The aviation industry has a narrow profit margin, understand revenue components and latest technology trends with IATA's senior lead in Airline Business Management and Sustainability, Davit Mamulaishvili, and Opremic's Chief Technology Officer (CTO), Michael Frank.
The global aviation profit margin is razor thin—just 3.7% or a little above $7 per passenger per segment. Decisions on ticket pricing are therefore of fundamental importance, affecting every aspect of an airline’s business.
The task of making sure pricing is correct falls to revenue management experts. But the complexity is bewildering. Consider just a few of the factors that will influence these mission-critical decisions:
Aside from the above, the aircraft type, airport and overflight charges, and local fuel uptake are among the numerous other elements to be taken into consideration. In short, every flight is unique and necessitates a delicate balance in priorities. Multiply this intricacy by the number of flights in an airline network and the scale of the challenge becomes clear. And it must also be remembered that every flight is a perishable good. The window of opportunity to sell is limited and so with every decision, the clock is ticking.
Much of the complexity is managed by revenue management systems (RMS), churning through algorithms and historical data to find the best pricing points. The human touch is ever-present, however, identifying outliers and ensuring unique situations, such as a sporting event or other disruptive factors, are taken into account.
Three main elements comprise revenue management:
Imagine a flight six months out has sold approximately 10% of its seats. Forecasting will suggest the eventual total revenue from the flight, which can then be compared with historical data or acceptable limits.
Airline strategy might call for market share rather than maximizing profit, for example. Inventory management and pricing then make changes accordingly. But remember, demand is always erratic and can change daily. The real skill is finding the sweet spot—optimal price points that are high enough to reflect anticipated demand but low enough to ensure a good load factor.
The fact that airline load factors are expected to reach an all-time high of 84% in 2025 is an indication not only of demand but also the skill of revenue management experts in managing that demand.
The job doesn’t stop there. Because of the multiple interfaces across airline operations, revenue management must successfully input into network decisions and much else. A double daily flight between, say, London Gatwick and Rome, might work well in the summer season. But in winter, it may work better as a single flight, perhaps with a second flight only on certain days. Revenue management feeds directly into such decisions. Maybe the figures show that no second flight is needed in winter or that there is potential for a third flight in summer. Equally possible is a requirement for the aircraft type to be upgraded or downgraded.
“Consider what this means to an airline,” says Mamulaishvili. “The entire network will need to adjust as an aircraft type can’t be easily switched—or a new aircraft bought. Then there is crew planning, maintenance schedules, catering—the list is almost endless. Cooperation between revenue management and multiple other departments is crucial.”
RMS are already sophisticated, able to accommodate a multitude of rules to find an optimal price for the market. But there is little doubt that such advances as artificial intelligence (AI) can refine the process even further. AI can learn as it goes and so has the ability to support human oversight through tailored suggestions.
There are also new processes and messaging standards that are affecting revenue management systems. The previous norm was dictated by global distribution systems (GDS), which sat between the airline and the customer, and covered the airfare, schedule, and availability. Airlines filed a fare through ATPCO (Airline Tariff Publishing Company), which was then communicated to the GDS. The airline schedule was also shared via a third party.
In effect, it was a complicated arrangement with the GDS at its heart. And most RMS being used today are still based on this traditional model, which also relies on legacy passenger service systems (PSS). The PSS manages all aspects of passenger operations, including ticketing.
Airlines are therefore beginning the move away from old-school PSS, in turn enabling them to upgrade their RMS. Airlines have all three pieces of essential information—price, schedule, and availability—meaning these critical databases can be made directly available to the customer. GDSs still form an important part of the distribution landscape, working with travel agents, but once the changes are complete, the door is open to Modern Airline Retailing, where airlines can directly make bespoke offers to passengers and fulfil them.
It means, for example, that an airline can charge a specific price, say $295.99 rather than $300. Or it can make a small charge for a “fare lock” for a limited period. This gives an airline much greater flexibility in its marketing and revenue management strategy.
The added agility of the new model will see greater integration of AI into RMS and superior optimization through the added granulation. Human oversight still won’t go away but the tools available will be greatly improved, further enhancing the impact revenue management has across airline operations.
As a case in point, the Indian airline, IndiGo, is set to implement Amadeus Segment Revenue Management Flex (Amadeus SRM Flex) to improve business efficiency and increase its revenue opportunities.
Cloud-based, Amadeus SRM Flex will receive information from IndiGo’s Navitaire New Skies Passenger Service System (PSS) through its cutting-edge Revenue Management Integration Service (RMIS). This will enable near real-time data exchange capabilities allowing the carrier to immediately respond to market dynamics, such as new bookings or equipment changes. Price setting capabilities within the system can be adjusted to be rule-based, science-based, or a mix of both depending on the carrier’s strategy.
“IndiGo is making great progress on its journey “Towards New Heights and across New Frontiers” to adapt and excel?in the evolving aviation industry,” says Abhijit Dasgupta, SVP – Planning and Revenue Management,?IndiGo. “Amadeus’ Revenue Management technology will enable IndiGo’s revenue management team to have more granular steering controls, make quicker business decisions, drive greater automation, and increase efficiency across the board.
“IndiGo will be able to streamline its operations by consolidating interfaces into one, resulting in time optimization and a sharper focus on more sophisticated Revenue Management strategies required for a fastgrowing network in a diverse set of markets and passenger segments,” he continues. “Most importantly, it enables IndiGo to merge its own growing data science and machine learning capabilities with the solution, leveraging the strengths of both?IndiGo and Amadeus to develop an ecosystem that can cater to IndiGo’s expansion plans and future growth.”
A career in revenue management, therefore, is far more than number crunching and in fact can be described as an art as much as a science. And because “getting a feel” for revenue management is so essential, the latest training incorporates simulation.
The designer of the simulation, Opremic’s Chief Technology Officer, Michael Frank, says it “takes students away from a “this button does this” classroom lecture and puts them at the center of an invigorating experience.”
The baseline is simulating customers in search of flights. The moment a participant makes a decision on pricing, the impact on the number of flight bookings can be clearly seen. “It lets them try out strategies,” says Frank. “What happens if they don’t overbook, for example. And it also allows competition with another student who is also making decisions that impact the same simulated market.”
Opremic is now testing custom Generative Pre-trained Transformers (GPTs) to transfer knowledge, a form of AI-based learning. Students will be able to ask specific questions on their weak spots. It is hoped such development will attract new talent, which the revenue management sector certainly needs following a loss of experience during the pandemic. Still, Frank says this is also an opportunity to get people from different backgrounds involved in what he describes as “a fantastic career.”
And those with airline revenue management knowledge are definitely in demand. It is consistently among the top three “in demand” skills within the industry and is also highly prized by other sectors, including hotels and rail. Importantly, even with AI looming on the horizon, there will always be a need for human analysis.
“AI is a long way from understanding the complexity of revenue management,” says Frank. “It will set some general rules and point out outliers, but the job of revenue management analysis is not in danger. That is so complex and nuanced that human oversight will always be essential.”
Maximizing airline revenue is an extraordinarily intricate activity and requires the perfect blend of strategy, pricing and load factor management. There is a direct impact on the planning and profitability of an airline, making the consequences of learning—or innovating—on the job significant.?
But training is improving all the time. The revenue management simulation is just part of a suite of courses, such as?Revenue Management and Pricing with simulation, and Revenue Management for Practitioners with simulation. Participants not only get expert tuition but also are at liberty to experiment in a risk-free environment.
“Airline operations and profitability pivot on the work done by revenue management,” concludes Mamulaishvili. “It is a demanding role but a rewarding one. As you would expect, it is not easy to teach the skills required through the classroom alone. Experiential training is crucial, and more innovation is on the way. you’ll never look back. Revenue management is a great career choice.”
IATA Training offers a comprehensive Airline Management curriculum designed to build strategic and commercial expertise across all levels. Beyond revenue management, our courses cover network planning, marketing, finance, and data-driven decision-making. The Airline Management Diploma provides a structured path for professionals aiming to advance into leadership roles. Whether you're strengthening core skills or preparing for executive responsibilities, IATA’s training supports your career growth with globally recognized certifications and industry-relevant content.
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