Disruption is the new normal for businesses in every industry. In the travel and transportation space, airlines are applying new levels of technology in order to deliver value on faster cycle times. Meanwhile, they are experiencing an increasing churn of talent, plus added restrictions and industry mandates. To survive in today’s volatile environment, airlines must enable real-time situational awareness to combat operational threats. Managing their cargo below the wing as they revenue manage their seats and ancillaries above the wing will help them achieve their goals.
According to the International Air Trade Association (IATA), worldwide demand for export and import orders continues to fluctuate, while cargo capacity restraints tighten. IATA reported that both cargo demand and capacity were down in April 2022 compared to the previous year, with global demand down 11.2% and demand for international operations down 10.6%. Global cargo capacity was reportedly down 2% versus April 2021 (although international operations were up 1.2%), and both were down slightly from March of this year.
IATA also reported that total demand for air travel was up 78.7% year-over-year in April 2021 and up 2.7% over March 2022, with several international routes trending above pre-pandemic levels. So while it appears that wildly fluctuating cargo capacity and demand are here for the long haul, air travel for commercial passengers continues to increase, despite fuel costs, political challenges, and pandemic complications.
Meanwhile, airlines struggle to effectively price cargo capacity in an increasingly dynamic environment. In a time when year-over-year and historical data leave gaps in future demand and pricing, traditional methods are unable to help airlines convert their unique offering into long-term revenue. Beyond that, cargo revenue management isn’t typically considered in legacy revenue management systems. Instead, carriers rely only on ad-hoc processes, infrequent heuristics, and effort spent exclusively on managing near departures. In a nutshell, airline analysts rely on guesswork to make cargo revenue management-related decisions. This is not the best way to maximize the usage and profitability of airlines’ most profit-turning assets.
FLYR Labs utilizes artificial intelligence, deep learning, and neural networks to solve the industry’s cargo model complexities. The Revenue Operating System® harnesses this cutting edge form of AI technology to provide the context behind airline data, helping analysts make better informed decisions.
The Revenue Operating System does not rely on outdated predictive equations, but rather infers complex relationships in high-dimensional space. The deep learning models provide meaningful, organization-wide applicable outputs – driving capacity planning, B2B negotiation, and automated request evaluations to support sustainable cargo revenue. For airlines, The Revenue Operating System also informs the price of passenger fares and ancillary products like neighbor-free seat offerings for true total flight revenue optimization.
For cargo revenue management analysts, this means they can now focus their attention on strategic activities – deepening their understanding of the network, evaluating complex opportunities alongside customers, and leading the cargo organization as a true commercial center. This is enabled through The Revenue Operating System’s outputs removing the need for manual oversight of standard requests, dynamically reacting to changing market conditions, and identifying where human attention is required. Models and frameworks that have been price-focused since day one ensure that carriers will no longer have to resort to rigid pricing and simplified frameworks while enabling increased organization, agility, and speed of collaboration with customers.
The result is a robust, sustainable, unified cargo management plan that minimizes waste, maximizes revenue, and streamlines operations across the entire airline.
Author: Oscar Marsters, Technical Product Owner, Cargo Revenue Management, FLYR Labs.
Editor: Krysten Powers, Marketing Communications Lead, FLYR Labs
Learn more about how airlines can unlock cargo’s revenue potential using The Revenue Operating System in Air Cargo Magazine’s April issue (Page 16), or visit https://flyrlabs.com/product/.