In my 21+ years of experience of working with the Airline, GDS and the Travel industry I have noticed a common problem in most of my client’s businesses that of “Revenue Leakage”. Companies are bleeding money every moment. “Revenue Leakage” is a real challenge for industries such as travel, which has a complex distribution and revenue management chain. In this current economic turmoil, travel & tourism industry and especially the airline industry is facing a tough time to maintain a balance between expenses and revenue.
What is it?
“Revenue Leakage” is the gap between the actual revenue and the estimated revenue, as per records. It is one of the most pressing problems in the Airline Industry, but surprisingly most airlines are taking too little or no precaution to stop this bleeding of their hard earned revenue.
In the not so oligopolistic domain of Travel, one question every Airline and Travel Management Company needs to ask themselves is, “Are we doing enough to handle ‘Revenue Leakages’?”
How does “Revenue Leakage” occur in the first place?
The three main sources of this problem are:
- Insufficiently trained staff at travel agencies and airlines, causing accidental revenue loss.
- Flight disruptions such as schedule changes, flight delays, and flight cancellations resulting in a passenger no-show leads to loss of revenue. For example, a passenger can be shifted from one flight to another due to one of the flight’s changing its arrival or departure time. If not shifted as per schedule this results in the passenger missing their onward connecting flight, a no-show occurs resulting in loss of revenue.
- Deliberately misusing the revenue system. This is the most frequent cause for “Revenue Leakage”. It is, however, the easiest for an Airline to remedy with a little determination, focus and a small amount of investment.
Why it happens?
“Revenue Leakage” manifests itself in many forms as sales are made through various distribution channels. Airlines have little direct control over these channels and are unable to prevent any “Revenue Leakages” across multiple channels. This is a direct and significant hit to profitability.
For an Airline, the main reasons behind “Revenue Leakage” are:
a. Un-ticketed bookings
b. Incorrect booking classes (Book in high class and ticket in low class)
c. Misuse of fare rules
d. Passive bookings
e. Blocking seats till 48/24 hours to flight departure
f. Duplicate bookings
g. Misuse or incorrect understanding of cross-border selling rules
h. Multiple bookings for the same passenger in the same or different class
i. Multiple bookings on several flights of the same airline operating in the same sector
j. Name changes
I am sure if you have anything to do with revenue, all the above might sound eerily familiar? What can an Airline do about it?
I would like to discuss ways that can reduce “Revenue Leakages” significantly. I have seen concrete evidence in the last 21 years that there are ways and methods that can significantly improve the bottom line for an Airline.
It is important to take a holistic approach and consider both ‘Revenue Management’ and ‘Revenue Integrity.’ Traditional revenue or yield management principles maximize revenue in the pre-booking period. However, this approach represents a limited part of the total revenue opportunity.
When a booking is made, there is no guarantee that it will be used (consumed), and even if it is used, it is very likely that the booking will get changed before the date of travel. As mentioned above, revenue disappears when actions such as duplicate bookings and un-ticketed bookings, multiple bookings, name changes and misuse of fare rules occur.
What is the solution?
It is necessary to adopt a complete revenue management process, which is a combination of training and adopting smart technology.
- Organizing frequent training and development programs for staff and employees, as well as travel agency partners.
- A disruption management technology that is capable of optimizing the “Revenue Leakage”, due to flight schedule changes, delays and cancellations.
- An intelligent online booking platform that can automatically identify and show results as per the allowed booking criteria for respective agents.
Nevertheless, it is a problem that airlines cannot entirely solve by themselves. Flight ticket sales occur through a wide variety of distribution channels over which the airlines have little direct control, as mentioned above, and these channels charge on the basis of bookings held and not passengers that board a flight. The Distribution network obviously has no incentive to reduce the resulting “Revenue Leakage” for the airlines. Thus, Airlines must work with the GDSs to encourage them, to supply more revenue integrity checks at source.
Improving the bottom line is essential to your business. Revenue integrity is a proven solution that provides quick & easy identifiable returns.
Airlines recognize the benefits of revenue integrity software, and some develop their own revenue integrity software but this can turn out to be an expensive affair. For many, outsourcing is an attractive alternative as it helps in avoiding the costs associated with additional IT overheads, as well as gaining access to expertise and experience, which can be difficult and expensive to obtain and also, retain in-house.
How does “Revenue Leakage” affect the travel agent?
- Again insufficiently trained staff leads to unintentional misuse of fare rules
- Receiving ADM’s from airlines for:
- Incorrect issuance of tickets
- Non-cancellation of inactive bookings (segments with HX, NO, UN, UC, PN) status codes
- Creating multiple bookings for the same passenger on the same airline with different flight timings
- Booking and cancelling the PNR through multiple instances
How can the ADM’s be controlled?
Travel agencies can use a simple automation solution to eliminate or control the main reasons for receiving ADM’s from airlines. An automation solution which focuses on automating pre-ticketing quality checks, deleting and cancelling duplicate as well as multiple bookings, well within the timelines.
N.B: This post is made by Prashant Abhyankar. Prashant serves as Business Development Head – ME & Asia at tavisca. You can directly reach Prashant at – firstname.lastname@example.orgFor product demos and queries contact – email@example.com Press and Media contact- firstname.lastname@example.org