Have you ever experienced the very annoying increase in price when booking a flight a few days before departure? You’d better know that there are people within airlines that work tirelessly to find the right price for every single flight and that this is a vital part of an airline’s management. Do you want to know more? Let’s look at how Yield Management works!
The yield index
At the heart of Yield Management, there’s the yield index. The Yield indicates the profitability of every single passenger. It is the result of the revenue brought in by every single passenger divided by each kilometre flown. This index gives information on an airline’s revenue per Available Seat Kilometre (ASK) or per Revenue Seat Kilometre (RPK). When it comes to the gross yield, this index is also used by airlines to evaluate the performance of specific routes to identify the most profitable ones. Such information is therefore very precious for airlines; let’s try and understand how this index is used to manage flight pricing.
What’s the aim of Yield Management?
As a vital element of every airline’s administration, Yield Management is something commercial airlines rely on. Those responsible for determining a ticket’s price must constantly monitor the plane’s Seat Load Factor (SLF). The logic behind Yield Management is straightforward: the more the passengers on a flight, the lower the cost of the ticket, and vice versa.
When providing a service, it’s no wonder that customers are targeted with different price-ranges. This is precisely what we witness when booking a flight: some people can afford to pay way more to fly in first or business class, with all the benefits the choice brings with it, while some are less interested in those luxurious treats and simply want to go from A to B paying as little as possible and will therefore choose an economy class ticket. This concept may sound logical to the vast majority of you. Still, you might not know that airlines count on different tariffs within the same classes (generally, First, Business and Economy), commonly known as fare restrictions. Airlines try to anticipate the so-called customers’ willingness to pay by offering them the most appropriate booking class. But how do they do that?
It’s all about yield management
To understand which booking class a passenger should be offered, airlines consider three different factors: when the booking is made, the flight’s length, and how long before the flight the booking is made. Some other tricks may help airlines to maximise their earnings. For instance, those passengers who book several weeks before starting the trip and whose return flight takes off at least five days after the outbound flight are most likely to be tourists. In this case, the Yield Management System of the airlines recognises this parameter and will offer these passengers a convenient ticket/booking class.
Something different happens with those who travel for business. Such passengers are generally less interested in the flight price, and their willingness to pay is, therefore, more flexible. The Yield Management System recognises these passengers when a booking is made for a shorter trip. Also, business people generally book a few days before starting the journey. To such a category of passengers, the Yield Management System would offer a more expensive ticket.
Some tips for saving up money
How can we spare money when booking a flight? First of all, you should always avoid going on a trip during the weekend, or when every kind of social event is organised at your destination, such as fairs or sports events.
Nowadays, most airlines offer ticket packages, whose price varies according to different services, such as priority boarding, free seat choice and, of course, how much luggage you are allowed to bring with you. In this case, just upgrade to the next ticket package only if you really need those services. Otherwise, if you want to save up money, you’d better buy single services separately.
Another trick is not to trust the “Limited availability” message. This sentence aims to put pressure on you and lead you to book without comparing the price of the ticket with that of other airlines. In fact, this message refers back to the tariff group and not to the actual availability of seats on the plane! For instance, there are usually 20 to 30 tariff groups on short-haul flights, for example, for those who are catching a connection, for children, and so on. Thus, if you are travelling with your family or friends, you’d better split up the reservation. By doing so, part of the family or friends will be placed in a lower cost tariff group. The remaining ones will end up in the next tariff group, but with the benefit of lowering the reservation’s overall price.
Are you going to follow these tips next time you book a flight? Let us know in the comments below!