AIRLINE YIELD May MANAGEMENT 2009

VKRB Frau Prof. Schusteritsch

Julius Neubauer, 5BT Kärntner Tourismusschulen Warmbad Villach

Airline Yield Management 2009

I. PREFACE As the global financial crisis continues to expand, it becomes increasingly important for companies of each economic sector to ensure and optimize its revenues. already recognized this in the late 70s, when the airline deregulation act was signed into law by the President of the United States of America. The purpose of this act was to remove governmental control over fares, routes and the market entry of new airlines. This led to an oversaturation of capacities in this market because within a few years many new private airlines emerged. In this time they were constantly keen on improving their cost structures to remain competitive. This was yield management’s hour of birth. Yield Management enabled airlines to dynamically adjust fares according to demand and to appeal to different target groups by offering customized rates. The basic consideration of Yield Management is to sell goods or services for the highest price a customer is willing to pay. To achieve this it utilizes several techniques, all explained in detail in the course of this skilled work. I decided to choose Yield Management because I think it’s one of the most important processes for airlines. Being in proper use, it enables companies to stimulate demand, adjust fares and make crucial decisions on seat allocation. During my research I read several books and dissertations which gave me a many-sided insight on this matter. It was very interesting to compare the different points of view of each author and hence draw my own conclusions. But I also encountered a few problems. In search of information for a case study on how airlines actually imply yield management, I figured out that this information is considered confidential. So, all airlines that I was in correspondence with rejected my requests. To prove this, I decided to attach two emails in the appendix.

II. DECLARATION OF INDEPENDENCE

With these words I am declaring that I have written this skilled work on my own, that I have just used the stated records and that I have submitted this skilled work nowhere else for examination purposes.

Villach, May 2009 Julius Neubauer

Julius Neubauer 2

Airline Yield Management 2009

III. TABLE OF CONTENTS

I. PREFACE ...... 2 II. DECLARATION OF INDEPENDENCE ...... 2 III. TABLE OF CONTENTS ...... 3 IV. TABLE OF FIGURES ...... 4 V. PASSENGER AVIATION IN GENERAL ...... 5

1. EUROPEAN BEGINNINGS ...... 5 2. AMERICAN BEGINNINGS ...... 5 3. AIRLINES TODAY ...... 6 4. STRATEGIC ALLIANCES ...... 8 A. Development ...... 8 B. Alliances today ...... 8 I. Star Alliance ...... 8 II. oneworld ...... 9 III. SkyTeam ...... 9 C. Aims and benefits of strategic alliances ...... 10 5. CODE SHARING ...... 10 A. Advantages ...... 10 B. Disadvantages ...... 11 VI. YIELD MANAGEMENT 101 ...... 11

1. DEFINITION ...... 11 2. DEVELOPMENT ...... 12 3. REQUIREMENTS FOR THE IMPLEMENTATION OF YM...... 13 VII. INSTRUMENTS USED BY YIELD MANAGEMENT ...... 14

1. MARKET SEGMENTATION ...... 14 2. PRICE DIFFERENTIATION ...... 16 3. CAPACITY MANAGEMENT ...... 19 A. Price/Quantity Management ...... 20 I. Demand Management ...... 20 II. Data Acquisition and Forecasting ...... 21 III. Allocation ...... 22 1. Limiting curves ...... 23 2. Constant allocation ...... 24 3. Nesting ...... 25 4. Network Yield Management ...... 26 B. Overbooking Control ...... 28 VIII. SOFTWARE - NAVITAIRE “SKY PRICE” ...... 31

1. COMPANY OVERVIEW ...... 31 2. “SKYPRICE” ...... 32 IX. CONCLUSION ...... 33 X. APPENDIX ...... 34 XI. BIBLIOGRAPHY ...... 39

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Airline Yield Management 2009

IV. TABLE OF FIGURES

Figure 1: US Airline route structure before the Second World War...... 5 Figure 2: US-Airline development from 1914 to 1928 ...... 5 Figure 3: Development of airlines compared to strategic alliances...... 8 Figure 4: Member airlines ranked by passenger numbers ...... 9 Figure 5: Aims and benefits of strategic alliances ...... 10 Figure 6:Boarding Pass of a code shared flight: ...... 11 Figure 7: Basic idea of yield management ...... 11 Figure 8: Correlation between marketing and YM ...... 12 Figure 9:US-Airline route structure after deregulation in 1978 ...... 13 Figure 10: Typical timeline of reservations of private and business travelers ...... 16 Figure 11: Developement of passenger volume in , sorted by occasion ...... 16 Figure 12: Impact of price ranges on the contribution margin ...... 17 Figure 13: From price differentiation to YM ...... 18 Figure 14: Course of booking without demand management ...... 20 Figure 15: Impact of DM on the revenue ...... 21 Figure 16: Splitting of physical- into virtual compartments ...... 22 Figure 17: Predicted course of booking calculated by a forecast model ...... 23 Figure 18: Calculated puffer zones ...... 23 Figure 19: Fully implemented limiting curve ...... 23 Figure 20: Static allocation of virtual compartments (VC) ...... 24 Figure 21: Basics of nesting ...... 25 Figure 22: Hub and spoke system ...... 26 Figure 23: Value of different legs and itineraries...... 27 Figure 24: Virtual Nesting for MUC – DUB (via STN) ...... 27 Figure 25: Load factor on a non-overbooked flight ...... 28 Figure 26: Load factor on a overbooked flight without restrictions ...... 28 Figure 27: Load factor on a flight with optimized overbooking rate...... 29 Figure 28: Calculation of optimal overbooking rate ...... 29 Figure 29: Graduated overbooking rate ...... 30

Julius Neubauer 4

Airline Yield Management 2009

V. PASSENGER AVIATION IN GENERAL

1. EUROPEAN BEGINNINGS On November 20th, 1909, Ferdinand Graf von founded the world’s first airline, based in am Main. The “DELAG” (German Corporation) carried more than 34.000 passengers between 1910 and 1913. The “DELAG“ was followed by further companies. In 1913 a large-area transportation network existed between Düsseldorf, Baden-Oos, -Johannistal, Gotha, Frankfurt am Main, Hamburg, Dresden and Leipzig. The foundation of the “ AG” in January 1926 is considered a big step forwards in the European passenger aviation. It resulted from the merge of the two leading German airlines: “Deutscher AG” and “Junkers-Luftverkehrs AG”. This emerging state-run airline was very fast-paced. So the “Luft Hansa” was able to take up business to Far-East and South American destinations already one year after its foundation. 1 founded in KLM 1919 Further important airlines at this time: Air France 1933 Aero O/Y (nowadays Finnair) 1924 Aircraft Transport and Travel 1919 Imperial Airways 1923 2. AMERICAN BEGINNINGS The American civilian route structure was developed merely sporadic in the nineteen- twenties (see fig. 2). It was rather designed for the transportation of airmail. This changed as soon as the “Ford Trimotor” (A propeller-driven aircraft with capacity for twelve passengers) was introduced in 1925. This is considered the FIGURE 1: US AIRLINE ROUTE STRUCTURE BEFORE starting shot for the boom of passenger aviation THE SECOND WORLD WAR. in America. Number of US-Airlines An even more exhilarant event was the first solo- 30 by Charles Lindbergh on May 19th, 1927. Since then the number of US- 20 2 airlines has nearly doubled (see fig. 1). 10

FIGURE 2: US-AIRLINE DEVELOPMENT FROM 0 1914 TO 1928 1914 1918 1922 1926 1928

1 cf. Fluggesellschaft, http://de.wikipedia.org/wiki/Fluggesellschaft, As at 27.1.2009 2 cf. Airline, http://en.wikipedia.org/wiki/Scheduled_air_transport, As at 26.1.2009 Julius Neubauer 5

Airline Yield Management 2009

The most important airlines at this time were: founded in Delta Air Lines 1924 United Air Lines 1926

Eastern Air Lines 1926 Northwestern Air Lines 1926 3. AIRLINES TODAY American Airlines 1930 An airline generally provides air transporation services for passengers or freight, generally with a recognized operating certificate or license. Nowadays, airlines can be divided into network-, charter- and low-cost carriers:

Network Carriers:

A network carrier is a carrier that provides scheduled flight services within a hub & spoke (see figure 22) system.3 They are often state-run (Flag carriers) but most commonly in private ownership, or with a governmental share.  State-run airlines: (Flag carriers) This means state-run and financed airlines. They are also called flag carriers because they are considered to be an object of prestige, carrying the ensign on each aircraft. The term “Flag carrier” is a legacy from the time when countries founded state-run airlines. Aviation rights were often negotiated between governments, denying private airlines an open market. So, many nations were forced to launch airlines to remain competitive. Some countries also launched them for nationalist reasons and to stimulate its economy.4 But a flag carrier does not have to be state-run, as long as it is designated by a country’s government. Due to the availability of public funds, flag carriers aren’t so much exposed to market fluctuation as a private carrier would be. Examples are: EgyptAir, Emirates Airlines (fully state-owned) Air France, Alitalia (partial governmentally share) , Quantas (private ownership)

Charter airlines:

This means airlines, that normally do not offer own flights, but flight services to individuals, tour operators and other tourism businesses. It differs itself from network carriers as it does not sell tickets directly to the customer. In most cases a charter company sells certain contingents to travel agencies, companies or even sports teams.

3 cf. Airline, http://en.wikipedia.org/wiki/Scheduled_air_transport, As at 14.3.2009 4 cf. Flag carrier, http://en.wikipedia.org/wiki/Flag_carrier, As at 15.3.2009 Julius Neubauer 6

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They also distinguish themselves from “regular” airlines through the airports they serve. Whilst large network carriers use established hub & spoke networks, charter airlines offer only point-to-point flights, serving smaller, remote airports in order to minimize costs and offer faster connections.5 Furthermore, charter airlines are expected to offer lower fares than network carriers. To reach this, intergovernmental, conditional agreements were made to relieve them of taxes and dues. Two of these conditions were:  A charter flight may only be offered in conjunction with a touristic service  Tourists arriving by charter may only depart by a charter flight. Hence, the lower fares result from:  very high load factors (90% and above)  guaranteed sale of the total or partial capacities through travel agencies or others  lower landing fees at remote airport  ticketing and administration savings (ticketing is usually done by travel agencies) The most established charter airline is the German Airline. It is a subsidiary company of Lufthansa.

Low-cost carriers:

A low cost carrier is an airline that offers very low fares by focusing on the core service of a flight, the transportation without any frills. The low fares are achieved by restrictions on flexibility, service and in-flight-comfort. Free rebooking to other flights is either impossible or connected with extensive costs for the customer, on-board meals are available, but pricy and departure- and arrival airports are often away from international airports. They mostly offer short- and medium-haul-flights at notably lower fares. Their profit results particularly from a higher load factor. But these are only the measures that can be noticed by the customer. However there are several measures set in the background:  uniform fleet (lower maintenance costs)  short turnaround times  single-class cabin  minimum crew (as permitted by law) Established European low-cost carriers are: Ryanair, Easyjet, SkyEurope and .6

5 cf. Air charter, http://en.wikipedia.org/wiki/Air_charter, As at 15.3.2009 6 cf. Fluggesellschaft, http://de.wikipedia.org/wiki/Fluggesellschaft, As at 24.1.2009 Julius Neubauer 7

Airline Yield Management 2009

Attached in the appendix you can find up-to-date statistic and transportation numbers.

4. STRATEGIC ALLIANCES A strategic alliance is seen to be a cooperation amongst aviation companies. At the same time each single company remains legally independent, but coordinates certain elements like booking systems, frequent flyer programs, interconnecting flights and “lease” contingents of seats among themselves (code sharing).7

A. DEVELOPMENT The first international strategic alliance was founded in 1986, as Air Florida and British Airways agreed to operate the route London – Amsterdam code shared. By the end of the nineties the formation of alliances was favored by the economic crisis in south- and East Asian tiger states and constantly increasing kerosene prices. Figure 3 illustrates the historic development of airlines versus strategic alliances:8

Year 1994 1995 1996 1997 1998 1999 2000 2001 Airlines 136 153 159 177 196 204 220 200 Alliances 280 324 389 363 502 513 579 501

FIGURE 3: DEVELOPMENT OF AIRLINES COMPARED TO STRATEGIC ALLIANCES

B. ALLIANCES TODAY At present three global alliances exist:  Star Alliance  OneWorld  SkyTeam

I. STAR ALLIANCE Star Alliance was founded in 1997 as the worldwide first strategic merge of Air Canada, Lufthansa, SAS, Thai Airways International and United Airlines. The code shared (see page 10) operation of several routes began in the very same year. Today it counts more than twenty members and carries nearly 500 million passengers per year. Its fleet counts 3325 aircrafts, which serve 912 airports in 159 countries.9

7 cf. Allianz (Luftfahrt), de.wikipedia.org/wiki/Allianz_(Luftfahrt), As at 20.1.2009 8 cf. Sterzenbach, Conrady, Luftverkehr, Betriebswirtschaftliches Lehr- und Handbuch. München/Wien: Oldenburg Verlag 2003, Page 205 9 cf. Facts&Figures, http://www.staralliance.com/de/press/facts_figures/index.html, As at 16.1.2009 Julius Neubauer 8

Airline Yield Management 2009

II. ONEWORLD In September 1998 American Airlines, British Airways, Canadian Airlines, Cathay Pacific and Quantas formed oneworld with the intention of generating more value for customers, shareholders and employees than any airline can achieve by itself. In 2008 oneworld has carried 320 million passengers using 2200 aircrafts, operated 3,5 million flights around the globe and generated a revenue of 100 billion US$.10

III. SKYTEAM Delta Air Lines and Air France agreed to a partnership in 1999. Subsequent to the joining of Aeromexican and Korean Air, the SkyTeam was formed. The Alliance serves 905 destinations in 169 countries. Furthermore it has 2500 aircrafts at its disposal, annually carrying 462 million passengers. A remarkable fact is that one third of them are members in frequent flyer programs. 11

Figure 4 illustrates the main member airlines ranked by passengers transported each year:

•United Airlines •American Airlines •Delta Air Lines •US Airways •British Airways •KLM

•Lufthansa •Iberia •Air France SkyTeam

•All Nippon Airways OneWorld •Quantas •Continental Airlines •Air China •Cathay Pacific

Star Alliance Star •China Southern Air •Air Canada •Aer Lingus •Korean Air •SAS •Finnair •Alitalia •Singapore Airlines •Lan Chile •Aeromexico •Turkish Airlines •Royal Jordanian •Czech Airlines

FIGURE 4: MEMBER AIRLINES RANKED BY PASSENGER NUMBERS

10 cf. Introduction to oneworld, www.oneworld.com/factsheet/W1_2009-01-08 introduction to oneworld.pdf, As at 27.1.2009 11 cf. skyteamFactSheet, www.skyteam.com/downloads/news/facts/skyteamFactSheet.pdf, As at 27.1.2009 Julius Neubauer 9

Airline Yield Management 2009

12 C. AIMS AND BENEFITS OF STRATEGIC ALLIANCES

Market-directed Business-directed Customer aims aims benefits

Market Flight-plan development Coordinated supply enhancement (through (planes, fuel) (more destinations, codesharing) better coordinated)

Technical Frequent flyer Increase of cooperation programs notoriety and image (DP, Maintainance) valid intraalliancial

Lower fares Joint marketing (according to studies, fares of alliance members are about 29% lower)

FIGURE 5: AIMS AND BENEFITS OF STRATEGIC ALLIANCES

5. CODE SHARING Code sharing is an often used means for load factor increase and the “expansion” of route structures in strategic alliances The term „code sharing“ is used if two or more airlines share capacities on a scheduled flight. Each airline involved lists this flight on their own flight schedule with their own flight number but it is conducted by only one of the partners, the so-called operating carrier. This allows airlines to offer flights that aren’t even conducted by themselves but by alliance members (expansion of route structures). 13

A. ADVANTAGES  Linkage of route structures: Joint marketing of certain routes only makes them profitable.  Decrease of competition between code sharing-partners.  Small airlines take advantage of bigger carrier reputations and big airlines vice versa benefit from favorable cost structures.

12 cf. Sterzenbach, Conrady, 2003, Page 207 13cf. Codesharing, http://de.wikipedia.org/wiki/Codesharing, As at 2.2.2009 Julius Neubauer 10

Airline Yield Management 2009

B. DISADVANTAGES  Massively increased coordination effort: Changes on the flight plan of competitors can affect the load factor of own flights.  Quality standards of operating carriers don’t always match those of code sharing partners. This can cause a negative overall impression for the passenger.14

FIGURE 6:BOARDING PASS OF A CODE SHARED FLIGHT: OPERATING CARRIER: HLX CODESHARING-PARTNER: DLH

VI. YIELD MANAGEMENT 101

1. DEFINITION Yield Management is the process of integrated price- and capacity management with the objective of splitting a total capacity given into partial capacities and to assign them to different price ranges in order to achieve a revenue optimization and profit maximization within the entire route structure of an airline. 15 Airlines can usually achieve a 3-5% growth in revenues. Lufthansa estimates its additional revenues caused by the implementation of Yield Management System at 0,9 billion $ in 1997.16 The basic consideration is demonstrated by the following example: An airline offers a flight from destination A to destination B. On this route two fares are available: The full fare rate for 125€ or the discount fare for 75€, which has to be booked early in advance:

Sell at Discount Fare: Discount 75€ Flight from Full-Fare: A to B Sell at "Full-Fare" 125€ Do not sell at Discount Do not sell 0€

FIGURE 7: BASIC IDEA OF YIELD MANAGEMENT

14 cf. Sterzenbach, Conrady, 2003, Page 202 15 cf. Weiß Matthias,Häußler Steffen: Yield Management – Konzepte und Techniken. Studienarbeit, University of Hohenheim, 2005, Page 1 16 cf. Christoph Weber: Revenue Management am Beispiel von Airline Revenue Management, Hauptseminararbeit, University of Köln, 2007, Page 11 Julius Neubauer 11

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Now the question poses itself, whether the airline should accept the booking request for one discount-fare ticket at an early point, or if it should wait until a full fare-request emerges. But the second option involves the risk of not selling the seat at all. Yield Management contains several instruments and techniques. It assumes that a service is sold to different customers at different times at different prices. 17 Furthermore a powerful IT infrastructure has to be given to analyze historic data from databases and calculate forecast models out of them. Often also the term revenue- or profit management is used. This derives from the fact, that “yield” (in airline business) defines the revenue per passenger kilometer. Through its integrated pricing component it is linked closely to marketing.

The figure below illustrates this correlation:

Marketing Yield Management

Product Price Capacity Management

Communication

Overbookings Price/Quantity -Management Distribution

FIGURE 8: CORRELATION BETWEEN MARKETING AND YM

2. DEVELOPMENT The very beginnings of Yield Management can be found in the early sixties. At that time the first controlled overbookings were allowed. This means that more seats were sold than actually available. 18 As the American air transportation industry was deregulated in 1978, and airlines were abruptly allowed to coordinate their destinations and fares themselves, a rapid development of Yield Management succeeded due to fast emerging business competition.

17 cf. Fricke Marco: Yield Management am Beispiel einer Fluglinie. Studienarbeit, University of Hamburg, 2005, Page 2 18 cf. Sterzenbach, Conrady, 2003, Page 335 Julius Neubauer 12

Airline Yield Management 2009

After the Airline Deregulation Act was signed into law by Jimmy Carter, 128 new airlines appeared. This led to extensive overcapacities on the major routes and hence to serious decline in prices (The flight price index dropped from $100 in 1977 to $87 in 198619). Through the favorable cost structures of smaller low cost carriers, the big major airlines got into pressure to act because the market share of private carriers rose and they could not keep up with the aggressive price-dumping. 20 So, the major airlines were forced to diverge from their present rate models and use more flexible sales strategies. Therefore, Yield Management Systems were invented and implemented to protect the high-yield segment and at the same time compete against the low-yield segments of low cost carriers. 21 First to mention in this case is American Airlines. American Airlines already introduced a capacity-controlled discount fare in 1975, called “Super-Saver”. At this special fare, a specific contingent of seats is reserved for later booking business travelers, but at higher rates. 22 The success of this uprising concept was remarkable. The increase in sales of American Airlines was numbered at 221% from 1978 to 1988 and new competitors were squeezed out of market within one year.

FIGURE 9:US-AIRLINE ROUTE STRUCTURE AFTER DEREGULATION IN 1978

3. REQUIREMENTS FOR THE IMPLEMENTATION OF YM For the successful implementation of Yield Management Systems, certain requirements should be fulfilled: 23  Perishability of services: A service expires if it isn’t used and can consequently not be sold any further (ie: seats on a flight, hotel rooms). The service “perishes”.  Possibility of market segmentation: In travel- and in touristic businesses as well as in airlines the target markets can be well segmented into 2 main segments: business and private. Through different rates, the willingness to pay of each individual segment can be well exploited.

19 cf. Axt Martin: Yield Management bei Fluggesellschaften. Hausarbeit, University of Eichstätt-Ingolstadt, 2004, Page 2 20 cf. Weiß, Häußler, 2005, Page 1 21 cf. Sterzenbach, Conrady, 2003, Page 336 22 cf. Weiß, Häußler, 2005, Page 1 23 cf. Axt, 2004, Page 3 Julius Neubauer 13

Airline Yield Management 2009

 Sale of a product prior to its use: This is essential for the application of Yield Management Systems, because otherwise Price/Quantity Management would be impossible.  Fluctuating demand: The demand fluctuates in course of time. Without this factor, Yield Management Systems would be unnecessary, because at a static demand, cost structures and available capacities could be adjusted.  Strictly limited possibilities of capacity adjustment: Available capacities cannot be increased or reduced without major difficulties.24 Considering these requirements, it’s obvious that passenger aviation is almost predestined for the implementation of Yield Management Systems. In the meantime Yield Management is already being successfully implemented by car rentals, in the hotel industry and at big events (i.e. concerts).

VII. INSTRUMENTS USED BY YIELD MANAGEMENT The form of Yield Management that Airlines use is an extremely complex one. It utilizes several instruments and techniques, which I would like to explain on the following pages:

Market segmentation

Price differentiation

Capacity Management

1. MARKET SEGMENTATION To split a market up into single segments, you first have to determine its complete potential. This means the- under certain conditions- achievable- total revenue on this market. Related to airlines this means to determine the total demand of transportation within the entire route structure. Subsequent, the total demand can be assigned to the individual segments.

24 cf. Sterzenbach, Conrady, 2003, Page 338 Julius Neubauer 14

Airline Yield Management 2009

The segmentation of a total market often becomes necessary because it consists of demanders that differentiate themselves by the experienced benefit of a service and their price elasticity. The carrier can leverage these differences by offering different rate models that are individually shaped to each market segment’s requirements.

The objective of market segmentation is to split the collectivity of demanders into individual segments on the basis of different criteria. These segments should in themselves be as homogeneous (having the same claims) as possible but to one another as heterogeneous (different) as possible. The results of this procedure then provide a basis for price differentiation. 25

In passenger aviation two major segments can be can be clearly distinguished from each other: Private and business travelers. These two major segments show several varieties regarding their behaviors and claims.26

Private travelers:

Private travelers basically differ from business travelers in their behavior of booking. They generally book their tickets far in advance and have high price sensitivity. Private travelers mostly choose the lower-priced fare, which is often linked to unfavorable restrictions as for example no free of charge rebooking and cancellations. But these restrictions are not relevant for private travelers because they assume that they will definitely be able to catch the booked flight.

Business travelers:

Business travelers on the other hand book their tickets on short notice. Therefore their price sensitivity is considerably lower than that of private travelers. They appreciate the superior flexibility and comfort that higher priced tickets offer. Thus most business-fares include amenities such as free of charge rebooking and cancellations until take-off. These amenities are essential for the business traveler because day-to-day business involves rescheduling appointments and cancellations which often preclude from showing up in the end. Another reason why people book business fares is that thereby the access to airport lounges is granted. In these areas that are marked out from regular waiting halls, all facilities necessary to proceed regular work during the waiting period are given. These lounges nearly always dispose of wireless internet access, laptop power supplies and sometimes restaurants, bars, shower rooms and sleeping accommodations.

25 cf. Fricke, 2005, Page 14 26 cf. Sterzenbach, Conrady, 2003, Page 345 Julius Neubauer 15

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FIGURE 10: TYPICAL TIMELINE OF RESERVATIONS OF PRIVATE AND BUSINESS TRAVELERS Number of reservations Private traveler Business traveler

Days before 0 364 departure

FIGURE 11: DEVELOPEMENT OF PASSENGER VOLUME IN GERMANY, SORTED BY OCCASION

250

Private 200 Business 150

100

50

0

1976 1983 1990 1997 2004 2011 2018

2. PRICE DIFFERENTIATION Price differentiation is on hand if a provider offers identical or marginal different services to different segments of a market at different prices. 27 Related to an airline, this definition can be explained as follows: The market segmentation has shown that different customers are up to pay different prices for nearly equal services (A flight from A to B, in this case). As already mentioned there are two major segments on the aviation market: the very price sensitive private travelers, who book their tickets far in advance and the business traveler, who books on short notice and is not as price sensitive. Based on these findings new rate models can be established that satisfy the claims of each segment and benefit the contribution margin and load factor of all capacities available:

27 cf. Weiß, Häußler, 2005, Page 4 Julius Neubauer 16

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 A low-priced rate that is though endued with serious restrictions (called fences). Classic fences of economy-fares are for example lower baggage limit, limited service on board, the “Saturday night rule” and rebooking at extra charge.

 And a higher priced one with amenities like free rebooking and cancellations and free access to airport lounges.

The thereby offered services can differ in space and on board service offered, but the essential benefit (the flight A – B) remains the same for all passengers. 28

90 80 83,3 75 80 67 70

60 50 50 40

30 20 10

% of possible possible of %contribution margin 0 1 2 3 4 5 Price Ranges FIGURE 12: IMPACT OF PRICE RANGES ON THE CONTRIBUTION MARGIN This figure shows that the introduction of additional booking classes can lead to an increased possible contribution margin and with it a higher profit. But on the other hand also the complexity of a Yield Management System rises with each additional booking class introduced. This involves higher costs for customer information, marketing and administration.

The objective of price differentiation is to fully exploit the willingness to pay of each single customer by offering different booking classes. The correct economical term for this procedure is skimming of customer surplus. This means the difference between the price charged and the maximum price that the customer would be willing to pay for a certain good or service.29

28 cf. Fricke, 2005, Page 18 29 cf. Weiß, Häußler, 2005, Page 4 Julius Neubauer 17

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Yield Management differentiates prices as follows: 30

 By compartment: First/Business/Economy  By time of booking: Early bird discount, last minute offers  By season: Strong or poor demand  By region: by airports of departure/arrival (special airport surcharges) (also called Origin and Destination, O&D)  By destination: National/Continental/Intercontinental  By quantity: by amount of participating persons (volume discount)  By sales channel: online-only fares, direct booking cheaper than booking via agency In airline business, price differentiation is always linked to a quantity component. As apparent from figure 13, a seasonal price differentiation charges different prices at different times (higher prices on strong demand and lower prices on poor demand). Now one might expect that only low fares are offered on poor demand and vice versa. But this shapes up as wrong, because merely the size of contingents (the amount of seats available) is adjusted (according to demand). This means: The majority of seats is sold at low prices on poor demand but a small contingent is reserved to customers willing to pay a higher price. This gets done to still be able to satisfy the higher-value demand of business travelers (see figure 14 on page 20).

Price Seasonal price fluctuation

Price Time Price Weekly price fluctuation P1 P2 P3

Mo Di Mi Do Fr Sa So Time Contingent P3 Price

Contingent P2

Daily price fluctuation Contingent P1

02:00 – 19:00 19:00-02:00 Time FIGURE 13: FROM PRICE DIFFERENTIATION TO YM

30 cf. Sterzenbach, Conrady, 2003, Page 344 Julius Neubauer 18

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3. CAPACITY MANAGEMENT At a constant rate of demand it would be sufficient to apply a differentiated pricing system to assure an optimal revenue and profit. Unfortunately, customers demand underlies permanent fluctuation. This can be caused by seasonal courses, sport events, conventions, political and economical occasions.

Based on the assumption that customers with a lower willingness to pay book their flights earlier than such with a higher one, it’s the objective of capacity management to reserve enough capacities for late booking (and less price sensitive) segments of a market. The calculation of the optimal contingent size thus involves trading off the risk of unassigned higher-priced seats against the “safe” revenue on low-priced seats that are booked early in advance. 31

A further problem is that possible cancellations and rebooking just before take-off can cause unused capacities. These are often enlarged through so called „no-shows“ (this means passengers that have already booked a flight, but fail to show up in the end) even more. A behavior like this can be observed in day-to-day business because it sometimes doesn’t allow a passenger to show up in the end. Especially noteworthy is that no-shows remain without any financial consequences, if the customer has booked a full-fare-ticket. Otherwise the customer often has no claims of restitution and the ticket simply expires.

Due to all above mentioned risk factors, airlines generally accept more bookings than capacity allows. One talks about overbooking. But such an approach can lead to passengers being refused boarding on the day of departure (generating additional costs) because the cancellations and no-shows hoped for, did not occur and hence did not compensate for the overbooked capacities. In addition to regular passengers, so called „go-shows“ (unscheduled passengers that have bought their tickets either last minute or on the day of departure) may emerge and further complicate this process. 32 Capacity Management mainly utilizes 2 elements:

 Overbooking Control: to calculate the optimal number of bookings to be accepted;  Price/Quantity Management: to assign accepted bookings to available capacities and the right booking classes;

On the following pages I would like to enlarge on these two main elements.

31 cf. Fricke, 2005, Page 18 32 cf. Weiß, Häußler, 2005, Page 7 Julius Neubauer 19

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A. PRICE/QUANTITY MANAGEMENT The main objective of Price/Quantity Management (as already mentioned) is to assign accepted bookings to unallocated capacities and at the same time to the right bookings classes. Along these lines it deals with the creation of contingents to be able to distinguish the lower-value demand of tourists and private travelers from higher- value demand of business travelers.

In order to subsequently deal with these subjects, the basics of demand management and data acquisition and forecasting must first be explained.

I. DEMAND MANAGEMENT

The purpose of demand management is to assign a priority to each single booking request and to decide on this base whether a request is accepted or rejected. This is a crucial task, because without it all incoming requests would be satisfied uncontrolled. This may lead to the following consequences: 33

 The incoming lower-value demand would occupy valuable seats at an early stage of the booking process,  And therewith not spare capacities for the later emerging, higher-value demand of business travelers.

The lower-value demand would consequently crowd out higher-value demand bit by bit, resulting in suboptimal revenues:

140

120 450 € 100 200 € Demand: 120 60 € 80 Max.Cap.: 100

Demand 60

40

20

0 52 48 40 32 24 20 16 12 10 9 8 6 5 4 3 2 1 0 Weeks before departure FIGURE 14: COURSE OF BOOKING WITHOUT DEMAND MANAGEMENT

33 cf. Sterzenbach, Conrady, 2003, Page 347 Julius Neubauer 20

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That implies:

120

100

80 22500€ 13000€ 450 € 60

+100% 200 € 60 € 40

Capacity (max. 100) = (max. Capacity 7000€

20 2100€ 900€ 0 without DM with DM

FIGURE 15: IMPACT OF DM ON THE REVENUE

Hence it is economically reasonable to reject lower-value demand in order to reserve the limited capacities given on a flight for higher-value demand.

II. DATA ACQUISITION AND FORECASTING All instruments used by Yield Management require a well-founded data pool. This data is gathered using computer-assisted reservation systems, then analyzed and afterwards fed back in real-time again.

Such databases contain information about the following parameters: 34

 Current bookings  Course of cancellations  No-show-behavior  Load factors  Development of costs and revenue  Competitive behavior  Seasonal influences

In tourism and aviation business the gathering of information is provided by computer- assisted reservation systems like Galileo or .

34 cf. Jörg Lindenmeier, Yield-Management und Kundenzufriedenheit: Konzeptionelle Aspekte und empirische Analyse am Beispiel von Fluggesellschaften, DUV-Verlag, 2005, Page 12 Julius Neubauer 21

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Forecasting now builds up on this pile of data to generate forecast models regarding the following factors: 35  Future level of demand Input for allocation  Expected course of bookings  No-Show prospects  Go-show prospects Input for overbooking control  Cancellation rate

In command of this specific knowledge, we can now proceed to the next chapters.

III. ALLOCATION The main task of allocation is the assignment (or combination) of available capacities to different booking classes. Several different techniques can be applied for this purpose, distinctive in their complexity and implementation possibilities in practice. But the corporate objective remains the protection of fixed contingents for higher- value demand. 36

The following techniques are widespread and applied in practice:  Limiting curves  Constant allocation  Nesting  Network YM - Virtual Nesting To prevent misunderstandings, I would briefly like to explain the term „booking class“: The available seats on an aircraft are generally divided into three compartments: First / Business / Economy. Nowadays only two of them are offered on most continental flights: Business and Economy. These physical compartments (generally differing in comfort, space and on-board service provided) are now further divided into several booking classes (also called virtual compartments). These virtual compartments are simply different price ranges with a fixed contingent of seats within a physical compartment. First

Business First Economy 1 First Business Economy 2 Business FIGURE 16: SPLITTING OF PHYSICAL- INTO VIRTUAL COMPARTMENTS Economy 3 Economy Economy Economy 4 Economy 5 Economy 6

physical compartment virtual compartment

35 cf. Weiß, Häußler, 2005, Page 9 36 cf. Weiß, Häußler, 2005 Page 9 Julius Neubauer 22

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1. LIMITING CURVES This technique has appealed to many companies. It forecasts the course of booking, based upon statistics and courses of booking of past and present databases. This results in an individual pattern for each single flight offered by an airline. To allow for unpredicted random fluctuations in demand, so called “puffer zones” are taken into account. The so generated limiting curves form the upper and lower limit of the actual demand development. 37

Upper Limit

Predicted course of Lower Limit booking Predicted course of booking 52 40 25 15 10 5 3 1 0 52 40 25 15 10 5 3 1 0 Weeks before departure Weeks before departure FIGURE 17: PREDICTED COURSE OF BOOKING FIGURE 18: CALCULATED PUFFER ZONES CALCULATED BY A FORECAST MODEL

The following figure shows a fully implemented limiting curve on a flight with 3 booking classes available: 8 100% 7 only 1st class available 6 5 Upper limit 1st + 2nd class available Lower limit 4 Actual demand 3

Load2 factor all 3 classes available for booking 1 0

52 40 25 15 10 5 3 1 0

Weeks before departure FIGURE 19: FULLY IMPLEMENTED LIMITING CURVE

The basic consideration of this concept is to make an intervention of humans unnecessary until irregularities occur. This would be the case if the real curve of demand moved outside of the forecasted limiting curves.38

37 cf. Weiß, Häußler, 2005, Page 13 38 cf. Sterzenbach, Conrady, 2003, Page 353 Julius Neubauer 23

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This means:

 If the demand bursts the corridor on the upper limit, this is a sign of very high demand for available capacities. Should this occur, the lower-priced 2nd and 3rd booking classes are closed. This from now on forces the customer to book the only rate available. If the curve then evens out between the limiting curves, the second class is made available for booking again.  If the corridor bursts on the lower limit, this indicates a very poor demand. Airlines try to countervail this by opening all booking classes. This should stimulate demand enough to settle down at a constantly increasing rate.

An important requirement for the proper use of this technique is the accuracy of forecasts. The more inaccurate they are the wider or closer the gap will be between the limiting curves. Both cases are not desirable. Regarding the first case, the margin of actual demand would be too big and so the higher-value booking class would never be exclusively available. Regarding the second case, real demand would often burst the corridor on the upper or lower limit causing frequent changing of available booking classes. This would negatively affect demand and considerably increase the maintenance effort of such a system. Allocation using limiting curves however is very popular since it is easily feasible and interpretable.

2. CONSTANT ALLOCATION Static allocation is seen to be the assignment of capacities of similar kind to different booking classes. This process is based solely on forecast models of demand for a particular flight. With this technique the size of each contingent is not changed anymore after being determined (it remains constant). Thus it is assured that predetermined capacities are not exceeded

The biggest disadvantage of this technique is that the size of booking classes cannot be adjusted according to demand. Likewise higher-value requests might be rejected if there is no capacity available in the favored virtual compartment instead of sourcing it out into other booking classes with capacity still available.

Total Capacity 100

VC1 60

VC2 30

VC3 10

FIGURE 20: STATIC ALLOCATION OF VIRTUAL COMPARTMENTS (VC)

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This method of allocation is, due to its simplicity, the most widespread of all. But owing to its lack of flexibility, it does not appeal to airlines. 39

3. NESTING Nesting does no longer assign a constant size to virtual compartments. Instead of that, each booking class is granted the access to lower-yield contingents (Also called the integration of virtual compartments into each other).This means that if the capacity of one specific booking class is depleted due to very high demand, it automatically obtains access to yet unassigned seats of lower-yield virtual compartments. 40 Example:41 On a flight from (MUC) to Dublin (DUB) 150 seats in all three virtual compartments are available. The forecast model predicts the following level of demand:

Virtual compartment Predicted demand

A (Fullfare) 90

B (Eco) 45

C (Eco-special) 15 Five days before take-off the bookings are as followed:

Virtual compartment Total seats Actual demand Seats left A 90 90 0 B 45 40 5 C 15 8 7 Total 150 138 12

If the 91st request for a seat in compartment A is received at that time, the booking theoretically will have to be rejected due to insufficient capacities in compartment A. But this proves to be absurd because the compartments B and C still have sufficient unassigned capacities. Nesting now allows compartment A to access the capacities of lower-yield compartments B and C. Consequently the request can be accepted although the preassigned contingent of compartment A is already used to capacity. That implies that virtual compartment A is able to use virtually all 150 seats on this flight. But vice versa the compartment C has no access to B and A, though compartment B to C but not to A. Compartment A (Fullfare)

FIGURE 21: BASICS OF NESTING Compartment B (Eco) max. 150 max. Compartment C (Eco-special)

seats 60 max. 15 seats seats 39cf. Axt, 2004, Page 8 40 cf. Axt, 2004, Page 10 41 cf. Sterzenbach, Conrady, 2003, Page 354 Julius Neubauer 25

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4. NETWORK YIELD MANAGEMENT Up to now, I have only focused on direct flights in this skilled work. The route structure of an airline develops simultaneously to the continuous growth of airlines to big international concerns and their permanent expansion to new markets. The huge number of direct flights causes the route structure to become inefficient and also very unclear. So there was need for action. The so called hub-and-spoke-system” was invented and shortly after established by all major airlines.

Hub-and-spoke means that an airline transports its passengers coming from smaller airports (so called spokes) to the big international ones (hubs) via small aircrafts (mainly Boeing 737-200 and Airbus A310/20). There, passengers have to change to big wide body aircrafts (mainly Boeing 747/77 and Airbus A340/80) in order to be passed on to primary flight routes. Then, after landing on a hub again (mainly that of a partner airline) the journey continues, after being reallocated to smaller aircrafts, to the spokes. 42

Spoke

Hub

FIGURE 22: HUB AND SPOKE SYSTEM

This system dramatically increased the load factor within the entire route structure. At the same time this made the process of allocation considerably more complex because a route now consisted of multiple single flights instead of one direct flight.

This plus in complexity requires new, more efficient allocation solutions. Such that can incorporate different combinations of airports of departure and arrival and the valence of revenue streams linked to it.

42 cf. Weiß, Häußler, 2005, Page 15 Julius Neubauer 26

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I. VIRTUAL NESTING This technique combines all booking classes available within the entire route structure to different categories. These categories are now called revenue classes and no longer virtual compartments This appears as follows: The route Munich (MUC) – Dublin (DUB) via London (STN) can be booked as “direct” flight (you have to change in STN), or as 2 single flights. The achievable revenues are as follows: Revenue: 350€ MUC – DUB (via STN)

Revenue: 250€ STN Revenue: 150€ MUC MUC - STN STN - DUB DU

B FIGURE 23: VALUE OF DIFFERENT LEGS AND ITINERARIES Out of this it is evident that a passenger of the itinerary43 MUC-DUB (via STN) is charged a higher price (called route contribution) than passengers of both single legs. 44 Based upon this, the passenger of the itinerary MUC-DUB (via STN) automatically receives the tender, prior to the other two passengers. Therefore the capacities for this itinerary and its legs would be nested as follows:

MUC - DUB (via STN)

FIGURE 24: VIRTUAL NESTING FOR MUC – DUB (VIA STN) MUC - STN STN - DUB

It should be noted that the offer MUC-DUB (via STN) consists of the simultaneous booking of both legs (MUC-STN, STN-DUB). The price difference compared to the single booking MUC-STN and STN-DUB is reached by discounts (because the allocation of capacities can be improved when flights are booked simultaneously).

43 A route where you have to change the plane in order to reach your destination. 44 The several segments of an itinerary. Julius Neubauer 27

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B. OVERBOOKING CONTROL

To keep the load factor of flights as high as possible, airlines use controlled overbooking. 45 This means that more seats are sold than actually available. This becomes necessary due to-short term cancellations and no-show passengers that then should be compensated through go-shows and overbooked capacities.

This approach requires very accurate forecast models. If the no-show and/or the cancellation rate are calculated too high, too many passengers are at the gate waiting for boarding (spill). In this case airlines have to reject passengers (denied boarding). Compensations, costs issued by overnight stays, upgrades or rebooking to competitor’s flights occur. This category of costs is called stock-out costs. If the rate of no-show passengers and cancellations are calculated too low, this may result in unused capacities. All costs caused by unused capacities are called deadhead costs. So an airline can proceed in the following ways:

It can offer the flight without any overbooking:

The load factor curve clearly drops in last section due to frequent short-term cancellations. This entails definitely no stock-out but high deadhead costs. 120%

100% 80% 60% FIGURE 25: LOAD FACTOR ON A NON- OVERBOOKED FLIGHT Load factor Load 40% 20%

0% 0 0,5 1 1,5 2 2,5 3 3,5 4 Days before departure It can overbook the flight without restrictions:

The load factor curve will clearly burst the maximal capacity of 100% but not drop low enough in the last segment to transport all booked passengers. This approach ensures a high load factor, but entails significant stock-out costs. 160% 140% 120%

FIGURE 26: LOAD FACTOR ON A OVERBOOKED 100% FLIGHT WITHOUT RESTRICTIONS 80%

factor Load 60% 40% 20% 0% 0 0,5 1 1,5 2 2,5 3 3,5 4 45 American Airlines have detected that a non- Days before departure overbooked flight has an average load factor of 85%. Julius Neubauer 28

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It can apply an optimized overbooking rate, based on forecasts:

These forecasts include rates of cancellation, rebooking and go-show passengers. This approach ensures a relatively high load factor, with the load factor curve clearly bursting the maximal capacity, but still dropping back close to it again. The difference of the two curves should then exactly be the amount of no-shows: 140% 120%

100% FIGURE 27: LOAD FACTOR ON A FLIGHT WITH 80% OPTIMIZED OVERBOOKING RATE.

60% Load factor Load 40% 20% 0% 0 0,5 1 1,5 2 2,5 3 3,5 4 Days before departure The optimal overbooking rate can also be seen as a trade-off between deadhead and stock-out costs:

Deadhead costs Stock-out costs FIGURE 28: CALCULATION OF OPTIMAL OVERBOOKING RATE optimal Costs overbooking rate

0 5 10 15 20 25 30 250 40 45 50 Overbooking rate in %

The overbooking rate can be considered as optimal if the total amount of costs caused by both deadhead as well as stock-out costs is as minimal as possible. This means that bookings will probably be accepted as long as the hence resulting revenue is bigger than the costs emerging if a customer has to be rejected.46

The above mentioned optimized overbooking rate is influenced by several factors: 47

 Historic no-show behavior: Contains information about no-show rates of past flights. (same in route, day, time and virtual compartment)

46 cf. Weiß, Häußler, 2005, Page 20 47 cf. Sterzenbach, Conrady, 2003, Page 348 Julius Neubauer 29

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 Percentage of business and private travelers: Due to the higher rebooking/no-show rate of business travelers, this has to be taken into account. 48 The higher the percentage of business travelers on a flight, the higher it is overbooked.  Number of flights per day: The more flights per day are offered by an airline (having the same destination), the higher each flight can be overbooked, because rejected passengers then don’t have to wait a long time until the next flight takes off.  Remaining time until take-off: The more time remains until take-off, the higher the overbooking rate. It then declines by time elapsed. In this case, the overbooking rate is not statically shaped (as in figure 25 to 27), but gradually. Figure 29 illustrates that:

160% 140% 120% FIGURE 29: GRADUATED OVERBOOKING 100% RATE 80%

60% Load factor Load 40% 20% 0%

0 0,5 1 1,5 2 2,5 3 3,5 4 Days before departure In case a flight should be overbooked despite an optimized overbooking rate being utilized, airlines apply a technique called „voluntary denied boarding”. This technique’s aim is to encourage passengers to voluntarily renounce transportation if they are awarded certain amenities. Such as upgrades to higher compartments of a later flight, hotel vouchers or compensatory payments. 49

To sum it up, is to say that overbooking affects allocation. Thus the appliance of both should be planned at the same time, which is very difficult to implement due to the complexity of both. Therefore the optimal overbooking rate is first calculated in practice as it provides the base for allocation.

48 To reduce the amount of passenger not showing up, many airlines conduct so called flight checks. In the course of a flight check, every single passenger is called and asked if he/she will definitely show up. 49cf. Sterzenbach, Conrady, 2003, Page 351 Julius Neubauer 30

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VIII. SOFTWARE - NAVITAIRE “SKY PRICE”

As already mentioned, IT-based Yield Management Systems require for very sophisticated hard- and particularly software solutions. Nowadays, many airlines have decided to outsource these processes. This means that they acquire the usage rights of a software and computing power offered by external companies. The only thing they basically then have to do is integrating the software into the existing IT-infrastructure and input the necessary parameters. Such solutions are provided by several companies:

 JDA Software  Ideas  Amadeus  Sabre  Lufthansa Systems  PROS  Revenue Management Systems, Inc.  The Rainmaker Group  Navitaire

50 1. COMPANY OVERVIEW Navitaire is a subsidiary company of Accenture, focusing its business on outsourcing services for airlines. The Company started off as PRA Solutions in 1993. At that time it offered revenue accounting solutions to major carriers. In the following years the company developed the via World Network as a cost-saving alternative to other GDS (Global Distribution System) systems like SABRE, Amadeus, Galileo and Worldspan (merged in 2006). In 2000, Navitaire acquired the Open Skies airlines reservation division from HP which is still in use today at major low-cost carriers like Ryanair. Below you can see a short summary of Navitaire’s most important customers:51

50 cf. Company Overview, www.navitaire.com/company, As at 3.3.2009 51 cf. Customers, http://navitaire.com/company/customers_all.asp, As at 17.3.2009 Julius Neubauer 31

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2. “SKYPRICE” Navitaire SkyPrice is an integrated price and revenue optimization system. It aims at low-cost carriers offering several booking classes that have no differentiation other than price. This challenges traditional revenue management theory which is based on passenger segmentation by fare classes and demands for new solutions. SkyPrice contains several algorithms and forecast models that can manage pricing and allocation simultaneously. SkyPrice is based on 3 stacks:  Optimization,  Analyzing  Integration

Optimization:

The optimization stack uses data collected by CRS systems to forecast parameters like:  Demand: The Software offers the possibility of involving special events, holiday seasons and other influencing factors.  No-show rate: Offers the option of using only segment-specific data to gain more precise forecasts. The Optimization stack also calculates the size of virtual compartments and overbooking rates by utilizing complex mathematical algorithms like EMSRb (Expected Marginal Seat Revenue) developed by MIT. EMSRb enables airlines to optimize revenues even further, but requires powerful IT infrastructure. Analyzing:

SkyPrice provides information about cost structures, competitor’s prices compared to yours and comprehensive access to all available flight data. It also enables you to easily create performance reports and immediately share them within the entire company. Integration:

One of the software’s aims is to flawlessly integrate itself into existing IT-infrastructure and communicate with other components and allow for easy interaction via flexible and simple user interfaces (UI).

All data that is processed by the software is stored in Navitaire’s data centers which are located in Minneapolis, London and Sydney. That helps reducing maintenance costs and increases security.

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IX. CONCLUSION Yield Management is one of the most revenue-affecting processes in airline business. The additional profit attributed to the implementation of Yield Management Systems at American Airlines amounts to 500 million US-$ each year.

The future development of Yield Management particularly depends on IT- infrastructures. The amount of decisions to be made by an integrated, IT-based Yield Management System is enormous. This amount can be illustrated by the following example:52 Lufthansa offers approximately 1500 flights per day. Each of them is split into 15-20 virtual compartments nearly 200 times before take-off. Considering that a flight is available for booking nearly one year in advance, this results in a huge workload of the IT-based Yield Management But this amount will constantly increase over the next years, which calls for very sophisticated hardware solutions.

Yield Management can also affect customer satisfaction, either by not accepting a customer request or rejecting him shortly before take-off due to overbooking. But also if he gets to know, that his seatmate has paid a much lower price than he did for one and the same service. Therefore customer satisfaction should be valued more than revenue maximization because without the former, the latter could never be reached.

52 cf. Sterzenbach, Conrady, 2003, Page 364 Julius Neubauer 33

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X. APPENDIX

Correspondence with Mr. Riess:

From: Riess, U. - VIEPV [[email protected]] Sent: Montag, 16. Februar 2009 08:56 To: Julius Neubauer Subject: RE: Anfrage Diplomarbeit

Sehr geehrter Hr. Neubauer,

Interessantes Thema das Sie sich da gewaehlt haben ! Unsere Niederlassung in Oesterreich ist ein integriertes Sales und Marketing Team, fuer Air France und KLM. Wir haben hier keine Ertragssteuerung in Wien, unsere Tarife werden von unserer Regional Direktion in Genf mit Paris und Amsterdam ausverhandelt, daher sehen wir hier kaum Mitarbeiter aus dem Yield Management, des jeweiligen Hauptbueros.

Ich kann Sie in Evidenz halten sollten wir einmal einen Besuch in Wien haben, es ist jedoch so, das die Ertragsteuerung das Herz eines Unternehmens in der Flugbranche ist und es sich hier sicher um sensible Informationen handelt die nicht gerne nach aussen getragen werden.

Die Basics nehme ich an sind Ihnen sowieso gelaeufig. Ich werde Ihren Kontakt und Ihr Interesse auch intern weitergeben

Mit freundlichen Gruessen Udo Riess

From: Julius Neubauer [mailto:[email protected]] Sent: Sunday, February 15, 2009 5:21 PM To: Riess, U. - VIEPV Subject: Anfrage Diplomarbeit

Sehr geehrter Herr Riess! Mein Name ist Julius Neubauer und ich bin Schüler des 5. Jahrganges an den Kärntner Tourismusschulen in Villach. Im Rahmen meiner Matura schreibe ich derzeit an einer Diplomarbeit welche das Thema Yield Management bei Fluglinien behandelt. In dieser Arbeit habe ich die Theorie des YM bereits umfangeich abgehandelt, es fehlt mir jedoch der Bezug zur Praxis, also wie YM bei Airlines zum Einsatz kommt. Deshalb habe ich von Frau Orasch vom Kärntner Reisebüro Ihre Kontaktdaten erhalten um mich mit Ihnen in Verbindung zu setzen. Nun wollte ich Sie fragen, ob Sie mir mit Informationen weiterhelfen könnten oder evtl. mit einem persönlichem Interview.

Mit freundlichen Grüßen

Julius Neubauer

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Correspondence with Mr. Juds:

From: Juds Benjamin [benjamin.juds@.com] Sent: Mittwoch, 18. Februar 2009 15:53 To : Julius Neubauer Subject: AW: Anfrage wg. Diplomarbeit

Hallo Herr Neubauer, wir benutzen das Navitaire Revenue-Management-System „SkyPrice“. Dies berechnet aus historischen Daten der für einen Flug festgelegten Referenzflüge (ähnliche Wochentage, Flugzeiten, Saisonalität, usw.) unterschiedliche Preis-Absatz-Funktionen im Zeitablauf, anhand derer dann die optimalen Preise im Zeitablauf und dementsprechenden Kontingente berechnet werden.

Mit freundlichem Gruß,

Benjamin Juds

Von: Julius Neubauer [mailto:[email protected]] Gesendet: Montag, 9. Februar 2009 14:50 An: Juds Benjamin Betreff: AW: Anfrage wg. Diplomarbeit

Sehr geehrter Herr Juds, in meiner Arbeit habe ich die Theorie bereits umfangreich abgehandelt, es fehlt mir noch der Bezug zur Praxis! Also wie YM jetzt wirklich bei einer Airline angewendet wird, wie Sie zB: Überbuchungen handeln, wie die Überbuchungsraten festgelegt werden, mithilfe welcher Kriterien Sie Marktsegmentierung betreiben und in welche Segmente Sie einteilen, welche Methoden der Kontingentierung Sie anwenden etc..

Anmerken möchte ich noch, dass meine Arbeit nicht veröffentlicht wird, da es sich nur um einen Modul meiner Reifeprüfung (Matura) handelt. Vielen Dank für Ihre Bemühungen!

Mit freundlichen Grüßen Julius Neubauer

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Air transportation numbers, provided by Statistik Austria (www.statistik.at)

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Passenger arriving in and departing from Vienna International Airport, provided by Satistik Austria (www.statistik.at)

Julius Neubauer 37

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A snapshot at European and north Atlantic transportation numbers, provided by ICAO (www.icao.int)

Julius Neubauer 38

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XI. BIBLIOGRAPHY

Air charter [Online] // en.wikipedia.org. - March 15, 2009. - http://en.wikipedia.org/wiki/Air_charter.

Allianz (Luftfahrt) [Online] // de.wikipedia.org. - January 27, 2009. - de.wikipedia.org/wiki/Allianz_(Luftfahrt).

An Introduction to Airline Economics, 6th edition [Book] / auth. O'Connor William E.. - Connecticut, London : Praeger, 2001.

Betriebswirtschaft, Volkswirtschaft und gastgewerbliche Betriebslehre [Book] / auth. Reith Wolfgang and Sator Manfred. - Wien : öbv&hpt, 2002. - Vol. 5.

Codesharing [Online] // de.wikipedia.org. - February 2, 2009. - http://de.wikipedia.org/wiki/Codesharing.

Company Overview [Online] // www.navitaire.com. - March 3, 2009. - www.navitaire.com/company.

Customers [Online] // www.navitaire.com. - March 17, 2009. - http://navitaire.com/company/customers_all.asp.

Flag carrier [Online] // en.wikipedia.org. - March 15, 2009. - http://en.wikipedia.org/wiki/Flag_carrier.

Fluggesellschaft [Online] // de.wikipedia.org. - January 26, 2009. - http://de.wikipedia.org/wiki/Fluggesellschaft.

Introduction to oneworld.pdf [Online] // www.oneworld.com. - January 27, 2009. - www.oneworld.com/content/factsheet/W1_2009-01-08 introduction to oneworld.pdf.

Luftverkehr, Betriebswirtschaftliches Lehr- und Handbuch, 3. Auflage [Book] / auth. R. Sterzenbach and R. Conrady. - München : Oldenburg Verlag, 2003.

Revenue Management am Beispiel von Airline Revenue Management, Hauptseminararbeit [Book] / auth. Weber Christoph. - University of Köln : GRIN- Veralg, 2007.

Scheduled Air Transport [Online] // en.wikipedia.org. - January 26, 2009. - http://en.wikipedia.org/wiki/Scheduled_air_transport.

Skyteam Fact Sheet [Online] // www.skyteam.com. - January 27, 2009. - www.skyteam.com/downloads/news/facts/skyteamFactSheet.pdf.

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Staralliance Facts&Figures [Online] // www.staralliance.com. - January 27, 2009. - http://www.staralliance.com/de/press/facts_figures/index.html.

Strategic Management for Travel and Tourism [Book] / auth. Evans Nigel, Campbell David and Stonehouse George. - Oxford/Boston : Butterworth-Heinemann, 2003.

The Theory and Practice of Revenue Management [Book] / auth. Talluri Kalyan T. and Ryzin Garrett Van. - Berlin : Springer, 2005.

Yield Management – Konzepte und Techniken. Studienarbeit [Book] / auth. Weiß Matthias and Häußler Steffen. - University of Hohenheim : GRIN-Verlag, 2005.

Yield Management am Beispiel einer Fluglinie. Studienarbeit [Book] / auth. Fricke Marco. - University of Hamburg : GRIN-Verlag, 2005.

Yield Management bei Fluggesellschaften. Hausarbeit [Book] / auth. Axt Martin. - University of Eichstätt-Ingolstadt : GRIN-Verlag, 2004.

Yield Management und Kundenzufriedenheit: Konzeptionelle Aspekte und empirische Analyse am Beispiel von Fluggesellschaften [Book] / auth. Lindenmeier Jörg. - Berlin : DUV-Verlag, 2005.

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