Malaysia Airlines: Low-cost carriers pose a "massive challenge"
Revenue management today is at the cutting edge and must be closely aligned across all aspects of a travel business. This requires people with traditional technical skill, an understanding of the markets they operate in and, not least, a willingness to challenge the status quo.
For Malaysia Airlines’ Shihaj Abdullakutty gone are the days when non-RM teams could ‘blame’ revenue management for all their travails and tribulations. EyeforTravel heard from Abdullakutty who is Senior Vice President, Network and Revenue Management about how this discipline is evolving and, in particular, the challenge of competing against low-cost carriers.
EFT: Many people will argue that it is increasingly important revenue management to be integrated across the business. Would you agree and why?
I couldn’t agree more. Today is cutting-edge and the business across-the-board needs to be fully on top of RM principles. They need to understand why some demand needs to be rejected however logical it may sound. Marketing communication strategy must be clearly aligned with RM forecasts – there is no point barking up the wrong tree.
Network Planning, Scheduling, Revenue Management, Sales and Marketing have no choice but to synergise. A network plan that deviates from Revenue Management insights is a failed proposition to begin with. Great connectivity and networking means the product proposition becomes stronger. A stronger product proposition means the Revenue Manager has a better ability to maximise price points and the range of fare products that are offered. Ultimately that makes the selling and marketing proposition clearer and simpler.
Equally RM principles do not (yet) fully evaluate the loyalty value of customers. In their endeavour to do the right thing for revenue, RM systems and people tend to ignore and under-value the loyalty asset.
EFT: Are there any particular challenges facing revenue managers in Asia? What are they?
SA: The influx of low cost carriers (LCC) seriously dents the confidence of traditional revenue managers. Coupled with exponential ASK (available seat kilometres) growth and ultra-aggressive pricing, the challenge for full-service carriers is how they compete in the LCC space and for how long. It is a segment that cannot be ignored because of the sizeable catchment volumes but the business also needs to know the risk of competing. And because a large part of the competing dependency revolves around cost, which revenue managers cannot directly manage, the challenge of going head-on with LCCs become acute.
EFT: What are the core qualities required by a revenue manager in today's environment and why?
SA: Well-rounded knowledge of the end-to-end commercial process is important. Very often RM teams tend to get comfortable in their glass houses without truly understanding the dynamics of sales and distribution. I am a firm believer that RM teams need to get out in to the markets to familiarise themselves with the latest sales techniques, competitor strategies at the floor level and the challenges facing traditional distribution channels.
That said, it is still important for revenue managers to have some of the ‘black and white” decision-making skill sets that is agnostic to the budgetary requirements of commercial teams. The traditional skills involving analytics, forecasting techniques, pricing mechanics are still very relevant.
EFT: How hard is it to recruit the right people? Do you see this changing?
SA: Highly skilled and experienced revenue managers are hard to come by. Part of the reason is that airlines invest a significant amount of time and money in developing the skills of their RM teams. These resources therefore do not always pro-actively scout for opportunities outside the organisation. Added to this is that there are no real foundation-setting courses for RM. Unfortunately, this trend doesn’t seem to be changing anytime soon.
EFT:Do you think that revenue management as a discipline undervalued?
SA: Not entirely. I believe the discipline is valued but I also firmly believe there is an issue in how organisations view the RM skillset. Very often, companies go about recruiting manpower with the academic skills but without really evaluating the aptitude required for the task. This is done with the hope that these resources can be trained.
EFT: What are the top challenges facing revenue management teams today?
SA: The pressure to integrate CRM in the revenue decision-making process is a key issue. We have not yet crossed the technology boundary that truly integrates this process based on the ‘value’ of the customer.
As I mentioned earlier, competing in the LCC space at significantly higher operating cost is a massive challenge. Additionally, some of this competing space happens to be in secondary markets. The challenge here is the relative difficulty is assessing the type and size of these secondary markets. Revenue managers typically use historical data within the organisation as a reference point to determining potential market sizes and then come out with an arbitrated forecast using the various demand data available externally. When there is limited historical data, this forecasting method tends to become obsolete.
Getting the right people with the experience and skill is clearly difficult.
EFT: So what then are your top dos and don'ts for revenue managers?
- Think more commercially. Sell revenue management as a commercial concept at every given opportunity
- Understand that long-term business requirements sometime offset short-term revenue spill
- Walk the streets. Understand what goes on at the floor level
- Constantly update yourself on the technology front
- Play God!
- Always think in black and white. There are always two sides to a story.
- Stop trying new things. Just because it didn’t work last time doesn’t mean we shouldn’t try again in a different competing environment
- Close yourself to the commercial world
- Don’t be afraid to challenge norms
For more insights from Shihaj Abdullakutty, Senior Vice President Network and Revenue Management at Malaysia Airlines, join us in Singapore for the Travel Distribution Summit, Asia from May 28-29