1. Revenue Integrity a vital ingredient to good Revenue Management
Paul Rose
MD Paul Rose Revenue Management Ltd
&
Chair of A.R.I.G.

2. Content Revenue Integrity - Sources, range and result of problems.
A Revenue Integrity programme and the benefits.
How a carrier can implement Revenue Integrity.
A.R.I.G.
Summary.

3. My background BA 1970-’94 mostly RM. VAA 94-97 implemented first RMS.
Rejoined BA ’ RM
O&D, Oneworld RM projects, BA’s RM & RI spokesman
Created A.R.I.G.
Since 2001 M.D. of PR RM Ltd, clients:-
A.R.I.G. – Chairman only independent RI organisation.
SITA, IATA, CALIDRIS
independent RM Consulting
Academia - Gerona University, Spain

4. Revenue Leakage is the problem!
Revenue leakage is: “the difference between the revenue that airlines expect from bookings and the amount they eventually actually receive”

5. Definition of Revenue Integrity
Providing robustness of reservations by ensuring that travel is undertaken within the conditions of the sale.
BY - Removing those reservations that create unnecessary additional costs and which reduce saleable inventory space to an airline’s clients.
OR more simply put:-
“Ensuring that the right passengers, fly on the right flight, at the right time, at the right fare ”

6. Sources of the problem
Accidental revenue abuse from badly trained staff at travel agencies and airlines.
Airline originated from unintentional process problems e.g. Misconnections.
The largest single problem is deliberate revenue system abuse from creative travel agents or customers !

7. The range of the problem
Unticketed PNRs
Incorrect class mix
Abuse of fare rules.
Sub MCT
Passives.
Space blocking
Dupe segments
Dupe Names
Redundant waitlists
Cross border abuse
No-show psgrs with onward carriage
Multiple bookings on same flight
Multiple bookings on several flights
No names - Groups & individuals
Name changes / Fake names

8. Results of these problems
Increased No-shows & late cancellations, 30-40% on some routes.
Unreliable R.M. data. = Forecasting error.
Abuse of Pricing rules causing revenue leakage.
Unnecessary distribution costs i.e. GDS charges.
Unnecessary meal wastage
Lower seat access for customers

9. 3 Elements to Revenue Integrity
PEOPLE
PROCESS
BENEFITS
SYSTEMS

10. Revenue Integrity - benefits
Departure Stage
Lower costs resulting from:
Reduction in GDS & DBC charges
Reduced catering costs and airport charges from delayed flights due MCTs.
Improved Customer satisfaction from:
Less offloads & downgrades
Earlier seat assignment at booking and check-in

11. Revenue Integrity - benefits
Booking Stage
Increased Revenue resulting from:
Higher quality booking data
Better Revenue Management forecasts
Improved seat factors
Reduced cancellations and no-shows
Less need to overbook

12. Revenue Integrity benefits
Increase customer access through removal of fictitious PNRs , hence improving revenue result.
Reduces on departure No-shows and late cancellations.
Reduces over forecasting.
Stabilises data quality and R.M. results.
Reduces costs elements to operation e.g. GDS costs, Catering wastage, overstaffing etc.

13. No-shows stabilisation
Can you ever eradicate no-shows ?
NO !
Removing large fluctuations is the aim of RI e.g. average no-shows may only be 15%, BUT there could be variance of 7% one week versus 23% another week!
RI enables the outliers to be removed and averages lowered e.g. constant 10% no-shows with variance between 8% - 12% = 10% average.
A RMS likes data consistency which helps forecasting resulting in Spill and Spoilage reductions.

14. Why implement Revenue Integrity solutions ?
GDS being overpaid by as much as 15%
Airline X operates = 50 flights per day
Capacity 150 seats = 7,500 seats pd
Average LF 70% = 5,250 seats.
15% = 800 passengers
Using average GDS charge = $4
GDS charge for no-shows = $3,200 p.d.
Annual cost of no-shows = $1.2M p.a.
Average industry no-shows are 15% (AEA)

15. Why implement Revenue Integrity solutions ?
No-shows necessitate overbooking.
Airline X operates = 50 flights per day
Oversold Flights = 5 (10%) pd
Offloads = 25 (5 per flight)
Compensation = $150 per pax
= $3,750 pd
= $1,350,000 pa
It’s far better to use RI than to continually overbook

16. Why implement Revenue Integrity solutions ?
The Revenue Opportunity is Significant
Airline X operates = 50 flights per day
Average capacity = 150 seats
Number of ‘closed’ flights = 5 (10%)
Average ‘closed’ flight LF = 90%
Number of empty seats = 180 pd
Average yield = $250
Lost revenue = $18,750 pd
Lost revenue = $6,825,000 pa

17. Why implement Revenue Integrity solutions ?
Revenue Integrity can be a very low investment with a very high R.O.I.
Typical airline benefits = 3% of revenue
Return on investment = At least 20:1
Some airlines getting >300:1

18. Different approaches to RI
Manual checks at checkpoint:
Advantages are better than nothing and possibly low cost dependant upon location.
Disadvantages
Leaves speculative bookings in place for long periods.
Higher cost than systematic approach.
Creates very irregular booking curve demand in RM system.

19. Different approaches to RI
Systematically at checkpoints :
Advantages
Lower costs over time.
More reliable than human resource
Disadvantages
Leaves speculative bookings in place for long periods.
Creates irregular booking curve demand in RM system.

20. Different approaches to RI
Daily on whole bookings database
Removes illegitimate bookings quickly.
Smoothes forecast demand curves in RM system.
Reduces number of transactions as only new bookings or changes handled.
24 x 7 x 365 capability.

21. Different approaches to RI
Real time, every PNR at time of creation or amendment
Removes illegitimate bookings almost immediately
Smoothes forecast demand curves in RM system.
Reduces number of transactions as only new bookings or changes handled.
24 x 7 x 365 capability and at Point of Sale
The ultimate solution!

22. Sporadic checks by airports, Res staff or RM does more harm than good.
R.I. recommendations
Sporadic checks by airports, Res staff or RM does more harm than good.
Distorts passenger demand forecasts.
Distorts No-show data, which can lead to offloads, downgrades or empty seats.
Distorts cancellation data which also leads to offloads, downgrades or empty seats.
Distorts yield data.
Either do RI consistently or do nothing !

23. New entrants to R.I. Primary decision, determine if you wish to :-
Outsource problem to a total service provider.
Purchase software from a solutions provider.
Opt for an ASP
Create a dedicated focus within RM
Take a standard approach as much as possible, minimise exceptions
Automate as much as possible

24. New entrants to R.I. Sell the benefits to get them on-side.
Communicate with Sales and advise what you are intending to do
Sell the benefits to get them on-side.
e.g. Freeing up more seats for Sales to sell ! Versus “We are going to cancel many PNRS in your Sales area !”
Identify exceptions - e.g. special markets, deals etc. ( Illustrates why RM need to control all deals centrally )
Analyse the benefits and communicate especially on your R.O.I !

25. LCC Impacts
Traditional carriers under attack from low cost carriers, price fences falling:-
Sat night min stay.
Round trip high fares replaced with low cost one way combinable fares.
Name changes / Itin changes permitted at a charge.
Direct sell & Web based sales increased massively.
Selling additional add-on services
All require R.I. Processes to be re-evaluated.

26. A.R.I.G.= Airline Revenue Integrity Group
Launched as a initiative to spread knowledge, share benefits in 1998 by BA
Crusade to clean up the industry
Non competitive issue for all carriers
Facilitate best practice- share experiences and knowledge
Cleanse industry problems to improve results

27. A.R.I.G. focus Improve data quality to reduce No-shows.
Raise awareness of R.I. opportunity, ROI etc.
Provide a stage to software vendors for system solutions.
Serves as a pressure group.
Work with GDSs to reduce R.I. problems at source. (Prevention being better than cure ! )

28. A.R.I.G Website www.arigroup.org featuring :-
Outputs from previous meetings - minutes, presentations, articles.
ARIG membership and contact details
Shared documentation.
Software suppliers
Discussion database
Industry news
Future event details

29. Summary
Revenue Integrity is a relatively low cost investment with a high R.O.I.
Very high R.O.I achievable, e.g. one carrier produces benefits of $70Mp.a. for >$0.4M costs
Cleansing data improves RM system results, which aren’t even estimated in the benefits figures.
Reduces costs
Easy to sell to both Senior Management and staff.

30. Summary Easy to implement with quick easily identifiable R.O.I.
Not a competitive issue airlines should work together to share knowledge and establish best practices.
JOIN ARIG !