Ancillary revenue plays a crucial role for most airlines, not only for low cost carriers, but increasingly for full service carriers. In fact, according to McKinsey, revenue from ancillary offers – such as that derived from premium seat selection, baggage fees, priority boarding, and partner hotel and car rentals – generates around $55 billion annually for the aviation industry.
Traditionally, ancillary revenue and airfare have been managed separately through the airline distribution system or retailing solutions. Ancillary pricing processes are often static and provide revenue managers little revenue insight. This disconnect has prevented airlines from accessing real insight into how changes to fares can affect ancillary revenues, as well as hindering the realization of the true value of ancillaries as a component of total revenue performance.
Despite this, revenue from ancillaries is a key driver of profit for most airlines. There is an exciting opportunity to deliver truly powerful, revenue-optimizing results by overcoming the challenges of legacy systems and harnessing the power of deep learning, a cutting-edge form of AI.
Total revenue optimization
At FLYR, we have set out to equip airlines with the tools they need to maximize revenue from flight fares, ancillary offers, and cargo capacity, giving airline analysts the ability to manage and forecast total revenue generated by each flight.
The Revenue Operating System® uses deep learning to draw understanding directly from dozens of data sources. This allows our airline partners to make ultra-accurate revenue forecasts and automate optimal ancillary pricing strategies. Offering this as an integrated solution that consolidates data across flights, ancillaries, and offers allows airlines to make decisions based on the full context behind each data point, reducing forecasting errors and enhancing decision making.
Because The Revenue Operating System automates the majority of day-to-day pricing decisions while continuously learning from previous offers, analysts can manage the more complex offers the airline sees. The result is that airlines base decisions on the full picture – understanding how fares, fare families, and ancillary transactions relate to each other, with fare changes and their effect on ancillary revenues visible in one integrated solution.
The power of deep learning for total revenue optimization
Now is the time for airlines to unlock their total revenue potential. Deep learning enables airlines to provide total revenue forecasts for each flight and understand the dependencies between the flight, bundles, and ancillary optimization. At the same time, integrated pricing strategies maximize total revenue and allow airlines to optimize their competitive market position.
Similarly, while customer shopping data and look-to-book conversion rates have long been available, it has been difficult to quickly generate valuable insight from this data. FLYR’s deep learning approach detects patterns beyond human capabilities, applying customer segmentation earlier on the booking curve and enabling airlines to provide travelers with intelligent dynamic offers. Deep learning also gives carriers the ability to react more quickly to market changes and surges in demand.
Advanced customer segmentation, as well as integrated revenue management and offer and order management solutions, helps airlines to quickly adjust the pricing strategy when required to increase the conversion rates of different customer segments. Leveraging deep learning, airlines can predict how a change in conversion rate boosts total ancillary revenue, ensuring that decisions need not be based on a single revenue stream, but rather on the full context. This allows for smarter decision-making, and turbocharges airline profitability through powerful pricing strategies. In other words, FLYR’s revenue operating system allows airlines to set optimal total revenue management strategies while maximizing the willingness-to-pay for each request, at shop or through any other customer touchpoint.
Watch this video to learn more about how The Revenue Operating System allows airlines to provide the right ancillary offers at the right price and at the right time while optimizing ancillary and total revenue.
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