Revenue Integrity

Revenue Integrity
a vital ingredient to
good Revenue Management
Paul Rose
MD Paul Rose Revenue Management Ltd
&
Chair of A.R.I.G.
Content
• Revenue Integrity -
Sources, range and
result of problems.
• A Revenue Integrity
programme and the
benefits.
• How a carrier can
implement Revenue
Integrity.
• A.R.I.G.
• Summary.
2
My background
• BA 1970-’94 mostly RM.
• VAA 94-97 implemented first RMS.
• Rejoined BA ’97 - 2000 RM
• O&D, Oneworld RM projects, BA’s RM & RI
spokesman
• Created A.R.I.G.
• Since 2001 M.D. of PR RM Ltd, clients:-
• A.R.I.G. – Chairman only independent RI
organisation.
• SITA, IATA, CALIDRIS
• independent RM Consulting
• Academia - Gerona University, Spain
3
Revenue Leakage is the problem!
Revenue leakage is:
“the difference between the revenue

that airlines expect from bookings and
the amount they eventually actually
receive”
4
Definition of Revenue Integrity
• Providing robustness of reservations by
ensuring that travel is undertaken within the
conditions of the sale.
BY - Removing those reservations that create
unnecessary additional costs and which
reduce saleable inventory space to an
airline’s clients.
OR more simply put:-
“Ensuring that the right passengers, fly on the
right flight, at the right time, at the right fare
” 5
Sources of the problem
• Accidental revenue abuse from badly

trained staff at travel agencies and
airlines.
• Airline originated from unintentional
process problems e.g. Misconnections.
• The largest single problem is
deliberate revenue system abuse from
creative travel agents or customers !
6
The range of the problem
• Unticketed PNRs • No-show psgrs

• Incorrect class mix with onward
• Abuse of fare rules. carriage
• Sub MCT • Multiple bookings
on same flight
• Passives.
• Multiple bookings
• Space blocking
on several flights
• Dupe segments
• No names - Groups
• Dupe Names & individuals
• Redundant • Name changes /
waitlists Fake names
• Cross border abuse 7
Results of these problems
• Increased No-shows & late

cancellations, 30-40% on some routes.
• Unreliable R.M. data. = Forecasting
error.
• Abuse of Pricing rules causing revenue
leakage.
• Unnecessary distribution costs i.e. GDS
charges.
• Unnecessary meal wastage
• Lower seat access for customers
8
3 Elements to Revenue Integrity
PEOPLE
PROCESS
BENEFITS
SYSTEMS
9
Revenue Integrity - benefits
Departure Stage
Lower costs resulting from:
 Reduction in GDS & DBC charges
 Reduced catering costs and airport charges from
delayed flights due MCTs.
Improved Customer satisfaction from:

 Less offloads & downgrades
 Earlier seat assignment at booking and check-in
10
Revenue Integrity - benefits
Booking Stage
Increased Revenue resulting from:
 Higher quality booking data
 Better Revenue Management forecasts
 Improved seat factors
 Reduced cancellations and no-shows
 Less need to overbook
11
Revenue Integrity benefits
• Increase customer access through

removal of fictitious PNRs , hence
improving revenue result.
• Reduces on departure No-shows and

late cancellations.
• Reduces over forecasting.
• Stabilises data quality and R.M. results.
• Reduces costs elements to operation e.g.
GDS costs, Catering wastage, overstaffing
etc. 12
No-shows stabilisation
• Can you ever eradicate no-shows ?
• NO !
• Removing large fluctuations is the aim of
RI e.g. average no-shows may only be
15%, BUT there could be variance of 7%
one week versus 23% another week!
• RI enables the outliers to be removed and
averages lowered e.g. constant 10% no-
shows with variance between 8% - 12% =
10% average.
• A RMS likes data consistency which helps forecasting
resulting in Spill and Spoilage reductions. 13
Why implement Revenue Integrity solutions ?
 GDS being overpaid by as much as 15%

Airline X operates = 50 flights per day
Capacity 150 seats = 7,500 seats pd
Average LF 70% = 5,250 seats.
No-shows @ 15% = 800 passengers
Using average GDS charge = $4
GDS charge for no-shows = $3,200 p.d.
Annual cost of no-shows = $1.2M p.a.

Average industry no-shows are 15% (AEA)
14
 No-shows necessitate overbooking.

Oversold Flights = 5 (10%) pd
Offloads = 25 (5 per flight)
Compensation = $150 per pax
= $3,750 pd
= $1,350,000 pa
It’s far better to use RI than to continually overbook
15
 The Revenue Opportunity is Significant

Average capacity = 150 seats
Number of ‘closed’ flights = 5 (10%)
Average ‘closed’ flight LF = 90%
Number of empty seats = 180 pd
Average yield = $250
Lost revenue = $18,750 pd
Lost revenue = $6,825,000 pa
16
 Revenue Integrity can be a very low

investment with a very high R.O.I.
 Typical airline benefits = 3% of revenue

• Return on investment = At least 20:1
• Some airlines getting >300:1
17
Different approaches to RI
Manual checks at checkpoint:
• Advantages are better than nothing

and possibly low cost dependant
upon location.
• Disadvantages
• Leaves speculative bookings in place for
long periods.
• Higher cost than systematic approach.
• Creates very irregular booking curve
demand in RM system. 18
Systematically at checkpoints :
• Advantages
• Lower costs over time.
• More reliable than human resource
• Disadvantages
• Leaves speculative bookings in place for
long periods.
• Creates irregular booking curve demand in
RM system.
19
Daily on whole bookings database

Removes illegitimate bookings quickly.
• Smoothes forecast demand curves in RM
system.
• Reduces number of transactions as only
new bookings or changes handled.
• 24 x 7 x 365 capability.
20
Real time, every PNR at time of creation

or amendment
Removes illegitimate bookings almost
immediately
• Smoothes forecast demand curves in RM system.
• Reduces number of transactions as only new
bookings or changes handled.
• 24 x 7 x 365 capability and at Point of Sale
• The ultimate solution!
21
R.I. recommendations
• Sporadic checks by airports, Res

staff or RM does more harm than
good.
• Distorts passenger demand forecasts.
• Distorts No-show data, which can lead to
offloads, downgrades or empty seats.
• Distorts cancellation data which also leads
to offloads, downgrades or empty seats.
• Distorts yield data.
• Either do RI consistently or do
nothing ! 22
New entrants to R.I.
• Primary decision, determine if you wish
to :-
• Outsource problem to a total service
provider.
• Purchase software from a solutions
provider.
• Opt for an ASP
• Create a dedicated focus within RM
• Take a standard approach as much as
possible, minimise exceptions
• Automate as much as possible
23
New entrants to R.I.
• Communicate with Sales and advise

what you are intending to do
• Sell the benefits to get them on-side.
• e.g. Freeing up more seats for Sales to
sell ! Versus “We are going to cancel many
PNRS in your Sales area !”
• Identify exceptions - e.g. special markets,
deals etc. ( Illustrates why RM need to control all deals
centrally )
• Analyse the benefits and communicate
especially on your R.O.I !
24
LCC Impacts
• Traditional carriers under attack from
low cost carriers, price fences falling:-
• Sat night min stay.
• Round trip high fares replaced with low cost one
way combinable fares.
• Name changes / Itin changes permitted at a
charge.
• Direct sell & Web based sales increased
massively.
• Selling additional add-on services
• All require R.I. Processes to be re-
evaluated. 25
A.R.I.G.= Airline Revenue Integrity
Group
• Launched as a initiative to spread
knowledge, share benefits in 1998 by BA
• Crusade to clean up the industry
• Non competitive issue for all carriers
• Facilitate best practice- share
experiences and knowledge
• Cleanse industry problems to improve
results
26
A.R.I.G. focus
• Improve data quality to reduce No-

shows.
• Raise awareness of R.I. opportunity,
ROI etc.
• Provide a stage to software vendors for
system solutions.
• Serves as a pressure group.
• Work with GDSs to reduce R.I.
problems at source. (Prevention being
better than cure ! )
27
A.R.I.G Website
• www.arigroup.org
featuring :-
• Outputs from previous meetings - minutes,
presentations, articles.
• ARIG membership and contact details
• Shared documentation.
• Software suppliers
• Discussion database
• Industry news
• Future event details
28
Summary
• Revenue Integrity is a relatively low

cost investment with a high R.O.I.
• Very high R.O.I achievable, e.g. one carrier
produces benefits of $70Mp.a. for >$0.4M costs
• Cleansing data improves RM system results, which
aren’t even estimated in the benefits figures.
• Reduces costs
• Easy to sell to both Senior Management and staff.
29
Summary
• Easy to implement with quick

easily identifiable R.O.I.
• Not a competitive issue airlines
should work together to share
knowledge and establish best
practices.
• JOIN ARIG !
30

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Revenue Integrity

good Revenue Management

Revenue leakage is:

“the difference between the revenue

• Accidental revenue abuse from badly

• Unticketed PNRs • No-show psgrs

• Increased No-shows & late

Improved Customer satisfaction from:

• Increase customer access through

• Reduces on departure No-shows and

 GDS being overpaid by as much as 15%

Annual cost of no-shows = $1.2M p.a.

 No-shows necessitate overbooking.

 The Revenue Opportunity is Significant

 Revenue Integrity can be a very low

 Typical airline benefits = 3% of revenue

Manual checks at checkpoint:

• Advantages are better than nothing

Daily on whole bookings database

Real time, every PNR at time of creation

• Sporadic checks by airports, Res

• Communicate with Sales and advise

• Improve data quality to reduce No-

• Revenue Integrity is a relatively low

• Easy to implement with quick

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