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Big business

Big data analysis has become a common theme. In an exclusive interview with PROS, Keith Mwanlushi discovers how the company is using big data to better align pricing and revenue management for low-cost airlines
 

Using the platform of the World Low Cost Airlines Congress in September, Houston-based company PROS Holdings unveiled a new revenue management solution for low-cost carriers (LCCs). The new solution – PROS’ first product for low-cost airlines – has been designed in response to a growing request for greater alignment between revenue management and pricing, which in turn will enable carriers to achieve revenue and load-factor goals.

 

In order to fully get to grips with the philosophy behind this type of software solution, Surian Adyanthaya, vice president for product management at PROS, believes it is necessary to understand the origins of the concept. “PROS is a company that specialises in pricing and revenue management technology. Essentially, the company provides software that many airlines around the world use to determine how to price their products and how to change these prices,” says Adyanthaya.

 

He recalls that back in 1986, Southwest Airlines became the first customer for the company. “Actually, it was an overbooking system that we did for them. They had this problem of cancellations and wanted a science-driven methodology to decide how to overbook, so PROS built an overbooking software solution. From there came the revenue management solution that many airlines around the world now use.”

 

In fact, the list of PROS software users includes a number of high-profile names such as Cathay Pacific, Lufthansa, Singapore Airlines and Emirates. As the number of airline clients has increased over time, Adyanthaya also notes how the course  of the airline industry has changed:  “The latest revolution has been the LCCs and how they have transformed the airline industry; they have changed the rules of the game.”

 

He cites that LCCs have challenged a lot of the traditional principles of aviation, causing a change in the way the underlying science has to work. PROS has been evolving with these changes in order to develop a solution, and ultimately, he says, it has a lot to do with data management.

 

“It’s very much data driven. Today one of the common technology themes is big data and cloud computing.” Adyanthaya says airlines, particularly in revenue management  pricing, have in some ways pioneered a lot of big data analysis, because all of the historical buying patterns of the airline’s customer are utilised and run through various statistical algorithms to predict future willingness to pay.

 

“That’s the essence of pricing and revenue management – taking lots of data and running it through mathematical models to predict future willingness to pay,” Adyanthaya points out. That considered, how important is it for an airline to get its pricing right?  “It’s incredibly important to continuously change and update the price to meet the changes in market demand. Essentially, market dynamics change very quickly, much quicker than five or even 10 years ago. The airlines need to have the ability to identify these changes in market dynamics and then react quickly with price changes.”

 

The use of outdated pricing methods within a changing environment will supposedly lead to an airline being priced out of business, and Adyanthaya agrees that if an airline is not on top of these market changes it might find itself losing the opportunity to capture passengers at the highest possible value.

 

Adyanthaya stresses that real-time dynamic pricing is extremely important. For instance, a mid-sized airline might have a thousand availability requests coming from different booking channels at one time, from reservation call centres or from the website. “A thousand transactions per second are not unusual, if you think about it. Twitter recently published that in one month this year its average global transaction, that is the number of tweets, was over 2,000 per second. So you are talking about one of the highest volume real-time transactional decision making systems in the world.”


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