Monitoring and the Audit Process

5

Optimizing Airline Revenue

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How Voyage Airlines Will Optimize Airline Revenue

Voyage operates in the airline industry where there is constant fluctuation of airline costs that leave managements confused. There are also many other airline companies offering the same services and in the management of revenue, pricing plays a huge role in influencing important aspects such as increasing market share, increased product development, and penetrating new markets. There is complexity in pricing with many factors contributing to constant changes in prices. “Because the average airline operating profit is just 3%*, it’s crucial that airlines use effective pricing strategies to make the most money for their products – while maintaining affordability for their customers” (Fairfly, 2021). Therefore, Voyage has to price more precisely to optimize revenue by;

Passenger Profiling and Customizing the Travel Customer Offer

Voyage will profile its customers and adjust prices accordingly. It can group passengers as either leisure or business classes and ensure different prices that suit each group. This strategy will help Voyage increase customer impact and their satisfaction. For instance, fairs can be higher for leisure travels who book months before their departure. The prices can be low for business travelers who book when they need to travel. This will ensure that all types of travelers are accommodated and the airline will maintain its customers. Voyage has to understand which routes are mostly taken by business travelers and those taken by leisure travelers. Prices must be designed to suit every route and the type of passengers that go there.

Bundle Pricing

Voyage has to understand its customers and generate custom prices that suit their individual attributes. The prices designed must consider a wide range of factors such as supply and demand, traveler’s history with Voyage Airline, the initiatives of the company, and pricing by its competitors. According to Shao and Kauermann (2020), considering all these factors will ensure the Airline prices fairly or even generate better prices that will allow it increase its revenue. Its pricing strategy will allow it to beat its competitors’ pricing and make higher profit margins from its services.

Building A Pilot Project

Voyage will do a test and understand what works for its model of business by measuring attribute-level customization. This will help the company determine optimum prices for each class and the highest possible amount each customer is willing to pay for a flight. They will then devise effective strategies of offering that price. According to Boin et al., (2017), the company can use customer travel profiles, purchasing patterns, number of passengers that book in a day, and the origin and destination of passengers. This information will allow voyage classify their customers and services effectively while designing differentiated offers and optimizing total revenue.

Discovery/Research

Aside from intelligence gathering, Voyage has to focus on research to capture revenue opportunities. With the growth in the airline industry and more route openings, travel frequencies are increasing and Voyage should continuously monitor the market and the evolutions taking place. The company will identify any variations and improve its demand projection processes when there is need. It has to adapt its prices and other offers to the changing business environment in the airline industry. To capture any revenue opportunities, Voyage has to stay close to the market, increase its surveillance, study all the activities and signals, and quickly adapt its strategies and tactics.

References

Boin, R., Coleman, W., Delfassy, D., & Palombo, G. (2017). How airlines can gain a competitive edge through pricing. McKinsey. Retrieved from McKinsey website: https://www. mckinsey. com/~/media/McKinsey/Industries/Travel% 20Transport% 20and% 20Logistics/Our% 20Insights/How% 20airlines% 20can% 20gain% 20a% 20competitive% 20edge% 20through% 20pricing/How-airlines-can-gain-a-competitive-edge-through-pricing. ashx.

Fairfly (2021). Top five pricing trends in airline revenue management. Retrieved from https://www.fairfly.com/insights/top-five-pricing-trends-in-airline-revenue-management/

Shao, S., & Kauermann, G. (2020). Understanding price elasticity for airline ancillary services. Journal of Revenue and Pricing Management, 19(1), 74-82.