Whitepaper Example

Empowerty Downline Cancellation Whitepaper

Summary: Full-service airlines have been using downline cancellation to increase revenue for decades. However, few
New Skies® airlines have adopted this simple, effective practice. In this whitepaper, we discuss the reasons New
Skies® airlines should strongly consider adopting downline cancellation - (a) potential to increase revenue by 3% or
more (b) avoiding the negative regulatory and consumer reaction often associated with revenue growth strategies -.

This Whitepaper was released with the permission of Empowerty Airline Services.

SHOULD YOUR AIRLINE USE
DOWNLINE CANCELLATION TO
INCREASE REVENUE?

Published June 2010 by:
Empowerty Airline Services
www.empowerty.com

Research & Analysis by:
The Agile Institute >> Research Group
www.theagileinstitute.com

© 2010 Empowerty | www.empowerty.com


Passengers miss flights (no-
show) regularly. Downline
cancellation allows airlines to
earn more revenue by reclaiming
and reselling the remaining seats
on the itinerary of passengers
who no-show. It is common
practice with full-service airlines
but not with New Skies® airlines.

About this whitepaper...

Downline cancellation is a significant revenue growth opportunity
Finding additional revenue has become critical to an airline’s success and survival. Some airlines have had to risk
regulatory and consumer backlash to find new revenue sources.

Since low cost carriers typically keep ticket prices low to attract passengers, it makes sense they are among the most
aggressive when it comes finding new ways to earn income. However, instead of dealing with the problems associated
with controversial revenue practices, we recommend New Skies® low cost carriers consider a less risky but lucrative
practice - downline cancellation.

In this report, we look at the effect of implementing downline cancellation using a fictitious airline, Friend Discounts (FD).
Our goal is simply to show why airlines, especially airlines where passengers forfeit tickets when they don’t show up,
should take the next step and release their seats in the system using downline cancellation.



Contents

Success Brings Challenges
Friendly Discounts faces growth obstacles

Selecting a Solution
Downline cancelation is the best choice

The Million-Dollar Opportunity

So What?
Downline cancelation deserves strong consideration



Success Brings Challenges

2002: Friendly Discounts launches with one daily 2010: Friendly Discounts has over 50 daily flights
flight from Atlanta to New York. to numerous cities along the East Coast.

Friendly Discounts faces growth obstacles
Although Friendly Discounts began with one daily flight, the airline currently earns over $120 million USD annually. This
success has brought a new challenge. Specifically, to remain profitable and keep investors happy, Friendly Discounts
must continue growing revenue. Unfortunately, it must do so in an environment where full-service carriers offer more
services at increasingly lower prices and low-cost carrier competition drives average ticket prices even further downward.
Combined with the added complexity of running a larger airline, FD faces a serious growth problem.

To overcome this challenge, Friendly Discounts must do something. The question is: what?

To determine the best course of action, FD creates a special team of revenue management, pricing, and IT professionals
(the revenue growth team) to select the best project to increase revenue.



Selecting a Solution

Downline cancelation is the best choice
The revenue growth team reviews numerous projects for the next six months and selects downline cancellation. The
team believes implementing downline cancellation is the best choice because:

1) It could increase revenue by millions. With the opportunity to add over $2 million in revenue, downline
cancellation met the team’s ﬁrst selection criteria - high revenue increasing potential.

2) It has a high probability of success. While other projects offered high revenue increasing potential, automated
downline cancellation’s success precedence, ease of implementation, and short implementation time set it apart. Based
on these factors, the team believes the project has a much greater chance of delivering the revenue gains promised.

With the decision made, the team must now explain to management why downline cancellation is the best revenue
increasing project. Let's take a closer look at the team's reasons.



The Million-Dollar Opportunity
To understand why the team believes downline cancellation is a million dollar opportunity, we must first understand how
FD currently handles no-shows.

Friendly Discounts sells an Approximately 5% Each year, over 40,000 no- To recapture lost revenue,
average of 75 tickets per passengers no- show seats are falsely FD oversells flights using
flight show per flight shown as occupied in FD’s less than perfect no-show
inventory estimates.

THE CURRENT PROCESS

Friendly Discounts flies 18,000 flights annually with over 1.3 million passengers. With a 5% average no-show rate, the
airline has over 40,000 seats forfeited by no-show passengers. To capture revenue from these seats, FD oversells flights.
However, the airline must do so conservatively or face regulatory fines and penalties if it bumps too many passengers
from oversold flights.



Friendly Discounts The same 2 Automated process Systems recognizes FD estimates it can
sells the same passengers no- removes no-shows 40,000 more sell about half these
average of 75 tickets show per flight from the no-show available seats seats and earn an
per flight segment and all annually additional $2 million
remaining seats in in revenue
the itinerary

THE NEW PROCESS

In the new process, Friendly Discounts has the same flights, passengers, and no-show issues. However, now, FD uses a
New Skies® add-on to automatically release the seats forfeited by no-shows. After each flight departure, the solution
queries the flight for no-shows and removes the seats from these PNRs (Passenger Name Records). This process gives
FD a much more accurate seat inventory and allows the revenue management and pricing team to sell seats more
aggressively. Friendly Discount’s revenue growth team believes approximately half of the no-show seats can be resold –
earning FD more than $2 million in additional revenue.



Higher probability of success

Revenue potential was the most important factor for choosing a revenue growth project. However, Friendly Discount’s
revenue growth team also realized promising significant revenue growth but not achieving it would be damaging to the
airline – and potentially their careers. Downline cancellation was chosen because, in addition to revenue potential, it had
a better chance of succeeding than other projects based on two points:

• Precedence. Automated downline cancellation has a history of success:

A. It works for other airlines. Automated downline cancellation, while not available in New Skies® and many other
low cost carrier reservation systems, is not new. Full-service carriers have been using the practice for decades
to increase revenue.

B. It is an accepted practice. Passengers are accustomed to losing reservations or paying penalties for missed
arrival times in the hospitality industry. Thus, not only can airlines avoid regulatory and consumer backlash by
implementing this practice but they also can earn additional revenue from late arrival or missed flight fees.

C. The concept works in research. Automated downline cancellation essentially improves inventory management
efforts. By freeing no-show seats, an airline's inventory estimates are more accurate. Since inventory drives so
much in an airline, for instance, ticket prices, promotions, and, even, flight routes, accurate inventory data has a
dramatic impact. In a 2003 IBM and Canada Air study, a research group used software that freed seats that
would have falsely been “filled” by no-shows to increase revenue up to 3.2%. We believe a similar revenue
increase is possible with downline cancellation 1.

• Ease. Downline cancellation is easy to implement:

A. Speed. Unlike most revenue increasing projects, downline cancellation can be implemented in as little as two
weeks. Also, the software the team reviewed can be added to FD’s current New Skies™ environment without
any Navitiare involvement and limited effort from IT.

B. Automation. Since the seats are released automatically, human error is removed ensuring seats that should be
released are released.

THE MAIN IDEA

Downline cancellation is a proven, low risk way for airlines to significantly increase revenue.

1 Richard D. Lawrence, Se June Hong, and Jacques Cherrier, Passenger-Based Predictive Modeling of Airline No-show Rates, 2003.



So What?

Downline cancelation deserves strong consideration
In this study, we show how Friendly Discounts decided to implement downline cancellation. While Friendly Discounts is a
ﬁctitious airline, we believe actual airlines can achieve similar revenue increases with less effort and risk than present in
many revenue growth initiatives they are considering today.

It is our hope this paper gives New Skies® airlines compelling reasons to launch their own examination into downline
cancellation.

AUTOMATED DOWNLINE CANCELLATION SOFTWARE

The catalyst for this paper was our competitive analysis of Empowerty’s eNo-Show Handler™. After comparing the
eNo-Show Handler™ to solutions from other airline software providers., we discovered (as of April 2010) it is the only
software that brings the beneﬁts of downline cancellation to New Skies® airlines by automating the process.

For more information about the eNo-Show Handler™ and Empowerty visit: www.empowerty.com.


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