1. ATC 2019 Beijing
How to Unite Revenue, Personalization and Happy Customers in Harmony Gert Hartmans
Data driven pricing of ancillary seating
As ancillary income becomes ever more important, more sophisticated approaches are needed to maximize the potential revenue. The presentation will report on recent research results investigating ancillary seating. Using massive data better insight in customer demand was achieved, which could be used for better pricing decisions. Where the scope of ancillary price differentiation can be hindered by the GDS, solutions to achieve full channel coverage will be presented.
CARNOC Aviation Trends Conference 2019 Beijing

2. Background Gert Hartmans
ATC 2019 Beijing
Background Gert Hartmans
20+ years revenue management systems experience
Team lead KLM O&D RM system
System implementation & continuous improvement
Designing new AF/KL O&D RM system
Project initiation & design of demand functionality for an unique O&D system
Supported KLM partners Alitalia, Kenya Airways
Developed new O&D/seasonality forecast
Replaced O&D optimization process functions, added USD 50 million/year
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

3. KLM focus and developments
ATC 2019 Beijing
KLM focus and developments
Customer Centric,
Product Investments
Net Promoter Score
from 42% to 46% *
Happiness
Revenue
Personali-zation
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing
Load Factor 89 % *
Profit/employee 16K **
*) Annual report 2018
**) Derived from Annual report 2018

4. Revenue supported by system investments
ATC 2019 Beijing
Revenue supported by system investments
2000: implemented O&D system developed by KLM
added class closure controls per O&D/POS
added exchange bidprice to support JV O&D control
2014: implemented O&D system by Air France/KLM
Revenue
O&D system improves load factor by balancing access via bidprice controls
O&D class closure controls support higher yields
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing
*) Annual report 2018
**) Derived from Annual report 2018

5. Revenue supported by system ownership
ATC 2019 Beijing
Revenue supported by system ownership OK
Class closure controls implemented in less than 4 months
Revenue
Too little closure
sell-up potential
Too much closure, reject too much
Using only bidprice, low load flights sell at lowest fare
Potential exists for sell-up which requires controls on O&D detail level & matching CRS functionality
Ownership of system enables customization
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

6. System can not be a black box on autopilot
ATC 2019 Beijing
System can not be a black box on autopilot
Requirements for system supporting improved revenues
Full understanding of design, data and functioning
Dedicated team monitoring and developing to improve
Tools providing full visibility of inputs/outputs
Certified analysts managing with clear strategies (& pricing)
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing
*) Annual report 2018
**) Derived from Annual report 2018

7. System can not be a black box on autopilot
ATC 2019 Beijing
System can not be a black box on autopilot
Example: Autopilot issue from other industry
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

8. System issues Will share some examples of system issues to avoid
ATC 2019 Beijing
System issues
Will share some examples of system issues to avoid
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

9. O&D Forecast: Data volumes & testing
ATC 2019 Beijing
O&D Forecast: Data volumes & testing
Testing new O&D forecast during development, it kept rising
As new O&Ds not previously booked were added in full
Solved by dividing by days possible to book
Extensive testing required for development and implementation
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

10. O&D Forecast: Seasonality
ATC 2019 Beijing
O&D Forecast: Seasonality
When airline management pushes new system while analysts rejected it as: ‘the forecast is completely flat’
Seasonality is key to revenue management
Clustering provides aggregation for improved forecast
Example real seasonality
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

11. O&D Forecast: Schedule changes
ATC 2019 Beijing
O&D Forecast: Schedule changes
Schedule changes
in O&D affect network demand
Schedules will change, and change again
Leaving it to analysts to solve is not an option
Correct processing schedule changes is critical
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

12. O&D Forecast: Correcting based on actuals
ATC 2019 Beijing
O&D Forecast: Correcting based on actuals
Common solution to forecast error; correct future forecast based on difference with recent actuals
Leads to loss of seasonality, and/or propagating past errors, loss of un-constraining
Forecast should not be a black-box, but results traceable to inputs with tools to visualize
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

13. Sell-up/Overbooking: Results in lower RASK
ATC 2019 Beijing
Sell-up/Overbooking: Results in lower RASK $
Case of analysts aiming to correct the system
Bidprice vector
Seats
Overbooking
Increasing demand in high yield classes with high cancellation rates, leads to adding seats for overbooking, ... demand books lower classes only
System needs head-up display & certified staff
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

14. O&D Optimization: Incorrect Inputs
ATC 2019 Beijing
O&D Optimization: Incorrect Inputs
Case system design hidden error in optimization inputs
Design used network value corrected with factor as input for bidprice
Factor was based on sum of leg network values leading to both legs have same value
Long haul value too low, short haul value to high
Corrected by prorating led to RASK improvement +6%
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

15. Revenue supported by system investments
ATC 2019 Beijing
Revenue supported by system investments
A lot can go wrong assuming RMS autopilot
But to achieve possible benefits need:
Correct O&D RMS supports evaluating Network value
Class closure controls on O&D support sell-up
Keep the hands on the wheel and knowledge of processes
Revenue
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

16. Importance people Developing staff with knowledge of
ATC 2019 Beijing
Importance people
Developing staff with knowledge of
Revenue management
and
System development
Forecasting
Optimization
takes time, so need to keep them
A dedicated team is required and needs to be closely aligned with RM business and IT
Revenue
Some background
Working at KLM I have more than 20 years revenue management systems experience
As Team Lead KLM O&D RM system, a system KLM developed I added sell-up on top of O&D bid-price controls, providing EUR 20 million/year
I worked on the design of the new AF/KL O&D RM system, provided leg/O&D design, unique to O&D systems
I have supported KLM partner Alitalia where I replaced the SABRE RM system O&D/seasonality forecast, improved RASK
Also I supported KLM partner Kenya Airways where I replaced parts of the PROS O&D RM functionality, which added USD 50 million/year
Recently I have worked on ancillary seating research, found a potential for EUR 25 million/year by adding differentiation in pricing

17. ATC 2019 Beijing
7 October 2019
KLM 100 Years