The Up-And-Coming Airline
5
Above: Analysts Fred
Hqllman. Eric Hillman.
Georganne Smith, and
Calhy Howe look over
the booking trend for a
particular Pight.
Lett: Debbie Honi and
Dennis Quinn, both ana
li/sts. check a /light on
the reservations con\put
er. In the background is
the MAPPER Computer
which gives a graphic
representation of how
the lligitt looks 30 days
before departure.
certain Piedmont
revenue
characteristics and the remaining
seats should be reserved for full-fare
business travelers who make plans
nearer departure time." she said.
"What we're doing is getting a good
base with the lower fares and reserving
the remaining seats for higher yield
traffic, people who make plans closer
to departure. Our late-booking pas
sengers, usually business travelers, are
probably our most valued customers,
our frequent fliers. They often must
make plans on short notice and by allo
cating fewer discount seats we give
them more flexibility,” Hoppe said.
The department allocates seats for
each class of service so as to best meet
demand while preventing loss of
revenue. In most cases, this involves
Market Analysis Variables
• advance bookings
• historical performance
of flight
• seasonality
• market character
• pricing
• scheduling
• market share
providing discount seats to those pas
sengers who book early, but systemati
cally limiting discount seats at a spe
cific period of time before departure.
Discount seats, in fact, are generally
available for over 300 days prior to
departure and will only be pulled back,
if appropriate, seven to 14 days before
departure, Hoppe said. This process is
capacity control and results in more
revenue.
S80,000 per day
"An additional $40 from 10 extra
passengers on only 25 percent of our
daily departures, would amount to an
additional $80,000 per day, $2.4 million
per month, and $28.8 million per year,”
Swenson said.
Take, for example, Cathy Howe's
Flight 364 from DCA to GSO. This flight
departs DCA at 5:55 p.m., and it's highly
attractive to business travelers. There
fore, Howe will allot fewer discount
seats on this particular flight. Instead,
she will make more discount seats
available on earlier and later flights in
the same market which will be just as
convenient for the pleasure travelers
but not as desirable for persons on
business.
"We’re offering the business person a
fufl schedule from which to choose and
the ability to change flights," Hoppe
said. “If we didn’t offer discounts, fewer
people would travel and in the end, the
businessman or woman would have to
pay more and would have fewer flights
Iroin which to choose. "
■'The most successful airlines in the
industiy. by and large, are using similar
techniques employing the same logic.
During the last full blown fare war
three years ago, we all learned that we
have to restrict discount lares to man
age them. By tillocating seats we hope to
keep ouryield up with little impact on
load factor,” she added.
Revenue Enhancement is already
making an impact on I’iedmont's
financial picture. In 1984, our load lac
tor was 52.42 percent, down 2.4 points
I rom the year before. Yet our total oper
aling revenues grew 36.1 percent to a
record $ 1.3 billion. In 1984 our yield
was 17.64 cents per revenue passenger
mile compared with 15.94 cents in
1983.
yield up in '84
■'Our yield was up more than most
other major airlines in the coimtry," Bill
McGee, senior vice president market
ing, pointed out, "and I credit Revenue
Enhancement for some ol this increase
even though the department existed
only a lew months in 1984. We expect
Revenue Enhancement to have an even
greater influence on our performance
in the future.
"Competition has become more
intense, and we need this department
to help us prosper. "
L^ill Howard, Piedmont's president
and chief executive officer, added:
"Revenue Enhancement specifically
represents the opportunity to increase
revenue through greater understand
ing and control of the many demand
factors affecting competitive markets
which we serve. This increased under
standing will provide necessary data
not only to Revenue Enhancement, but
also to upper management, which will
aid decision making. With greater con
trol of discount seat inventory, the
department will also increase our
income in the future."
For the department to function,
cooperation is needed from many areas
of the Company, especially Stations
and Reservations. Discount seat cilloca-
tions, as determined by Revenue
Enhancement, must be honored in
dealing with requests from customers.
"We. of course, recognize that there
will be unusual situations when excep
IVnns to know
capacity control — allocating seats
so as to best meet demand while pre
venting loss of revenue.
load factor — percettlage of seats
filled on our flights.
revenue — money iw receive for
services.
revenue passenger miles (RPMs) —
one passenger carried one mile.
yield — the amoiuit of money a>e
receive for carrying one passenger
one mile.
tionswill be appropriate, but the.se
exi e|)tions must be approved by a
supervisor." Swenson said.
"Station agents and sales people
often call the department with on the
spot inlbrmation, and their input has
proved vei^/ valuable, " I loppe said, " and
we encourage these calls. "
monitoring flights
" Everyone must realize how closely
we monitor flights, " she emphasized.
"You can t determine the jjcrfor
mance ol a flight by looking only at the
number of people who board that flight,
l^iad factor is important, but you also
must consider the revetiue side. We
may have fewer people on a flight but
that flight may produce more revenue
becau.se more passengers are paying
full fare or another higher yield fare. "
Revenue Comparison
H Fare = $70
100 seats sold
100 H Fare - $7,000
Revenue $7,000
Y Fare =$100
85 seats sold
60 Y Pare S6.000
25 11 Fare S 1.750
Revenue $7,750
61 % rilled
52% filled
'based on a 727 200 with 164 seats