Revenue Management? Revenue Management is all about selling the right seat to the right customer at the right time for the right price via the right channel.
  18. 18. Revenue Management System Historical data analysis Demand forecast Optimization Maximized revenue Human decisionsOptimization
  19. 19. Revenue Management Systems: Leg vs Origin & Destination VS Leg based system: Optimize the traffic on one street of the city Origin & Destination system: Optimizes the traffic of the whole city
  20. 20. When to Buy a Ticket?
  21. 21. Demand Segmentation Different categories of customers are coming in at different points in time Each Revenue Manager keeps in mind: • Don’t sell too early! • Don’t sell too late! • Departed free seat cannot be re-utilized! price days before departure60-30
  22. 22. Importance of Connecting Passengers 10 12 10140 Total number of seats: 172
  23. 23. Additional Products
  24. 24. Blind Bookings
  25. 25. Betting for an Upgrade
  26. 26. Hack the Price, Anyone?
  27. 27. Human Factor Errors from www.airnguru.com
  28. 28. Can Airline Employees Fly for Free?
  29. 29. Overbooking
  30. 30. What is Overbooking? Overbooking is the practice of selling more tickets than there are seats.
  31. 31. Why does Overbooking Exist? It is not banned by most of the governments (except Russia, for example) In Europe ~4-5% of passengers do not show up at the gate Revenue of passengers coming last minute > overbooking compensation
  32. 32. Future of Overbookings Discussions about the economics of overbookings restart again after the United fiasco This very unfortunate incident costed them ~1 billion USD and counting
  33. 33. Thank You!

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