One KPI To Rule Them All
Whenever we work with a business, we always need to find the ‘one’ key metric they use to measure how well they are doing. In military depot maintenance operations, Maintenance, Repair and Overhaul (MRO), they use Output Per Paid ManDay (a terrible KPI if there ever was one) or OPMD.
Airlines Focus on Route Profitability
In the Airline industry, they focus on Route Profitability, an area we have done a lot of consulting and advisory work in. Though airline route profitability is a key metric for the airline, like the OPMD figure, it is what you do with the route profitability figure that is actually more important.
Why is that?
Well, indicators are either lagging, current or leading indicators. Airline Route Profitability is a lagging indicator, roughly equivalent to looking in the rear view mirror of a car to see where you have been.
Route Profitability Results Drive Constant Course Corrections
Many people within an airline and the airline eco-system actually use the route profitability information to adjust future behavior, making this lagging indicator into a critical leading indicator of future actions.
Aviation is Fast Growing Must Get this Right
According to the International Civil Aviation Organization (ICAO, 2018), over 4.3 billion passengers were carried by airplane in 2018; moreover, the aviation industry is expected to grow at an annual rate of 2.7% until 2030 to meet surging demand, especially in fast-growing emerging markets (FAA, 2014).
Ensure Profitability Every Day
For instance, let us say you are a Commercial Manager for a national airline located in the Middle East. You’re are a very busy man, 3 mobile phones attached at the hip, and highly concerned with making sure your airplanes are both full and profitable, everyday..
If only this gauge could tell you if this flight was going to be profitable! But alas, neither it nor any other instrument on the plane can..
Real Time Revenue Management
Real-time revenue management for airlines provides the ability to track and analyze the profitability of airline routes in real-time. With this information available through your SAP system, you can make data-driven decisions that will positively impact the profitability of your airline.
Real-Time Aviation Intelligence
What do you do with Airline Route Profitability information after you have it in hand:
- With knowledge of the demographics of the surrounding areas of your airline’s destinations, when you notice a decline in profitability, you kick-off promotions.
- With knowledge of seasonal demand patterns, and potentially using the demand planning modules of SAP APO, you may decide upon both the type of aircraft and configuration of each aircraft you fly.
- You may want to launch CRM based promotions, via the Facebook SAP plug-in, to promote cross-channel communications and related sales.
- When you notice a drop in ridership, using your own or SAP’s loyalty management system, you may want to start an e-mail lead nurturing campaign with special offers.
- Using SAP BOBJ predictive analytics capabilities, you may make adjustments to your seat pricing models.
- Based on information in the PNR (Passenger Name Record), you may initiate a quality management initiative to increase customer satisfaction.
- Compare Costs and Revenue between different routes.
- Perform robust route scenario planning.
- Conduct multiple 'What-If' Scenarios.
- Dynamically match supply and demand.
Cutting Edge Technology
In short, using the cutting edge SAP Airline Route Profitability reporting capability, you can quickly focus on those efforts that will most affect the profitability of the next flight you put in the sky, and continuously adjust in a virtuous Plan, Do, Check, Adjust cycle.
SAP's Solution Solution Provides
- User-friendly and dynamic dashboards
- Real-time alerts
- Rapid drill-down capability and analysis
- Built on a powerful Insights platform and SAP BI toolset
- Cloud-based technology
How do we do it? By using SAP BW and BOBJ solutions to deliver these benefits. As it happens, this same cycle of analysis and adjustment is present in any transportation industry, among many others.
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