<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by FT wannabe:
On the other hand, airlines should take a closer look at the yield management software. Because whatever it is doing, it is not filling up the seats at profitable scale. Maybe some assumption they put into the software are not valid anymore...</font>
Bingo.
Yield management was pioneered in days when airlines could reasonably expect a mid-to-high single-digit percentage increase, year over year, in air miles flown.
Further, the proportions of leisure vs. business travelers, the percentage increase in average fare paid, the average distance per flight ... these numbers all stayed remarkably constant through the Reagan / Bush Sr. / Clinton boom years.
Ah, but with a recession comes a different set of rules, and on 9/11, the rulebook went right out the window.
The 20 years of data airlines have powering their yield management software is ... well, maybe
worthless is too strong a term, but certainly no longer dependable.
But who's going to blink first, scrap that data, and start over with a radically rehauled fare and FF structure? Or will all 6 majors go lemming-like over that cliff instead?
Mook