Airline revenue planning and the COVID-19 pandemic

Abstract

Purpose: The static world of flight scheduling where schedules rarely change once published is becoming more responsive with schedule change updates leading up to the departure date due to demand volatility and unpredictable demand patterns. Innovation in cash flow generation will take center stage to operate the business in these uncertain times. Forecasting demand for future flights is a challenge since historical demand patterns are not meaningful which requires a new adaptive robust revenue management approach that monitors key metrics, detects anomalies and quickly takes corrective action when performance targets cannot be achieved. Design/methodology/approach: The novel COVID-19 pandemic decimated the travel industry in 2020 and continues to plague us with no end in sight. With the steep drop in revenues, airlines need to adapt to a new marketing planning process of scheduling, pricing and revenue management that is more nimble to adapt quickly to changing market conditions. This new approach will continue to be relevant in a post-COVID-19 world during and after economic recovery. Findings: A methodology for airline revenue planning: scheduling, airline pricing and revenue management, has been proposed that will also work in a post-COVID-19 era. Research limitations/implications: The limitation of the proposed model is that it needs to be applied in practice to determine the true benefits of this novel approach to airline revenue planning. Practical implications: Flight scheduling will rely more on clean sheet scheduling, schedule revisions and close in refleeting to better match demand to supply. The office of the chief financial officer will have a permanent task force to monitor cash flow and come up with innovative solutions to generate cash flow for liquidity. Adaptive robust revenue management workflows will be integrated into traditional revenue management workflows in the future for competitive advantage. Social implications: In a post-COVID-19 world it is anticipated that airline business processes will transform to be nimbler and more proactive in making timely decisions at a greater velocity. Originality/value: The approach to airline revenue planning for scheduling, pricing and revenue management is a new business process that does not exist today at scale in the airline industry.