A lifetime in airline revenue management

This article reviews the lifespan of Revenue Management (RM), the changes and the problems that still persist today. In the 1970’s RM consisted of very simple basic inventory controls based on gut feel and hope, with few prices to manage and no such thing as brands. In the 1980’s deregulation in the United States drove multiple fare offerings worldwide requiring more sophisticated inventory controls of up to 26 selling classes. British Airways’ (BA) RS13 inventory control system was perhaps leading edge in this area with colour coded triggers and the addition of point of sale controls too. This period also saw the emergence of first generation Revenue Management System (RMS) for a handful of airlines, most notably American Airlines who pioneered RM development to combat People Express and Laker’s Skytrain; early forerunners of a Low Cost Airline. RM system successfully saw off this threat and lead to other major carriers investing in their first in-house developed systems. The 1990s saw boom time with several RMS providers allowing many other airlines to join the RMS club. It also saw the rise of the worldwide internet which has revolutionised the travel industry and our lives in general. The 2000s witnessed the birth of Origin and Destination RMSs for network carriers, while many more carriers implemented their first RMS. This was helped by cheaper data storage, enhancements to the microchip and more sophisticated programming. However, despite all the technical advances in 40 years many airlines still fail to realise the often quoted 9 per cent of potential benefits of a RMS. Paul considers why this might be.