Ikramerica From United States of America, joined May 2005, 21025 posts, RR: 60 Posted (5 years 2 weeks 3 hours ago) and read 6792 times:
I was looking to fly same day roundtrip LAX-SEA this saturday. VX and everyone else had the same advance purchase fare of $193 roundtrip.
But now that it's less than 7 days out, VX has stopped offering that fare even though their flights are very empty. AS is still offering the fare for flights with lots of seats, however. They have only increased fares on flights with fewer available seats.
Is this a problem with VX's revenue management algorithm? Could this explain their low LFs in Y?
Interestingly enough, the F section hasn't filled on these flights, but they soon will because the price hasn't gone up with the Y fare, and the difference is under $100.
Of all the things to worry about... the Wookie has no pants.
Singapore_Air From United Kingdom, joined Nov 2000, 13711 posts, RR: 21 Reply 2, posted (5 years 2 weeks 3 hours ago) and read 6704 times:
Firstly, Virgin America's website is very slow for me (in the uK).
Secondly, make that extremely slow.
I got a fare on Satruday of US$158 and then returning at US$83 then add on taxes and fees (no surcharge?)
Judging from the way their website looks, including the web address, I think it's based on Virgin Atlantic's pricing system, and so hence possibly their yield management system.
However, while commendable, it's a tough job commenting on an airline's yield management system. If what you say is true, one would hope and think that it would sound alarm bells for Virgin America's revenue department.
Although that's not always the case. A few years back SQ318 from Singapore to London left with around 8 people in Economy Class due to a failure in the yield management system and seat control. No one noticed until the flight left.
Ikramerica From United States of America, joined May 2005, 21025 posts, RR: 60 Reply 3, posted (5 years 2 weeks 3 hours ago) and read 6688 times:
Quoting MSYtristar (Reply 1): Are you looking at the seat maps posted on the website?
I go to seat assignment after choosing flights. Especially the return, very empty. Considering most booking for VX is done via the internet and that part of the VX booking process on their site is to choose a seat (so they can sell you the $15 upgrade to exit), you can't get your ticket without choosing a seat like on some carriers.
You can then compare this to AS, where you also get to choose your seat, and the AS flights aren't as empty but the fare is still available.
Saturday is a slow day, so I would assume it's better to break even on that day than fly an empty plane. VX already cuts 1 flight that day (from 4 to 3) but you'd think they'd, if nothing else, want to fill those seats to give people a taste of VX on this new route and convince them to come back.
That was my plan, but now I'm looking at flying AS or not going at all (it'll be a last minute decision).
Of all the things to worry about... the Wookie has no pants.
JGPH1A From , joined Dec 1969, posts, RR: Reply 5, posted (5 years 2 weeks 2 hours ago) and read 6648 times:
Quoting Ikramerica (Thread starter): Is this a problem with VX's revenue management algorithm? Could this explain their low LFs in Y?
VX are currently hosted on AIRES, which is a bit of a garden-shed solution (VX are the only carrier on AIRES - DJ and WS both started to migrate but backed out due to issues with the platform). I'd be amazed if there was anything cleverer than time/date initiated bucket gating for each fare, regardless of how full the flight is getting. I'd be interested to hear what AIRES does actually offer in terms of revenue management.
Quoting Singapore_Air (Reply 2): I think it's based on Virgin Atlantic's pricing system, and so hence possibly their yield management system.
It isn't - not even close. VS use SHARES B Res/Inventory and probably some variant of PROS revenue management.
Flighty From United States of America, joined Apr 2007, 7427 posts, RR: 2 Reply 6, posted (5 years 2 weeks 2 hours ago) and read 6635 times:
They might bump the fares because they expect that to make more revenue (since the price is higher). People who travel late tend to be more desperate.
Hence, that would be good revenue management. Not ideal, of course. You would rather have full flights. But given that they are empty, bumping the price may increase revenue.
Ikramerica From United States of America, joined May 2005, 21025 posts, RR: 60 Reply 7, posted (5 years 2 weeks 2 hours ago) and read 6569 times:
Quoting Flighty (Reply 6): They might bump the fares because they expect that to make more revenue (since the price is higher). People who travel late tend to be more desperate.
Only if your flights are filling up. Otherwise most carriers offer an equivalent fare to their 7-day advance or 14-day advance that is a "fare sale" fare, or they just extend 7-day fare until it fills up.
VX's load factors indicate that whatever system they are working is not filling the planes. Now, does filling a plane mean profits? No, of course not. But at $195 RT including tax, that should at minimum break even in terms of CASM. But RASM drops if you don't take that customer and fly it empty. Not filling those seats with $83+tax flyers on the off chance there will be a rush of customers on friday who need to go to/from Seattle on a non-holiday, non-summer Saturday afternoon, well, that's not a great gamble.
Of all the things to worry about... the Wookie has no pants.
Flighty From United States of America, joined Apr 2007, 7427 posts, RR: 2 Reply 8, posted (5 years 2 weeks 2 hours ago) and read 6521 times:
Quoting Ikramerica (Reply 7): they just extend 7-day fare until it fills up.
They do? I could point out a lot of markets where that's not the case. That is why there is a 3 day fare, a 5 day fare or what have you. The later people will all pay more, according to the general notion of "the later they buy, the more they are willing to pay."
This logic goes both ways. It may seem like VX should offer $83 plus tax. But if they only get 20 x $83, where they could get 14 x $183, then clearly it makes more sense to charge $183 because it makes more money.
I think you will find this is true on many empty markets around the country. Fare bumps at the end will increase the revenue, at least in certain markets. It is up to VX to examine whether that is the case here.
JGPH1A From , joined Dec 1969, posts, RR: Reply 9, posted (5 years 2 weeks 2 hours ago) and read 6507 times:
Quoting Flighty (Reply 6): Hence, that would be good revenue management. Not ideal, of course. You would rather have full flights. But given that they are empty, bumping the price may increase revenue.
Revenue Management is about predicting demand along a time-based curve and pricing accordingly. If you stuff up your demand forecasting, you have to then drop the fares to stimulate the demand. Similarly if you predict your demand wrong, you may end up selling seats for less than you could get by making too many seats available too soon or at too low a fare. The science involved is mind-boggling, I know some VERY clever people at various airlines (BA, QF, LH) whose life's work in Operational Research is to get that forecasting scientifically perfected.
Ikramerica From United States of America, joined May 2005, 21025 posts, RR: 60 Reply 10, posted (5 years 2 weeks 2 hours ago) and read 6455 times:
Quoting Flighty (Reply 8): They do? I could point out a lot of markets where that's not the case. That is why there is a 3 day fare, a 5 day fare or what have you. The later people will all pay more, according to the general notion of "the later they buy, the more they are willing to pay."
This is just a blanket refutation without support, and if it were the case in all markets, there would not be weekly emails from CO, UA, AA, DL etc with last minute fare sales.
Airlines have to balance between these sales and having too many people wait to book thinking a sale will come.
I asked this question because I understand revenue management and was wondering if VX's low loads (documented) and losses (documented) are a result of poor management.
It goes beyond the theory to the actually practice, and if VX is doing it wrong? Especially because this is a very new route and VX should be trying to gain customers.
And AS has responded with a media blitz in LA regarding all their non-stops to Seattle from all the different airports.
You get it. It's a complex problem that can't be answered with "the later they buy, the more they are willing to pay." That is just not the case all of the time.
Of all the things to worry about... the Wookie has no pants.
Flighty From United States of America, joined Apr 2007, 7427 posts, RR: 2 Reply 11, posted (5 years 2 weeks ago) and read 6090 times:
Quoting Ikramerica (Reply 10): "the later they buy, the more they are willing to pay." That is just not the case all of the time.
Did I say it was always true? But it is true most of the time. Airlines know this. This is why the fare structures are BUILT so low fares expire closer to departure. They make exceptions to this rule all the time and launch a sale. But that's not always desirable.
Even if the flight is empty! Booked 0/150! In some cases, the price will still be $450 to get on that flight. Why? Because airlines make more money that way.
Sounds crazy but it's true.
20 x $100 = $2000
10 x $450 = $4500
Which price would you charge? $450 is the way to make the most money. You only get 1/2 the customers and your load factor suffers. But you made more money. Even on a bone dry empty jet. So that's why walkup fares cost more than $20.
Some people ask "why don't the airlines just charge $20 to fill those empty seats?" This is the reason why. Because you can't tell who is desperate and who isn't. In a sale they all pay $20 including the businessman going to his meeting, and the airline misses its chance to make money.
Director - Revenue Management
Burlingame, California
About Virgin America:
Virgin America is a new travel brand that challenges industry norms in an attempt to deliver a more humane travel experience for the domestic traveler. Taking advantage of the Virgin Brand’s world-renowned customer focus and distinctive style, Virgin America plans to create a high-value, low-fare airline that offers more: more fun, more options, more comfort, more entertainment and more value.
The U.S. airline is American-controlled and majority-owned, and is managed by a team of leading American aviation executives. The company plans to add more than 3,000 jobs to the U.S. economy in its first five years of operation.
Departmental Statement:
Virgin America’s Revenue Management team will implement all pricing and yield management functions.
Main Purpose of the Role:
The position requires a hands-on approach and a cross-functional, multi-faceted understanding of airline pricing and yield management. Additionally, the position requires creativity, inventiveness, and craftiness to create a unique experience for Virgin America customers and to keep us steps ahead of competitors.
Main Areas of Responsibility:
The Director of Revenue Management will report to the Vice President of Planning and Sales, and supervise initially a staff of 1 team lead and 4 analysts.
Qualified candidates will possess the business acumen, technical competency, and leadership qualities to conceive, sell, and implement distinctive, innovative, and disciplined revenue management including the following responsibilities:
Develop and direct the strategic and tactical implementation of Virgin America’s pricing and yield management plans to achieve revenue and financial objectives.
Promote and seek to constantly improve the efficient use of pricing and inventory systems, and the development and use of effective business intelligence analytical tools and processes, to ensure optimum utilization of systems and people in support of competitive pricing, optimum demand forecasting, and timely analysis.
Provide strong leadership and mentoring to a small team of highly skilled pricing and yield management personnel, and ensure close liaison with other cross-divisional teams to ensure a competitively priced and clearly-communicated pricing and yield management strategy.
Prepare and present senior executive-level presentations.
Complete all other tasks as assigned by the VP of Planning and Sales and other senior leadership.
Professional Experience Required:
A minimum of 7 to 10 years of professional experience in well-respected companies with recent experience in positions of, at minimum, senior-managerial level responsibility.
Experience managing the Revenue Management functions, or a closely related department, in a major or domestic airline, is required. Optimal experience would include additional sales and distribution leadership experience, as well as time spent in a successful low-cost carrier, U.S. based preferably.
Significant hands-on experience with airline pricing and yield management tools, yield forecasting techniques, and general airline economic data.
Management of significant and numerous airline improvement and planning/analytical projects, with an outstanding track record of results.
Experience in building a highly skilled, highly organized, leadership team.
An understanding of, and great interest in, Virgin’s entrepreneurial culture.
Job Requirements:
Some travel will be required.
Professional Certifications and Education Required:
Undergraduate degree in marketing, economics, business or a related field is required.
Master’s Degree in Business Administration or a related field preferred.
EA CO AS From United States of America, joined Nov 2001, 12556 posts, RR: 64 Reply 13, posted (5 years 1 week 6 days 14 hours ago) and read 5487 times:
Quoting Expatmatt (Reply 12): VX is hiring Director - Revenue Management.
Call me crazy, but I'd imagine it would have been a good idea to have had this role filled PRIOR to launching service...
"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
Knid From New Zealand, joined Aug 2005, 224 posts, RR: 0 Reply 15, posted (5 years 1 week 6 days 11 hours ago) and read 5117 times:
Quoting SANFan (Reply 14): My guess is VX is looking for a NEW (different) Director - Revenue Management! I wonder if the person who held the position at skybus will apply?
One would hope that they are looking for a new one, but more of the question is why is the old one leaving? Ikramerica has pointed out what on the face of it could look like a serious flaw, I'm sure that everyone can accept that in the current market, errors in the pricing are not acceptable. While VX is a relatively new airline, and they wont have that much data to base their demand forecasts on, if the information Ikramerica provided is correct then perhaps it may indicate a problem. Having said that unless an insider wants to tell us how their system works (or doesn't) we may never really know.
Quoting Ikramerica (Reply 10): I asked this question because I understand revenue management and was wondering if VX's low loads (documented) and losses (documented) are a result of poor management.
Should we take, arguendo, your explanation of mis-management causing the apparently absurd pricing structure as true, the very fact that VX is looking for a new manager does not indicate poor overall management, but rather effective managers who are removing those not performing as they should.
EA CO AS From United States of America, joined Nov 2001, 12556 posts, RR: 64 Reply 16, posted (5 years 1 week 6 days 11 hours ago) and read 5067 times:
Quoting Knid (Reply 15): Should we take, arguendo, your explanation of mis-management causing the apparently absurd pricing structure as true, the very fact that VX is looking for a new manager does not indicate poor overall management, but rather effective managers who are removing those not performing as they should.
It should be pointed out that someone in a Director-level position would actually be the one managing the managers. The Director would report to a Managing Director or VP level position.
"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
Par13del From Bahamas, joined Dec 2005, 5892 posts, RR: 8 Reply 17, posted (5 years 1 week 6 days 10 hours ago) and read 4879 times:
Quoting Flighty (Reply 11): Did I say it was always true? But it is true most of the time. Airlines know this. This is why the fare structures are BUILT so low fares expire closer to departure. They make exceptions to this rule all the time and launch a sale. But that's not always desirable.
Even if the flight is empty! Booked 0/150! In some cases, the price will still be $450 to get on that flight. Why? Because airlines make more money that way.
One thing with this logic, is that it probably made WN the largest domestic carrier in the US as they do not do this massive mark up on last min. pax, if it made so much money for the legacy carriers they would not be in the trouble that they are in now. DL tried its "simply" fares a couple years ago, other airlines also, they all returned to the tried and "true" method in short order, I believe because they did not want to stick it our if their competitors did not follow, that mindset explains why they are all offering fares and flights all over the place with no takes but can't seem to understand the losses it causes.
Luv2cattlecall From United States of America, joined Sep 2007, 1648 posts, RR: 2 Reply 18, posted (5 years 1 week 6 days 9 hours ago) and read 4614 times:
Quoting EA CO AS (Reply 13):
Call me crazy, but I'd imagine it would have been a good idea to have had this role filled PRIOR to launching service...
Be nice...they only had 3 years! Craigslist wasn't really that big until last year, and do you have any idea how hard it is to fill a position when Monster.com keeps crashing?
When you have to breaststroke to your connecting flight...it's a crash!
VX From United States of America, joined Apr 2008, 18 posts, RR: 0 Reply 19, posted (5 years 1 week 6 days 6 hours ago) and read 3896 times:
Quoting JGPH1A (Reply 5): VX are currently hosted on AIRES, which is a bit of a garden-shed solution (VX are the only carrier on AIRES - DJ and WS both started to migrate but backed out due to issues with the platform). I'd be amazed if there was anything cleverer than time/date initiated bucket gating for each fare, regardless of how full the flight is getting. I'd be interested to hear what AIRES does actually offer in terms of revenue management.
aiRES version 2.0 is rolling out soon, so it will clear up some of the bugs in the system. However, I believe our revenue management in aiRES is just like any other system.
JGPH1A From , joined Dec 1969, posts, RR: Reply 20, posted (5 years 1 week 6 days 6 hours ago) and read 3871 times:
Quoting VX (Reply 19): However, I believe our revenue management in aiRES is just like any other system.
Is it built in or is there a seperate system like PROS or Rembrandt in the background ? Normally RevMan is complex enough to require a system all to itself.
JAAlbert From United States of America, joined Jan 2006, 1187 posts, RR: 1 Reply 21, posted (5 years 1 week 6 days 6 hours ago) and read 3788 times:
I don't know about its SFO to SEA routes, but SAN to SFO flights are virtually sold out for this weekend.
I love the Mission Statement of VX described above: an airline that attempts to offer a "more humane" travel service. Makes us sound like cattle heading off to slaughter!
Brilondon From Canada, joined Aug 2005, 3163 posts, RR: 1 Reply 22, posted (5 years 1 week 6 days 6 hours ago) and read 3670 times:
Quoting JAAlbert (Reply 21): I love the Mission Statement of VX described above: an airline that attempts to offer a "more humane" travel service. Makes us sound like cattle heading off to slaughter!
Is this not the way it is in the airline business today with all airlines in the U.S.
Luv2cattlecall From United States of America, joined Sep 2007, 1648 posts, RR: 2 Reply 23, posted (5 years 1 week 6 days 3 hours ago) and read 2847 times:
Quoting Brilondon (Reply 22): Quoting JAAlbert (Reply 21):
I love the Mission Statement of VX described above: an airline that attempts to offer a "more humane" travel service. Makes us sound like cattle heading off to slaughter!
Is this not the way it is in the airline business today with all airlines in the U.S.
I don't know...I have a feeling that PETA would flip a lid if they saw how unreliable the RED IFE system is !
When you have to breaststroke to your connecting flight...it's a crash!
VS11 From United States of America, joined Jul 2001, 978 posts, RR: 0 Reply 24, posted (5 years 1 week 6 days 3 hours ago) and read 2810 times:
Well, any revenue management system takes into account statistical data for each flight. As they are a young carrier, they do not have a lot of historical data to make any relevant statistical analysis to base their pricing on.
25 B752OS: I am sure that will be a great quality VX is looking for, having armchair CEO experience posting on these boards. I am surprised VX just doesn't star
26 Knid: Fair enough, I should remember to Americanise my posts, down this end of the world we have different names for every thing, so I was using managers a
27 SANFan: Probably due to the Red Bull Air Races. But, whatever the reason, it's nice to see. Unfortunately, IMHO, VX doesn't seem to care very much at all abo
29 San747: Hey, at least they serve our city... That's more than can be said for some larger domestic airlines like NK...
30 SANFan: Hey, I'm only repeating what I've seen published by VX several times. For example: "San Francisco, Calif. -- Feb. 12, 2008 -- Virgin America, Cali
31 Thomas_Jaeger: Hi Jonathan, I think they use airRM from RMS (http://www.revenuemanagement.com), one of the best revenue management systems I have ever worked with i
32 JGPH1A: Thanks for that - I don't know a huge amount about RM systems, it's not in my area. I know there are a number of guruistic approaches promoted by var
33 Jetdeltamsy: How do you know what they are booked to? I mean, unless you work there, you have no basis for such a statement.
34 BAW716: There are two revenue arguments. First, if you know loads are going to be weak, if the fares are marginally higher and you are still getting bookings
35 Ikramerica: Now the fares have dropped to $99 for tomorrow because they didn't fill the planes (last minute flyers don't always pay more…). I don't know what th
36 Ikramerica: Well, I am getting to go afterall. First class up in the morning, Y coming home. Should be a fun experience. Hopefully they are on time in the morning
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