Maximising revenue production while cutting costs: An airline industry mandate

In cases of severe passenger demand disruption and economic downturn, some airline companies react by disregarding revenue management tactics in favour of simply slashing capacity in hopes of gradually growing back load factors. With luck, the company can maintain market share and generate acceptable cash flows. This paper contends that there are strategic reasons for rejecting this shortsighted view. Revenue management, as the executor of the commercial plan, retains that pivotal role even when the plan is in crisis mode. This paper presents eight specific tactics that can be used with success in the down phase of the business cycle. The paper describes how revenue management can contribute substantially to cost savings and revenue maximisation, while helping to maintain quality in the midst of deep cutbacks in flight operations and staff.