Airline business manoeuvre, adjusting demand to supply

Seasonality on one side and hyper competitiveness on the other, any business manoeuvre that brings success to airline industry should be praiseworthy. Most airlines have in their operational manual action steps outlined to face one type or other situations relating to demand-supply dynamics. Adjusting demand to fit supply is one such scenario. 

Beginning with, airlines use different seating system consisting of three forms of configuration:

Four class:  First class, Business class, Premium economy & Economy

Three class: First class, Business class & Economy

Two class: Business class & Economy

Unlike the first class that is refurbished with mostly permanent features, other classes render themselves to be expandable and contractible in terms of passenger seats. It is the dictum in airlines that instead of flying standard seating arrangements for the entire flight duration adjust the demand to fit different classes that fall vacant in a given flight. Two limbs are interwoven here

Firstly, mean seating arrangement dictates the number of passengers expected for each class and accommodation be made accordingly. Here the airline depends on the past information collected and collated during the last couple of years broken down into seasons such as spring, summer, fall and winter or in terms of days of the week or in terms global events like Olympics or in terms of destinations that attract business travellers or pleasure travellers as the case may be.

Secondly, maximum seating capacity cannot be increased as per air travel regulations. So for example, when the economy class is full demand for it must be adjusted by treating the excess travellers as if they have selected business class and the fare would be increased just below the usual fare applicable to business class travel. What actually happens is the demand for economy is trimmed and the rate of occupation of business class is being jacked up. 

If this method is not feasible in the case of overwhelming demand across the classes, airlines are placed in a dilemma. One way out is to increase the price beyond at a point, say, 80% of the seats are already booked and confirmed. This may have negative effect over the customer pricing policy. Second way of exit is to transfer the passengers to other airlines who are members of same alliance to which the affected airline belongs. The caveat is the other airline must service the same departure & arrival except for the time schedules.

If none of these options are available, airlines staff must persuade prospective travellers to amend their flying schedule to be accommodated in the next flight. In case successive flights are also fully booked sales staff must quietly get the prospective travellers to agree to a near future date when demand could slacken marginally.

None of these manoeuvres however, work in case where the traveller is determined to stick to his travel itinerary. Most business travellers would not stomach this kind of stuff anyway. Hence, trying to help them to travel even by using competitor airline would be a kind measure. This leaves a sense of appreciation in the mind of business travellers, who would come again to the airlines that helped them out. This business manoeuvre balances two aspects. Airline loses cash-flow but at the same time its goodwill is never lost! 

 

Cheers!

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist