Research proposal for creation of Revenue Management System for small scale airlines at a cost

effective rate.

Introduction

Before 1980s airlines bookings solely handled by Reservation System and price of a ticket is basically
at one level per compartment eg Economy class seats, all offered at one fare level for same origin
and destination. Further found most of the seats get empty before the flight departure. Thus came
into early bird promotions of few seats to attract price sensitive customers and found, still it is not a
viable solution for empty seats at the departure. At this stage early concept of budget airlines came
into the picture in America in 1990’s. This further made issue from bad to worse for airlines like
American. Therefore found ways to attract low fare seekers by issuing few seats at a lesser price at
very early stages, while retaining the current customer base by offering the general fare level
throughout. This method seems to be success a solution, finally with further offering different fare
levels to different customers lead to proper Revenue Management system. Today the most success
revenue management controlled airlines have about twenty fare levels to offer at different
passenger segments at different time intervals. Eg PROS. Further pre allocation of seats for these
fare levels resulted better automation of distribution and selling system in further developing
technological and digital world. Evolvement of Revenue Management system lead to place the
reservation systems to second place and became first in importance. Revenue Management system
is also called Yield Management system. Today most successful airlines have the core reservation
system to maintain the operational customer data base and to service the customers while pricing
decision makings and confirmation of seats recommendations to be controlled by revenue
management process. Thus Revenue Management division became a key centre in the commercial
airline business. As it is the key to drive the pricing strategy of the airline.

Background

Need of a creation of a basic Revenue Management System, is very vital in small scale budget airline
at a lesser cost to sell in South Asian regions countries like Sri Lanka, India, Bangladesh, Maldives,
Bhutan etc., Opposed to high technology based sophisticated, high cost systems available in
western/rich countries used by full fledge airlines.

While excelling with the research process we will engage in below subjects which we have covered
so far in our study process.

Economics, Business Analytics, Data Base Management systems, Digital Business and Project
management.

Problem

In developing countries’ small scale airlines are inhibited of using high-tech, high cost system
solutions due to unbearable cost factors of these system solutions. Hence these airlines manage to
handle their most sub functions manually apart from the main reservation systems. This is a tedious
time consuming less effective method which is common to any manual handling process. Most of
these airlines use well known systems such as Amadeus, Galileo, Sabre as the main reservation
system a to be in par with the competition and to be in par with selling standards such as
International Air Transport Association (IATA) and Official Airline Guide(OAG). But these airlines are
unable to allocate further funds on the revenue driver systems at very high cost , though they are
very vital for optimisation of their seating capacities. Therefore these countries’ small scale airlines
restricted to manual processors.
Solution/Motivation

Our proposal is to create a small scale cost effective and efficient system solution with proper
evaluation of current market demand, to handle the revenue issues to small scale airlines at a cost
effective rate.

This way it will help to optimise,

 Individual Travel and

 Group Travel.

Aim/ Objective

Our objective is to create a system solution to meet the demand of current niche market at an
affordable price level.

Solution will provide,

1) Predictions for future flights to proper allocation of number of seats at different pricing
levels by looking at the historical flight price levels and number of seats sold at these levels.
2) By having an interface to insert the competitor data, current market competition
involvement and analysis.
3) Recommendation to confirm group seats at price levels which is very relevant with current
market demand.
4) Reporting system.
 To capture the revenue status of the future flight bookings.
 To identify low/high booked flights.
 To identify new markets and their patterns and trends.
 To identify the group demand.
 Point of sales information.
 Flight route information.
 Identification of seasonality effects.
 Identification of productive travel agents.( e.g., top ten )
 Identification of unproductive travel agents. ( e.g., to cut down the wastages)

Benefits of using the proposed system solution.

1) Proper identification of high low demand routes will lead to proper allocation of aircraft
capacity and same will lead to fuel efficiency. Eg prediction of less demand routes – Will
allocate smaller Aircraft such as A320. Similarly Prediction of high demand routes will be
allocated with bigger capacity aircrafts. Hence system will give a somewhat idea for capacity
management too.
2) Identification of Seasonality effect will lead to proper schedules planning methodology.
Finally it will help engineering department to handle their maintenance schedule without
interrupting to main flight schedule. Service levels standards of the airline will be at higher
level.
3) As per point 3, reporting system will help internally to other departments to make decisions
on their own work processes.
 4) By predicting the future demand, it will help the senior management to take strategic
decisions. Such as whether to plan an expansion plan to buy/lease aircrafts, or on the other
hand cut down on routes and selling/leasing out any additional aircrafts.
5) Effective and Efficient revenue management process will lead to flight, route finally towards
the profitability of the airline.

Group Members

Ahamed Nabeel Ikram - 16207078

M.W. Pubudu Madurang. - 16207080

Geethani Hewa Wellage. - 16207045

K.G. Chathuri Kavidya Jayarathna. - 16210576