The Big Change
Aerolíneas Argentinas’ Revenue Management Transformation
Aerolíneas Argentinas’ new real-time revenue integrity technology, implemented as part of its revenue management transformation, duplicates seats returned to inventory, decreasing inventory speculation and making available more seats to customers. It also supports more precise revenue management forecasting and reduces no-show and overbooking levels.
The technology transformation we have undergone in our revenue management department at Aerolíneas Argentinas permits us to offer competitive pricing and inventory for our passengers in all of our distribution channels, generating more revenue for the airline.
This is exactly what I shared with the revenue management community in May during the “Successful Business Case of Revenue Integrity at Aerolíneas Argentinas” presentation at the AGIFORS conference in Buenos Aires.
It has been five years since the government of Argentina acquired the airline from its previous owners and started a strategic transformation plan to revive it. The transformation plan involved several key initiatives, including:
- A complete fleet renewal,
- An extensive technology upgrade,
- Network growth focused on our Aeroparque and Ezeiza hubs in Buenos Aires,
- Enhanced products for improved customer experience,
- A significant on-time performance improvement.
A SkyTeam Member
In 2012, Aerolíneas Argentinas became the first SkyTeam alliance member in South America. Its membership added 40 new destinations to SkyTeam’s network.
Since then, we have expanded our fleet, adding 70 new planes to the network. We have increased sales by 100 percent to US$2 billion. And we have grown our passenger base by 57 percent to 8.4 million, as well as increased revenue per available seat kilometer (RASK) by 30 percent.
During the transformation, there were considerable investments made to aircraft hangars, airport facilities, VIP lounges and training simulators. The airline also joined the SkyTeam alliance in 2012, becoming the first member in South America and adding 40 new destinations to the alliance’s network.
Today, Aerolíneas Argentinas serves 36 domestic and 20 international destinations that include Brazil, Europe, the United States and the main cities in South America with a fleet of 14 Airbus A330/340, 36 Boeing 737NG and 22 Embraer E190.
A significant piece to this transformation involved upgrading and/or replacing much of our technology. As part of our technology overhaul, Aerolíneas Argentinas chose Sabre Airlines Solutions® as one of our main technology partners to upgrade most of our core systems.
As part of its revenue management transformation, Aerolíneas Argentinas made substantial investments to several areas including aircraft hangars, airport facilities, VIP lounges and training simulators.
The revenue management technology transformation began in 2011 with the upgrade of our 10-year-old revenue management system to the latest version of Sabre AirVision™ Revenue Manager, followed by the implementation of SabreSonic® Inventory, Sabre AirVision™ Fares Manager, Sabre AirVision™ Group Manager and Sabre AirVision™ Revenue Integrity. In addition, an end-to-end fare-class realignment was implemented, giving us a unique fare-class structure in all markets we serve. It was designed to align with SkyTeam’s requirements.
During the diagnostic phase of the revenue management transformation project, considerable revenue leakages were discovered in the inventory generated by false or suspicious bookings. There were also a substantial number of blocked seats on the inventory for long periods of time due to a flexible ticket time policy. Lack of reporting and analytical capabilities made it difficult to find the problems, so improvements were required in this area as well.
Sabre Airline Solutions recognized key members from Aerolíneas Argentinas for their dedication, partnership and teamwork that helped ensure the success of several project imple- mentations under the revenue management transformation process. From left: Crisitan Denevi, Horacio Rodriguez, Rafael Martinez and Mauricio Sana.
It was clear that we needed advanced technology with real-time capabilities that could push the passenger name record (PNR) information to the inventory solution at the end of all transactions to guarantee a cleaner inventory.
Implementing Revenue Integrity in 2012 enabled us to more quickly and thoroughly identify suspicious and fake PNRs. In addition, the system offered the scalability required to move to an origin-and-destination (O&D) revenue management environment that fit into our long-term strategy.
Along with modernizing our technology, we also re-evaluated our processes and policies. For example, our long-term revenue integrity policy was complex and extremely flexible, to the point that customers were permitted to blocked seats in advance with no commitment. That clearly prohibited us from reaching our revenue potential. Therefore, we decided to shift our internal processes and policies, moving from a complex and flexible approach to a strict and simple one.
The proposed new policies were simple and consistent across all markets we served. However, they were very strict on ticket time limits (TTLs), leaving no room for blocked seats. In the beginning, the proposed TTL policy was met by significant resistance from stakeholders. However, after its implementation, early results quickly demonstrated the importance of maintaining a cleaner inventory, and the stakeholders realized that the availability of more seats at lower rates was good for everyone.
Aerolíneas Argentinas realized a 33 percent reduction in no-shows after using Sabre AirVision Revenue Integrity for one year.
In addition, cleaner inventory and shorter TTL enabled us to achieve better forecast accuracy based on a true reservations curve, as well as avoid the need to have higher overbooking levels.
The results have been astonishing. After one year of using the new real-time revenue integrity technology, seats returned to inventory increased 110 percent, and the no-show rate decreased 33 percent.
Economical results of the first year reflected an estimated savings of US$30 million on seats returned to inventory (half of the savings were realized since the real-time technology implementation), as well as US$10 million estimated savings per year on no-show reduction.
We’ve also experienced additional cost savings that we have not yet quantified, such as a reduction of global distribution system booking fees from unproductive bookings, denied boarding compensations and meal wastage generated by no shows.
Another important result was that we duplicated the seats returned to inventory without an increase in the number of hits to the inventory system. In fact, the message counts have decreased compared with our previous revenue integrity technology.
But it is not just the technology that has brought us this level of success. Another significant contributor to our real-time revenue integrity implementation was the teamwork displayed between Sabre Airline Solutions’ experts and Aerolíneas Argentinas’ revenue management team, as well as the project methodology we used.
In the beginning, it was a challenge to align our teams and manage cultural differences, so we worked on the engagement process and established common goals and a unique project methodology to generate trust and partnership. As a result, we worked hand-in-hand as a united team. That level of support and partnership drives us to do even more to improve our airline.
As such, our next initiative will be the implementation of the O&D version of Sabre AirVision™ Revenue Manager, which will help us improve our inventory optimization at an O&D level on a network that is connecting an increasing number of passengers every year through our Aeroparque and Ezeiza hubs in Buenos Aires.
We knew this type of transformation was not going to be an easy task. Therefore, in the early stages, we commissioned external consultants, including Sabre Airline Solutions, Oliver and Wyman, and Universidad de Buenos Aires, who spent more than 2,500 hours to help build a sound strategy, incorporate industry best practices, expedite the transformation process and minimize the risks related to the significant changes that resulted from the transformation.
In the end, incorporating new aircraft into the fleet, investing in the right technology, effectively training employees to ensure they use the technology to its full potential and aligning processes with our business strategy turned out to be the best path forward. This level of transformation was required for us to secure a strong foothold in the markets we serve as well as set us up for long-term growth and success.