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💡Flyla Expert Talk #1 - “You shouldn’t work harder, you should work smarter!” 💡

Flyla News

14. April 2024

Anja travelling
Anja
Mar 07, 2024 · 4 Min read

To learn, grow and optimize our own offer, we at Flyla seek regular exchanges with different industry experts. This year we would like to invite you to take part in our insights through our Flyla Expert Talk Series - starting with a take on Revenue Management by Henrik Toksvang.

In the dynamic environment of the aviation industry, the principles of revenue management have become the navigator for airlines seeking to maximise profitability and efficiency. With more than 30 years of experience in this field, Henrik Toksvang has been at the forefront of the revenue management evolution. Through our interviews, we captured Henrik's insights into how modern revenue management strategies, powered by advancements in data analytics and technology, are reshaping airline operations. 

In a nutshell: The evolution of revenue management, especially in aviation, is characterized by adaptation and innovation. Initially, the focus was on simple inventory control – ensuring that each scheduled flight maximized passenger potential (in terms of volume, demand variation/uncertainty and willingness to pay). Over time, as competition intensified and technology advanced, the strategies became more nuanced. Airlines began to leverage data analysis and predictive modelling to forecast demand and adjust prices dynamically. Now, with the ever-increasing sophistication of AI and machine learning, revenue management is again at a turning point with a future that could allow for real-time decision-making and more personalized customer experiences. 

This interview will explore Henrik's journey and contributions to aviation revenue management and capture an outlook into a challenging future that is full of opportunities for airlines.

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5 Questions to Henrik Toksvang, Senior Revenue Manager for Air Greenland 

How did it come that you’ve started your career in revenue management?

This was almost 99% coincidence. It just happened. My early interests in mathematical modelling and operations research were pivotal. During my education, I was deeply engaged in these areas, which naturally led me to explore their application in various industries. Revenue management was my second job - and I ended up being in this area for more than 30 years now. And this is amazing. With all the developments in technology, it has been really interesting all these years. 

How has revenue management changed since you started in this field? 

When I started at SAS in the early 90ies, revenue management was a very special area. Very cumbersome, very technical and complicated. We only had a PC for the complex models.

In the beginning, we were responsible for allocating seats in the optimal way for planned flights. Other departments were accountable for planning which airplanes on which days from which airports were starting. We were doing our revenue management optimization for the capacities already put in place. We couldn’t optimize all in one go. 

But things progressed because of technological advancements. Over time we developed much more sophisticated models, used ad hoc algorithms and established a more precise forecasting of the capacity utilization. The introduction of overbooking was a game-changer in revenue management. 

And today, we are using constraint demand forecasting. Constraint demand forecasts results in Expected To Board figures that are widely used in a lot of planning processes afterwards in airline fleet operation. So we know quite well which passenger mix will end up being on a specific airplane and our task is now to structure crew planning, all the catering stuff, resource planning on the airport, and so on. It’s all a chain - and revenue management can optimize it in one go. 

Which developments do you see in the future of revenue management?

With all the technical progress and development - not least with AI and machine learning - the way for revenue management to get broader instead of being something elite for airlines and big hotels is paved. 

If timing is good, revenue management could expand to even a small hairdresser chain with 10 shops that use this to allocate their limited capacity in the most beneficial way. You could have cheaper fares during time slots that are not that popular, and higher fares e.g. on weekends or in the evenings. It’s important to be thinking in customer segments - and offer the most appropriate deal to each segment. For example, if you don’t have the financial means, you could pay “with time”. 

And what does this mean for the airline industry? 

It could be a breaking point that is going to lead to progress, but it could also mean that some areas go into very fluctuating, unstable periods until we know what’s going on and how all the AI technology  works effectively. Ideally, we can use the developments to re-model and re-evaluate our programs and parameters.  

So you could make some improvements to the airfare modelling. And what's even more interesting is the potential surplus in revenue coming from ancillary services: selling supplementary offers along with the basic products as we experience everywhere where we walk. Thereby, it is crucial to work with emotions, getting the services across visually and breaking up the established NDC frames that are being installed. 

Finally, we would be interested in which guiding principles or values are from your point of view critical for a successful future of revenue management.

My approach to revenue management has always been grounded in principles of fairness and balance. It's not solely about profit maximization; I also focus on the customer's needs, employee well-being, and the broader societal impact. 

Of course, solely focusing on the monetary part is very easy - but at the same time it’s also very limited. With all the computer power we have, we might be able to simulate a lot of different scenarios, bringing all stakeholders in balance and thus create win-win situations for companies, society as well as the environment. 

A question I frequently ask myself is: Do we always need more products? And I would clearly say no, we just need better products. So if you have this mindset, I believe revenue management will develop in a highly different way than if it were all driven by money and the question of where can we earn the most. It is now key to develop the right tools for the right setting. Because - you shouldn’t work harder, you should work smarter. And that’s all that revenue management is actually about. 

Thank you for the interesting insights, Henrik!