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ABSTRACT
KEYWORDS: multi-class booking hierarchy, RBD, revenue management, sales targets, pricing, fare rationalisation
An airline's multi-class hierarchy fulfills a number of very important functions within the organisation. It can be a powerful strategic and tactical tool when used to address business process disconnects, especially between the Revenue Management/Pricing and Sales departments. This article describes a fare stratification process to address these issues, where the intent is to refocus the multi-class hierarchy in terms of network revenue priorities. The article also includes simulation results to substantiate the merits of this process improvement, and it reveals that Multi-class Fare Rationalisation must be an integral part of any network-wide organisational strategy that incorporates the overarching mission of revenue maximisation.
Journal of Revenue and Pricing Management (2006) 5, 118-127. doi:10.1057/palgrave.rpm.5160027
THE BUSINESS PROBLEM
Introduction
An airline's multi-class booking hierarchy - sometimes referred to as reservation booking designator (RBD) structure - is often misunderstood as nothing more than a trivial necessity for pricing, tariffs, and revenue management. Stated simply, a multi-class hierarchy serves the following functions:
1. To provide segmentation of the various origin-destination-fare class-point-of-sale (ODF -POS) products sold by the airline.
2. To give each of these ODF products an 'address' or 'bucket' (eg, Y, B, M, Q, V, etc), wherein seat inventory is allocated for sale by Revenue Management.
3. To link the tariff filing of each ODF product to a booking code that could be sold by various distribution channels based on availability determined by Revenue Management.
Practically speaking, the existence of a multi-class has no significance to the consumer, and its awareness is superficial at best by many quarters within an airline. However, what appears on the surface to be insignificant can in reality be the underpinning of something greater. That is certainly the case with an airline's multi-class hierarchy.
The multi-class hierarchy actually can be a powerful strategic and tactical device if its underlying fundamentals are properly harnessed. Conversely, when those fundamentals are misunderstood, overlooked, or underestimated, they can give rise to a major disconnect in business process associated with an airline's commercial endeavours.
This paper begins with an anecdote of a universal business process problem that invariably exists at any airline between its Revenue Management/Pricing departments and its sales function. The article then...