We largely agree, have a few misunderstandings - and there is one point where you lost me.
Originally Posted by [url=http://fabo.sk/
Fabo.sk;
30960520]Because, respectfully, you keep repeating "someone else does it, I think they should do it, therefore they are wrong and I am right"
Huh? Not at all.
There are *two* things which I believe you have mixed up in one statement:
1) What indeed I am certain to be right: "They could do it". aArlines with sophisticated inventory management have the possibility to manage inventory for certain customer segments by using fare buckets. They do that successfully today. The algorithms doing that are not 100,00% fail-proof, but close enough for airlines to feel comfortable with the very small number of IBD that creates. That is an undisputable fact, and I keep repeating it when it is being put in question. On this point, only on this, yes, I maintain, claiming the opposite is wrong. I would love to move past that point so that the second one, on which I have no fixed option at all but rather ask a question, can be discussed:
2) I *ask the question* why AFKL doesn't do it. There has been very little discussion about that, although that is the actual question that I put out. The few statements I made were that neither do I know whether they have considered it or not. So I am not saying that anybody is right or wrong or that AFKL is wrong not offering it - I just wonder why they don't. And I point out that some people would find it valuable.
without accepting the possibility, however remote, that AFKL actually does know this is a thing that exists,
Even if I repeat myself: I repeat that I do not know whether AFKL knows about the existence or doesn't. I do accept the possibility that they know it exists.
and maybe, just maybe, they have decided that it's not in the best interest of their business to offer this.
I concur. Maybe they have come to that conclusion after consideration. Or maybe they haven't considered it (you said in your last post that you were sure that they had considered it. You seem to be sure, I am not. Not a problem)
With all due respect, I know that inventory management exists. I wasn't born yesterday.
Well good, if you are so familiar with it, why are we having the debate about booking guarantee creating more IDBs.
Because the only way you can prevent bumping pax is knowing ahead of time exactly what flight the booking guarantee is going to be used and not sell the exact number of seats that will be filled by booking guarantee using pax... or else keep entirely too much reserve inventory free, which will prevent you from selling the available seats at close-to-full fare anyway.
Precisely, that is how inventory management works! That is already how they manage their fare buckets today between J, C, D, Z, I and so on: they close lower booking classes so that they can keep higher ones open. At one point they close them all to avoid creating too much overbooking and having to bump people. Nothing to do with booking guarantee. For instance, if the algo gets it wrong and closes I, Z, D, and C too early and only leaves seats in J because the airline expects people to turn up and buy J but then they don't - unsold seats are the result. And vice versa, if you leave availability open for too long (=create too much overbooking) then you create IDBs. We agree on that, don't we? Now just apply exactly that principle to booking guarantee: make the booking guarantee class the highest booking class (with the highest protection level), then close lower booking classes earlier depending on what you expect for the highest booking class. Exactly the same thing as today. Booking guarantee is just a different bucket, the one that you close last.
You seem to think current inventory management is good enough for that, I think it's not.
?? This is the part I don't get. You accept that inventory management is good enough to manage inventory between the different fare buckets, that it manages to close fare buckets earlier or later based on predictions, differentiating between different protection levels - but it wouldn't be good enough to manage one additional bucket using precisely the same methods? Why not?
The only point when a booking guarantee is needed is on a flight that would otherwise be full.
At the same point, that is also the flight where AFKL faces the highest lost revenue if the last seat is not sold.
I agree. In today's world, this is why they leave lower booking classes open long enough toavoid unsold seats. In the booking guarantee world, they would leave "non-Elite" availability open long enough to avoid unsold seats.
Your solution to the capacity issue was to keep some seats in a separate bucket and release them only if unsold at point of last guarantee.
To be precise: "leave unsold or steer overbooking in such a way as to be able to accommodate these pax". But yes, that is how it works. Just like the highest fare classes today have the highest protection levels and are the ones closed last.
That could work, but only if you assume 100% reliable inventory control
You are right. You would need 100% reliable inventory management to avoid unsold seats or to avoid overbooking. But that is the case already today. See above: if you close lower booking classes too early you may find yourself with unsold seats if you mis-predict the number of people buying at high fares; or if you leave booking classes open for too long , you create too much overbooking. But that is already a problem with inventory management today, predictions can be wrong. Not different if you introduce booking guarantee. You can get it wrong as well in the future, but there is no reason why you'd get it wronger than before.
and/or some reliable very, very last minute demand (<24h).
In theory, yes. But, the way this was explained to me by a revenue manager is that you hardly have any more fluctuation in the last 24 hours before departure. The ratio of booked seats/available seats (the "overbooking factor") stays pretty stable, and waitlists hardly move.
You're expecting that AFKL considers business class pax on high-demand routes low-value customers. Just because a pax doesn't have AFKL Platinum card, doesn't mean they aren't valuable.
This is where I fundamentally disagree with you. I believe that over time repeat high fare customers have higher economic value for the company than one-time customers. I would look at LTCV (long term customer value or life time customer value, depending on whose term you use) rather than the economic value a customer generates with one flight. Especially since the booking guarantee customer would in any case have to pay the highest fare. Result: the booking guarantee customer has higher lifetime value and equal transaction-value-on-this-flight.
Whether Plats are always higher LTCV customers is a different debate and may well be questioned.
You say you don't, but you act like you know they didn't
No. What I have certainty about is that inventory management systems can run a booking guarantee scheme without problems. That is one statement.
What I have no certainty about at all and said so repeatedly and therefore asked the question was if they had considered and dismissed it or never considered it. I don't know. That is another statement.
and you want them to.
Yes. Because I can think of some customers who find this valuable.
I rather presume it's more likely they did.
I accept that. I have absolutely no basis for believing the same or refuting it. Maybe you have some evidence. I just don't know.
Yes, certainly the inventory and revenue management takes these factors into account. How is that even relevant?
Because you mention another airline's inventory.
I am not talking about short haul network. The whole discussion is about the longhaul business guarantee
Is it? Since when? Not in my original quesiton at least. Because it's also in the short haul network that I would find booking guarantee super helpful and where it is sometimes needed.
Which only makes the problem worse. While it's possible to predict loads fairly well in regular operations, it is impossible to predict when meltdowns will happen exactly. So you might aim to have 1-2 empty seats at T-48 and get to that goal, but suddenly the French ATC announce a strike and you have 10 Plats trying to make use of the booking guarantee, which leaves you with 8 people who already bought the highest cabin available that you need to bump or reroute. Rerouting someone on dirt-cheap eco ticket has far lower impact than rerouting someone in business class.
Yes, you are right. This is exactly the situation where bumping pax will be unavoidable and it will cost the airline. The very same moment where those that can benefit from the booking guarantee will say "Those guys really got me out of a critical situation". In marketing there is something called the gratitude moment which translates into higher loyalty, which is worth money (FYI: there are firms who actively play with that. Make small issues appear big and then let the customer agent who solves the problem appear as the saviour, and create the moment of gratitude, which has been proven to translate into higher lifetime value of those customers)
But there are ways around it: AFKL could suspend booking guarantee in the case of network meltdowns (strikes in France...) and simply revert to the promise that already exists today: "you'll be top of the wait list."
Anwyay the point in relation to LHG here is, that regulating IRROPS by rerouting via 3/4 hubs is a lot, lot easier than rerouting via 1/2 hubs, lessening the commercial impact.
Why? Hypothetical example: ff Lufthansa has to bump a passenger from Dublin to Athens; it can put him on one of four LHG A320 planes that leave in the next couple of hours. Each of those next planes has 160 seats, a total of 640 seats. One connections is via Frankfurt, one via Munich, one via Zurich, one via Vienna. To re-accommodate the bumped pax it has to find just one seat among the 640 seats that leave in the next hours.
Now if KLM has to bump a passenger from Dublin to Athens; it can put him on one of four A320/B738 AFKL planes that leave in the next couple of hours. Each of those next planes has 160 seats, a total of 640 seats. Three connections are via Amsterdam, one via Paris. To re-accommodate the bumped pax it has to find just one seat among the 640 seats that leave in the next hours.
The point that I am trying to make: it doesn't matter if you have four hubs or two or three. What matters is how much capacity you have to re-accommodate bumped passengers. It doesn't matter if all those re-accommodation solutions fly through one or different hubs.
The debate would then be if LHG has a much denser network than AFKL which would allow it to have access to more inventory. Probably the answer depends on what connections one is looking at, and to what extent airline alliances are being taken into account. Being bumped of a Lufthansa flight from ATL or Rio de Janeiro will leave you in a worse place than bumped off an AF flight. LHG has one daily to each ATL and GIG, whilst AFKL have three dailies to ATL (plus the DL JV) and 18 weekly flights to GIG. Bangkok would be the other way around: one AF and one KL, but three (or even four?) daily LHG flights and alliance partner TG.
Yes, and that's why IDBs never happen... unless they do.
They do. Already today. Also in Business Class. Nothing news. Algos are imperfect.
Maybe I don't give AFKL inventory management enough credit, but I don't think the likelyhood of people being bumped stays the same. After all, you are removing the concept of "sold out" for a certain class of customers.
You would be right if booking guarantee worked until the last minute, because as you say it would remove the concept of sold out. But that's not what I suggested. The flight *is* sold out even for everybody, including the top customer 24/36 hours (pick your number) before departure. I just apply the same principle that inventory already apply today: close lower booking classes earlier to only leave the higher ones open. I just make the booking guarantee class the highest one.
Cultural factors, that I don't want to say there is no impact of them on the decision. after all the simple look at tiers with both benefits and ease/difficulty of achieving suggests, that LH values their high-tier flyers relatively more compared to paid J pax in general in comparison to AFKL.
Yes, we agree.