Project Report on

“AIRLINE INDUSTRY PROCESSES”

Submitted by
SOMAN

In partial fulfillment of the requirement

for the award of the degree

M.SC in Information Technology

 Acknowledgment

Life is a journey of excellence. Every mile that one reaches during

the external journey is marked by guidance & support of the near &
dear ones & this endeavor of mine is no inception.

I SOMAN have designed a project on AIRLINE INDUSTRY PROCESSES

as an essential requirement of course, which is authorized by the
college.

I extend my kind acknowledgement to my Learning Centre for giving

me this precious & useful opportunity to improve my practical
knowledge.

I am also thankful to all my teaching members for giving us moral

support & confidence throughout the project. They provided all data
formats, full guidance and other valuable help.
Suggestion for further improvement, project will be gratefully
received and acknowledged.
 SUMMARY
The Airline industry is one of the most competitive and strategic industries in the
world. Like any other enterprise the foundation of this industry is dependent on
three driving forces: Process, People and technology.

Airlines strive to stay ahead in the industry. To do this, airlines need to constantly
analyze published fares and seek innovative methods to attract passengers. The
fare should be such that it satisfies passengers and simultaneously brings profit to
the airline industry.

This Project outlines the processes in the airline industry and explains airline
ticketing in detail. In addition, it discusses how the fare of a ticket is determined by
certain factors or parameters.

The parameters that help analyze the published fare of a ticket. Further, it reflects
on the strategic decisions that are implemented by the airline industry. It identifies
the information system used to analyze passenger information, which helps make
strategic business decisions.
 Declaration by Student

I hear by declare that the Project Report entitled

Airways Industry Processes

Submitted in partial fulfillment of the requirements for the Degree of MBA to

University, India, is my original work and not submitted for the award of any other
Degree, Diploma, fellowship, or any other similar title or prizes

Place: Ghaziabad

Date:

Roll no: 8112389562

Table of Contents
Title - Page no.

Introducing processes in Airline Industry…………………………………… 1

Illustrating processes in Airline Industry………………………………………2

Identifying Information System…………………………………………………..10

Identifying components of Airline Ticketing…………………………………..18

Understanding process in Airline Ticketing………………………………………18

Generating reports from a Ticket…………………………………………………..45

Understanding the Information System in Airline Ticketing…………..49

Understanding Factors of Published fares……………………………………… 52

Understanding the Profile of an Airline Passenger……………………………54

Exploring Published fare factors for Analysis…………………………………..57

Examining the Airline Route for Information Analysis……………………….57

Examining Demand Density for Information Analysis…………………………62

Examining Profiling for Information Analysis………………………………………66

Analyzing profiling for Strategic Business Decisions……………………........71

Analyzing Loyalty Programs……………………………………………………………….71

Understanding Loyalty Programs-FPP…………………………………………………78

Identifying Information Systems for Analysis………………………………………81

Using CRM Systems for Information Analysis……………………………………….82

Using Profiling Software for Information Analysis………………………………..93

Introducing Processes in the Airline Industry

Consider the scenario. Imperial Airlines, Inc. is the major airline that provides air
transportation to passengers across the world. Headquartered in Atlanta,
Georgia, U.S., the company has a fleet of over 200 aircrafts, which fly 180,000
passengers each day to over 200 destinations. The 3500-odd employees’ work
and interface with each other to generate $3 billion of revenue annually.

With an efficient management of processes, Imperial Airlines has consistently

made profits for the past five years. However, the airline needs to rearrange the
corporate structure, which will enable the senior management to counter the
competition and to drive the business forward.

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Illustrating Processes in the AIRLINE Industry

Process in an enterprise exists to efficiently perform a series of tasks for a specific

output. Processes are either operational processes or business processes. Each
Process is related to its respective departments. Senior executives head the
departments and manage the processes.

Some of the operational processes in the airline industry are Air Traffic
Management (ATM), airport ground services, airport billing, and resource
management. Broadly the output of Operational processes in the airline industry
is to ensure passenger’s comfort and safety and the aircraft worthiness. For
example, the airport ground services daily assist a large number of passengers to
reach their desired destinations on time.

Some of the business processes in the airline industry are financial services, sales
and marketing, and fleet management. The output of the business processes in
the airline industry is to ensure revenue maximization. For example, the strategy
of optimum airfares set by the sales and marketing process is to attract a large
number of passengers.

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The following figure illustrates the main processes of the airline industry:

Airlines
Process

Business Operational
Process Process

Airport
Sales and Financial Fleet Air Traffic Resource
Ground Airport Billing
Marketing Services Management Management Management
Services

Various Processes of the Airline Industry

3
Based on the revenues generated, the US. Department of Transportation (DOT)
identifies three types of airlines:

 Major Airlines: Are the titans of the airline industry generating more than $1 billion
per annum.

 National Airlines: Are the planned or scheduled airlines generating revenue between
$100 million to $1 billion per annum.

 Regional Airlines: Are the airlines that service particular regions of a country and fill
the niche markets that are overlooked by the major and national airlines. These
generate revenues between $20 million to $100 million per annum.

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Understanding Operational Processes

Operational processes exist to manage the various operations efficiently. Operations in an enterprise
include planning, structuring, and coordinating with various departments, leading and motivating
employees, maintaining resources, allocating and utilizing resources, and ensuring quality service to the
passengers. In the airline industry, the operations include helping the passengers to board aircrafts,
managing and checking baggage, and tracking routes of aircrafts. Separate processes control each of
these operations.

Here is a glimpse of some of the operational processes in the airlines industry:

 Air Traffic Management (ATM): The primary driver of activities at airports is the flight
schedule. Flights depart and arrive in close proximity. Scheduling requires an integrated
management of air traffic controls. It involves monitoring aircrafts on runways and in air so
that they are flown on specified routes and do not collide and cause hazards in mid air.
 For example, Imperial Airlines has a fleet of 200 aircrafts. Each aircraft undertakes three
scheduled flights each day. In total, the ATM controls 200*3=600 flights that take off and
land each day.

ATM

 Airport Ground Service: Passenger service activity at the airport is related to the flight
schedule. All these activities are controlled, coordinated, and managed by the airport
ground services, which interact with passengers and politely respond to their queries.

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The airport ground services render services, such as assisting passengers to board flights or cancel
their bookings. Some passengers need assistance for baggage claims or ground transport services.
Other passengers need assistance to proceed to board connecting flights. Confirmed passengers
arrive ahead of their flight for the check-in process, which includes tagging personal handbags,
baggage check-in, collecting boarding coupons, and security check. Simultaneously, passengers
arriving by more than one flight collect their baggage from different conveyer belts

 Airport Billing: Airport management charge a fee for the services and facilities offered to
airlines and users. This fee is also called landing fee. It is used to generate revenue for the
airports. The fee is based on the weight of the aircraft. Therefore, it is essential that the
airport authorities have accurate information about the date, time, and type of facilities
used by airlines

 Resource Management: The Resource Department manages resources including aircrafts

and handles multiple services for employees, such as recruitment, promotions, consultancy,
contracts, training, and allocation.

6
Understanding Business Processes
Business processes exist to run enterprises efficiently by increasing performance levels to maximize
revenues. Business processes in the airline industry revolve around planning, selling, and operating.
Planning processes involve scheduling and long-term services of the fleets. Selling involves setting
fares of tickets and travel packages, and operating involves managing the fleet.

Here is a glimpse of some of the business processes of the airline industry:

 Financial Services: Handle revenue or yield management, accounting, and statutory services.
There are three strategies used in yield management: different fares, overbooking, and loyalty
programs.

Routes and the number of stopovers govern difference in fares. For example, two
passengers pay different fares to fly to the same destination. One pays $500 and the
other pays $15,000. This setting of different fares is considered to be a lucrative
strategy for airlines.

In overbooking, the number of booked passengers exceeds the number of seats on

board. This is a vital strategy. In the absence of overbooking, many seats would go
empty resulting in severe losses to airlines. Overbooking requires careful analysis of
the demand for flight economics and the passengers’ profile.

Loyalty programs are given to passengers who are regular fliers. These fliers are
given membership to frequent flyer clubs and they earn mileage points each time
they fly with the airlines. The mileage points are added to provide free tickets.
Loyalty programs are popularly known as Frequent Flyer Programs (FFPs).
Revenue accounting is a process that involves accounting of ticket sales through
various modes. It also involves determination and settlement of liabilities between
various airlines.

In statutory services, in cases where airports are owned by enterprises, the

management pays fees and taxes to the government.

The financial services process also supervises the company’s property, fuel purchase,
purchase of spare parts and other supplies such as catering.

 Sales and Marketing: Tracks competitor’s fares and is always on the lookout to
increase the revenue of the airlines. The process makes fare-pricing strategies. For
example, if some major airlines lower their ticket fares, the other major airlines
immediately follow.

The fares of tickets are subject to fluctuations in supply and demand, which are
mostly based on the type of passengers, such as business and leisure. In addition,
ticket fares are subject to fluctuations in schedules, but these schedules rarely
change. This process publicizes the fares and schedules, and provides them to travel agents. The

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process works closely with airport managements and stakeholders and is
responsible for increasing the number of services at airports, flight frequency, and
passengers who use airports. In addition, this process publicizes the fares and
schedules through advertisements and promotions.

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Fleet Management: Airlines own different types of aircrafts, such as commercial jets,
regional jets, and turboprops. The key tasks of fleet management are monitoring and
tracking maintenance expenses of aircrafts to ensure their safety and reliability and to
maximize their usage. Fleet management comprises services, such as cabin services
and assigning routes to aircrafts.

Identifying the Roles of People in Airlines Processes

An airline involves extensive activity and expertise. The nature of the activities performed
by people ranges widely from highly technical to day-to-day operations There are
employees, such as accountants, finance officers, airport managers, pilots, aeronautical
engineers, flight attendants, baggage handlers, reservation agents, and software engineers
Sometimes, airlines outsource chefs, cleaners, telesales executives, insurance experts, and
accountants.

Airline employees comprise a major part of company strength. Hence, more than one—
third revenue generated each day by major airlines, goes towards making payment to its
employees.
The airlines industry comprises the following types of employees:
 Line Employees: Include pilots, flight attendants, reservation clerks, aeronautical
engineers, gate personnel, and security guards. Reservation clerks form the largest
group of airline employees. The line employees are grouped under three categories:
 Engineers: Form about l0 percent of the airline workforce. These employees
maintain aircrafts according to maintenance programs and ensure passengers
comfort.
 Flight Operators: Are responsible for scheduling aircrafts and crews to man the
aircraft. In addition they train the crew. Flight crews include pilots, attendants,
and sometimes in-flight security employees.
 Sales and Marketing employees: Are responsible for activities such as setting
ticket fares, advertising ticket fares, promoting ticket sales, and improving
customer service. They use computer reservation systems for sales, ticketing,
and scheduling.
 Staff Employees: Include specialists in legal, finance, personnel, information
services, and public relations. Their function is to support the line employees to
run the airline efficiently.
Note:
 Finance personnel manage the revenues of the company. This department also
supervises the company’s property, purchase of fuel, spare parts, and other supplies
such as catering.
 The information services design and maintain the computer systems of the company

9
Identifying Information Systems

An information system is a data processing system that collects, processes, edits, and stores,
transmits, and supplies data related to a certain area of application. Each process of the
airline industry is controlled by specific information systems.
These information systems include the automation systems, the transaction processing
systems, the management information systems, and the Decision Support Systems (DSS).
The automation system automates tasks that were previously performed manually. The
transaction system processes and records business activities and the management
information system supplies information to managers. The DSS supports the
implementation of strategies of an organization and it is most useful in flight operations in
the airline industry. For example, a major airline generates extensive data for more than
3000 daily flights. Data features details, such as the flight route, fuel costs, and weather
changes.

This data is necessary in terms of weather dynamics for scheduling flight. Otherwise,
flights may be delayed or even cancelled. The data is also critical to make decisions on
fuel volumes to be loaded according to expected weather conditions, and determine flight
routes according to expected weather conditions.

To manage this data, a flight management system is required to enable efficient operation
of flights.
A simple process, such as handling baggage of passengers is also an information system,
called the baggage management system. It ensures that the baggage is not mishandled so
that passengers are satisfied with the airlines service. In addition, new technologies such
as the Radio Frequency Identification (RFID) tags have been developed to generate
baggage-tracking data. This type of data reduces the number of mishandled episodes and
reduces the time to locate baggage.

Airlines continually need to identify information systems and adapt new technologies.
Several technologies have been developed to ensure data security, to provide enhanced
services for passengers through online reservation, and to improve air-traffic controls.
These information systems help airlines to have a competitive edge over rival airlines.

10
Understanding Airlines Information Systems Architecture

Consider the scenario; Tom Wilkins is the Chief Information Officer of Imperial
Technology, a wholly owned subsidiary of Imperial Airlines. Tom manages day-to—day
operations of Imperial Technology with the support of nearly 1,000 employees. To
provide real-time information to the airline and to ensure convenience for passengers,
Tom now wants to set up an online reservation system for the international flights of
Imperial Airlines.
The users of this online system would be required to provide information for the
mandatory fields. For reservations passengers need to enter information on route
comprising names of the origin city and destination city and the date of travel. The online
system would also enable passengers to reconfirm tickets and reschedule travel.
This information provided by the passengers is stored in the airlines database. When a
passenger books a ticket, the unique number called the Passenger Name Record (PNR) is
assigned to the passenger. The PNR number is then stored in the reservation and departure
control systems of the airlines.
Evidently, the airline industry is dependent on technologies, such as mainframe
computing, and information systems such as, Global Distribution Systems (GDS) and
Departure Control Systems (DCS).

Note:
The PNR is the primary "storage" unit for reservation of information in the GDS. The
PNR is the unique number, which includes the passenger's name, along with the route, fare, payment,
special handling requests, and seat information. The PNR enables the
passenger's reservations to be processed and is controlled by the booking and
participating airlines. The PNR is also used to access ticket details for queries and
cancellations

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The major information systems that are currently used in the airline industry are:

Global Distribution System:

GDS, a reservation system, is the central repository of the details of passenger information collected
when passengers book tickets and is compiled in the computerized reservation networks. This data
helps to understand a passenger's behavior and profile.

GDSs were originally developed by the airlines to enable travel agents to book and reserve tickets, but
soon its services were extended to making bookings for hotels, car, and cruise. Therefore, GDS
connects airlines to other airlines and to the allied services, such as travel agencies, hotels, cruises,
tour operators, and car rental companies.

The following figure illustrates the four types of GDS:

World span

Sabre Travel
Network
GDS
Amadeus.net

Travelport

Types of GDS

12
The four major reservation systems or GDS that serve the airline industry are:

• Sabre: Is considered to be the pioneer and the largest reservation system. Sabre is
constantly upgrading to meet the market requirements and technology advancements.

Headquartered in Southlake, Texas, it connects more than 60,000 travel agency locations around the
world, providing information to around 400 airlines, 55,000 outlets, 52 car rental companies, and several
transport operators.

The following figure shows the products and services elements of the home page of the Sabre website,
which conveys the huge extent of information transmitted into the
GDS:

The Sabre Website

13
  Travelport: Is a diversified global technology leader. The company is branched in 16
countries and serves travel agents spread over 44,000 locations. Others served by
Travelport are 500 airlines, 227 hotel companies, 35 car rental companies, and 368 tour
operators. The following figure illustrates the products and service elements of the home
page of Travelport:

The Travelport Website

Worldspan : Provides Web-based technologies and services to its customers. It serves

around 16,000 travel agencies in 90 countries and connects around 400 airlines, 200 hotel companies,
40 car rental companies, and several service suppliers.

14
  Amadeus: Is the most recent GDS. A leading technology provider, Amadeus serves more than
57,000 travel agency locations, and 10,500 airline sales offices in 200 markets spread around the
world. It also serves around 58,000 hotels and 50-car rental companies over 24,000 locations.
The following figure illustrates the products and service elements on the home page of
Amadeus:

Note:

The Airline Reservation Systems (ARS) proliferated into the Computer Reservation Systems
(CRS), and later evolved into the GDS. In 1950, American Airlines developed Sabre to provide
real-time information flight details. Soon, a network developed which connected various ARS
and was called the CRS. CRS helped to automate reservation process for travel agents, who no
longer had to call up airline offices to make reservations. In late 1990's, the major CRSs
became GDS that enabled travel agents to access real-time flight details including schedules,
seat accommodation and pricing information to book tickets.

Departure Control System

DCS is an automated system that performs various processes, such as check-in, checking

15
 flights, issuing boarding passes, seat accommodation, seat exchange, flight plan, and
stand-by listing. The processes have been explained as follows:

 Check-in: Passengers need to check-in before flight departure. In the check-in

process, passengers’ tickets are verified with the computer reservation system. It also
includes screening of the passenger’s baggage through X-ray machines.

 Checking flights: This service checks the connecting flights and routes.

 Boarding pass: The gate desk issues boarding passes to passengers. It is mandatory
for passengers to have a boarding pass to board an aircraft.

 Seat accommodation, seat exchange, and flight plan: These services are concerned
with the even distribution of passenger load based on the position and load of
baggage/cargo on the aircraft.

 Stand-by listing: A stand-by passenger who makes a last minute reservation is allotted
a seat after all the confirmed passengers have checked in and boarded the flight.

The required fields of the PNR are transferred to the airline’s DCS approximately 36 to 48
hours prior to flight departure. The check in employees renders this service, when a
passenger checks in. The employees enter the name, seat number, and the passenger’s
baggage in the DCS. Prior to departure, a printout of the list of passengers’ information is
issued. The records for each flight are purged from the DCS within 24 hours of flight
arrival.

Note:

The emerging trends of airlines."

 There are self-service kiosks that enable passengers in buy tickets in the same way
as ATM machines.

 There are bar code scanners at the gate, which verify which passengers are
aboard.

Identifying the Components of Airline Ticketing

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Ticketing generates revenue for the airline industry. Airlines have ticket distribution
systems. Earlier airlines sold tickets only at the airports. However, post deregulation, the
distribution channel veered towards the travel agents. Airlines pay travel agents’
commissions based on the price and percentage of the value of tickets sold. Commissions
represent the fourth largest expense after labor, fuel, and cost of aircrafts.

To reduce costs, many major airlines have slashed commissions and distribute tickets
through an alternate and cheaper mode, that of websites. Major airlines, such as
Southwest Airlines and Delta Airlines have used this strategy to their advantage.

Interestingly, this has benefited passengers who now have varied modes for purchasing
tickets while retaining access to travel agencies. Sometimes, airlines also sell the tickets
of other airlines. This practice enables airlines to increase sales and to expand their
operations to remote areas. This type of airline partnership is called code sharing.

Understanding Process in Airline Ticketing

Consider the scenario; Imperial Airlines is popular for nominal ticket fares. John Barrett,
the CEO of Imperial Airlines has asked Ken Burton, the Chief Commercial Officer, to
advertise ticket fares through various media, such as newspapers and television and
regularly update fares on the website, www.imperial.org

Mr. Edward Jones, the CEO of an MNC company wants to fly on a low-priced ticket from
Delhi to Australia. Edward can book air tickets through any one of the following modes,
offered by Imperial Airlines:

 Airline Counters
 Travel Agents
 Websites

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The following figure illustrates the various modes to book air tickets:

Booking through Airlines Counters

Booking through Travel Agents

Booking through Websites

Passenger

Various Types of Ticket Booking

Booking an Air Ticket through Airlines Counter

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Imperial Airlines has a number of reservation offices in each city. Each office has several
reservation counters to handle reservations and cancellations. Each counter has a counter
assistant who is responsible for making reservations and cancellations.

When a passenger makes a request, the counter assistant performs the following activities:
 Inquires details, such as the date, sector, and class of travel from a prospective
passenger. Next the counter assistant checks the availability of seats on the
requested date in the Reservation file.
 Confirms details with the prospective passenger and inquires for more details,
such as seat preference in the smoking or non-smoking zone; vegetarian or non-
vegetarian meals; and special service requests, such as diet and medical
considerations.
 Updates the seat availability status in the Reservation file and adds the passenger
details to the file. The passenger is assigned the unique PNR number.
 Prints a ticket, collects payment, and gives the ticket to the passenger.

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The following figure illustrates the process of booking air tickets at the airlines reservation counter:

Booking Tickets through the Airlines Counter

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Booking an Air Ticket through Travel Agents
Travel agents are responsible for selling airline tickets in bulk. Most of them
use airline- owned reservation systems to track flight schedules and fares, to
make bookings and reservations, and to issue tickets to the passengers.
Airlines pay a standard commission and overrides to the travel agencies.
Overrides are commissions paid for exceeding sales targets.

21
The following figure illustrates the process of booking air tickets through travel agents:

Receives Itinerary

Airline Reservation

Sends Itinerary

Travel
Agent

Booking Tickets through Travel Agents

22
The process of ticketing involves the task to gather vital passenger information. The travel
agents collect the following details from passengers:

 Name and occupation

 Age
 Origin and Destination (O&D)
 Carrier/Airlines
 Time and day of travel
 Multiple stopovers in a route (if desired)
 Class
 Frequent flyer number (if applicable)
 Mode of payment
 Credit card number (if payment has been made through credit card)
 Contact numbers and e-mail id
 Actual fare of the ticket
 Discount on actual fare of the ticket (if any)
 Tax
 Surcharge
 Final payment

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Booking an Air Ticket on Websites

The online booking service of Imperial Airlines has triggered a good response from passengers. Online
booking is quick and easy to access. It has led to customer satisfaction. There has also been a rise in
ticket sales with the introduction of the service.

The following figure illustrates the online process of booking air tickets through websites:

Booking a Ticket on a Website

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The online ticketing process involves the passengers who visit websites to plan their trip by searching for
itinerary details related to their travel. There are three types of websites that control the online ticketing
process:

 Online travel scheduling and flight booking websites: Represent the websites o travel
agents, such as www.travelocity.com, www.expedia.com, and www.travelport.com.

 Airline websites: Represent the cheapest distribution channels for airlines that connect
with passengers. These websites are owned by the airlines.

 Auction and reverse outlets: Represent the mediators between the suppliers and
passengers. The websites connect with the yield management system of airlines to
determine the optimum time and number of seats available for bidding. Examples of
such websites are lastminutetravel.com and priceline.com.

Note:

In addition, there are non-airlines websites for booking tickets, which are also called third
party tools.

The following figures illustrate the websites for online booking of air tickets:

25
An online Travel Website

26
An Airline Website

27
An Auction Website

28
 Websites generally seek additional information from passengers for ticketing. Additional
information, such as:

 The passenger's gender

 E-mail Id

 Special preferences

 Physical disability (if any)

 The pin number of the passenger's credit card

Note :

The emerging trends of airlines: The concept of electronic (e) ticketing is catching up with many
major airlines. It is fast, easy, and saves selling expense for the airlines. An e-ticket unlike regular
tickets is not in a paper format. Here, the name and flight detail is stored on the airlines’s
computer . However, the passenger has to check in to receive aboarding pass.

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Understanding Airline Ticket Types

The ticket is a contract between the airlines also known as carriers, and the passenger in the itinerary of
the ticket. A ticket comprises three leaves, which are the flight coupon, the passengers' coupon (travel
receipt), and the auditors' coupon.

The following figure shows a sample ticket:

A Sample Passenger Ticket

30
Each flight coupon of the ticket contains extensive information such as:

 Evidence of payment of fare.

 Evidence that an interline agreement exists between the carrier in routing and ticketing carrier.
 The required data to enable proper handling of online and interline passengers their baggage
through the stated route.
 A record of all the conditions that must be known at the time of ticket reissuance refund.
 The required data for billing purposes of the travel agent who issues the ticket of (airlines
reservation counter and the revenue accounts departments of the airline.
 The value of the flight coupon based on the entry in the fare basis box and the routing
information.

Types of Air Tickets

The airline industry generates four types of tickets. Each airline generates tickets of same size.
The types of tickets are:

 Automated tickets: Are multi-copy carbonized tickets that are issued by the air These tickets
feature the flight coupon, boarding pass, and baggage check as a document. The features are
demarcated by perforations.

 Neutral automated tickets: Are standard universal documents, which are issued the
International Air Transport Association (TATA). These tickets do not bell identity of any specific
airline and can be distributed to any airlines or travel agents. These tickets consist of the flight
coupons, passenger receipt, and air passage information. A three-columned grid on the top-left
of the ticket bears information such as the fare calculation, carrier, and route specified as from
and to.

 Neutral manual tickets: Are similar to the neutral automated tickets but do not have
the three columned grids.

 Airlines specific tickets: Are issued by airlines, such as Delta Airlines, Southwest
Airlines, United Airlines, and Jet Airways. These tickets feature the front cover,
auditor’s coupon, agent’s coupon, flight coupons, and passenger’s coupon.

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Note:

IATA is a global trade association representing over 270 airlines. Through its Agency
Program, IA TA provides the structure and rules for the working relationships between
member airlines and their appointed sales agents worldwide

Airline tickets are also classified according to the Billing and Settlement Plans (BSP), a
standardized system for airlines and agents. BSP provides a simplified approach to
selling, reporting and administration of passenger air transportation.

 BSP Ticket: Banks or other related financial entities are informed about the sale of
BSP tickets so that they can handle the processing and payment of tickets.

 Non-BSP Ticket: These tickets are issued by airlines that do not participate in the
BSP. In such cases, the tickets must have a stamp of an official exchange. Automated
tickets fall under this category.

Understanding Ticket Fares

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Consider the scenario, two passengers of Imperial Airlines pay different fares for the
same route. One passenger travels by the business class, while the other passenger travels
by the economy class. These two classes differ in terms of the facilities provided to the
passengers and fare.

A ticket fare is the price a passenger pays to an airline for traveling by air. The ticket fare
is based on the distance traveled by passengers and the travel class chosen by passengers.
There are two types of ticket fares, published and unpublished fares.

 Published Fares: Are set by airlines and the tickets conforming to this fare can be
bought either from any airlines or travel agents. The Airline Tariff Publishing Company (ATPCO)
publishes fares for both domestic and international markets and makes the fares available to
travel agents and airlines. For international travel, the published fare is decided jointly by
airlines under the guidelines of the IATA. The respective governments of the countries to which
the airlines belong also approve the published fare.

Note:
The ATPCO is an external governing agency for collection and distribution of fares
and fare—related data for the airline and travel industry. It also offers travel data
services and solutions, revenue accounting, and decision support systems. Various
airlines publish their fares in the AT PCO, which in turn shares them with GDS.

Each published fare has the following components:

33
  One-way and round-trip fares: Many fares are published as one-way or
round —trip fares.

 The base fare: This fare signifies the fare of an airline ticket, before tax has been added.
Commissions are calculated on the base fare

 The class of service required for booking: The allocation of seats at different
fare categories is accomplished through the use of class of service code on
airline reservation systems.

Note:

The class of service code refers to the alphabetic category (A, D, F, J, C, Y and H) in
which an airline seat is reserved on a Computer Reservation System for a published
fare. It indicates which part of the plane the traveler will sit in (such as First Class or
Economy) and the type of service that they will receive while traveling with the airline.
Generally First Class is coded as F or P, Business Class as C or J, and Full- Fare
Coach as Y. Most special fares are coded by using other letters, such as, M, B, H, K, Q,
L, and V.

The fare basis code: Provides information about the specific fare in addition to
the class of service required for booking. Every published fare has a fare basis
code, and this code appears on the ticket in the fare basis box.

34
  Fare rules: Every published fare also has a published set of fare rules. These
rules govern the conditions that must be met for a passenger to qualify for this
fare.

The major examples of published fare tickets are:

 Apex fares: Indicate discounted international fares.

 Discount fares: Are offered for a limited time.
 Excursion fares: Are low priced fares with certain restrictions.
 Full fares: Indicate expensive tickets subject to last-minute changes.
 Joint fares: Offer price-break for multiple-routes
 Thorough fares: Signify fares to a destination through a gateway city.

35
Unpublished Fares: Arise from the consolidators and these fares are low priced. The
tickets that conform to these fares cannot be bought from the airline counters. These
tickets can be bought either from the consolidators or travel agents. These are
actually deals struck between the airline sales personnel and travel agents and these
tickets are off-the-published arena.

Note:

Consolidators are wholesale companies. They interact with travel agent and not with
the general public.

Consolidator airline tickets differ from the regular tickets in the following respects:

 These tickets do not quote a price. Airlines are cautious and conceal the actual price
of tickets sold to consolidators.
 These tickets do not allow passengers to change flights, endorse tickets, or transfer
tickets between airlines.
 There is no credit for frequent flier miles.
 Unlike apex fare tickets, these tickets are not purchased in advance.
 These tickets are only available with the travel agencies that offer consolidator
tickets.
 These tickets cannot be cancelled.
 These tickets have several restrictions, such as a stiff penalty for refund and changes

36
Identifying the Informative Fields in an Air Ticket

The ticket has an outer cover and an inner cover. While the outer cover specifies general
rules and regulations, the inner cover provides vital information. The information on the
inner cover is as follows:

 Passenger Name: is printed in a specific order. The surname is entered first and is
followed by the first name. The title name is an optional field.

 Carrier: Refers to a two-letter code or an alphanumeric code designated to the airline.

Some examples of carrier code are: DA, TW, and CO.
 Airline codes: Every airline has a two-character code. This code is used to
identify schedules and fares, and to ease working in terms of making
confirmations and planning passengers’ itineraries. For example, American
Airlines have AA and Frontier Airline have F9 as their code.
 Industry code: is a three-digit numeric code used in ticketing and revenue
accounting. In a ticket, the industry code precedes the ticket number. For
example, the industry code can be 220, 310, and 450.

 Flight/Class: Carriers have three classes and each class is designated by a unique code. These
classes are:
 First class: F, P. and A
 Business class: C, D, 3, and Z
 Economy class: Y, B, M, K, Q, V, and H

37
The following figure illustrates the various flight classes in an aircraft:

Business compt. Economy

J, C, D classes Y, B, M, K, Q, V, H, T, W, S classes
First Compt.
F, P, A classes

Flight Classes

 Date of departure: Is entered as two-digits followed by a three-letter abbreviation

the month.

38
  Flight time: Indicates the scheduled departure time entered as "A" for A.M, "P" for
P.M, "N" for noon, and "M" for midnight. Time is entered in the 24-hour format. For
example, the time formats of afternoon and morning departures are 220P and 900A,
respectively.

 Booking status: Provides the status of the passenger's reservation and identifies following
fields:
 Space confirmed (SO)
 Space waitlisted (RQ)
 Space available (SA)
 Infant, no seat (NS)
If a passenger does not confirm the reservation, then "OPEN" is printed across Flight/Class, Date, Time,
and Status boxes.

 Fare basis box: Indicates the appropriate code applicable for the calculated fare. There are
many types of code such as primary, secondary, and discounted combination of any of the
primary, secondary, and discounted code.

 Primary (U): Represents “Shuttle Service - No Reservation Needed — Seat Guaranteed”.

 Secondary (QLNR): Q represents the primary fare code for Economy/ Coach
Discounted fares, and L, N, and R indicate Restrictive Qualifier code. L
represents the lowest level of fare code, N is for the night/off-season fare code,
and R is for round trip fare code.

 Date and place where the ticket was issued: Contains the form and serial numbers
of an exchanged ticket. In addition, it contains the code of the place, the date of
original issue, and the travel agent’s numeric code.

 Fees: Are extra duties levied for airport services.

 Fare calculation (flight cost estimate): Is the amount entered either in the currency
of the origin city or in Neutral Unit Currency (NU C). It also includes the fuel
surcharge, which is a part of the fare.

Note:

39
Passengers may travel to more than one country. However, the currencies of all the
countries cannot be added. Therefore, a fictitious currency called NUC has been
devised. The N UC amounts for each portion of the trip are added to get the total NUC.

 Mode of payment: Is made through cash, traveler’s checks, checks, credit card, and
other payments, such as government transportation request or a prepaid ticket advice.

 Baggage weight: Is predefined for excess weight. Passengers have to pay an extra fee
for excess baggage.

 From/To (Route): Shows the itinerary of passengers. It shows the full name of each
city, including the origin city, enroute cities, stopover cities where passengers change
carriers, and destination city.

 Not-Valid Before" and “Not-Valid After” boxes: Are applicable in case of multiple
stopovers in a route.

 Tax and commission boxes: Are seen on the ‘auditors’ and ‘agents’ coupons of a
manual ticket.

 Ticket designator box fields are as follows:

 AD - Agent discount
 AT - Attendant traveling on discount fare accompanying a disabled passenger
 DH - Reduced fare transportation for person officially traveling to travel agent
arbiter hearings.
 EG - Group education trip for travel agents
 IB - ATA employee traveling on industry business
 ID - Air industry employee
 RG - General Sales Agent
 TG- Tour Guide
 VUSA- Visit USA

 Fare box: Contains the fare excluding tax for the entire itinerary of the tick conjunction tickets,
which are more than one ticket booklets to cover the passenger’s itinerary.

40
The following figure illustrates the informative fields in a sample ticket:

A Standard Ticket Sample

1 – Passenger’s Name
2 – Route
3 – Ticket Number

41
4 – Flight Number
5 – Ticket Booking Class
6 – Date of Journey
7 – Local Departure Time
9 – Ticket Reservation Number / Record Locator
10 – Ticket Restrictions/ Endorsements
11 – Fare Basis
12 – Baggage Allowance

1- PASSENGER’s NAME

A passenger’s name must be spelled exactly as it appears on the passport. Forget the driver’s license and
nicknames, especially if you travel outside the US. If you notice that your name is not spelled correctly,
immediately contact your travel agent or airline and fix the error. Usually a passenger’s name cannot be
changed after the ticket is issued. Depending on the airline, an unwritten rule has always been that the
first 4 letters of the passenger’s last name should be spelled correctly. Keep in mind that most gate
agents follow this, but on some occasions you may be asked to buy a new ticket. Therefore, before
buying, actually paying for the ticket, make sure your name is spelled correctly; ask for an email or fax or
other form of media with your travel itinerary.

2- ROUTE

This is your travel route: to and from cities. When you see an ‘X’, this means a transit city or connection,
where you spend less than 24 hours. Sometimes you may also see ‘O’ on the left side of the city, this will
show you the city where you have a stopover, more than a 24 hour stop.

3- TICKET NUMBER

This is your unique airline ticket number – your proof that the ticket was issued. Usually the first 3 digits
signify the airline code. Each airline has a 3 digit code unique to the airline (e.g. in the ticket sample it
would be 021). This number is followed by the actual ticket number or otherwise called ticket stock
number.

4- FLIGHT NUMBER

This is the airline 2 letter code followed by the flight number (e.g. DL 032 would stand for DL = Delta
airlines, 032 – flight number for that particular airline)

5- TICKET BOOKING CLASS

42
This is usually a letter which shows in what the service class your flight is booked. The service class can
usually be either coach, business, or first. Some airlines have upgraded coach classes, others have one
service class for business and first.

There are maybe 10 or so coach service classes and several business and first classes. The differences
between all these coach classes are the price and the rules; the more you pay for the ticket, the less
restrictions the ticket has. That’s it. You will not get better seats nor will receive more benefits or better
service if you buy a more expensive ticket. The airlines have certain number of seats available for each
tier of prices. When the lowest price tickets get sold, you’d need to pay more to get on a flight. You may
pay $200 for a ticket and sit next to a passenger who pays $1000 for a ticket in the same coach class.
Business and first class fares may also have several price tiers. However, most of these fares allow free
changes and no fee refunds.

6- DATE OF JOURNEY

This is your travel date. Usually it is a day and a 3-letter month code.

7- LOCAL DEPARTURE TIME

Time when your flight is schedule to depart. Always know the local time as this time is always based on
local time zone.
Note, be very cautious if you’re traveling during the daylight saving time or other time changing events.
The reservation systems might not recognize the time change in advance and on some occasions you
might need to reschedule or reroute your trip due to the lack of connection time.

9- TICKET RESERVATION NUMBER/RECORD LOCATOR

Otherwise called as record locator is your unique reservation number. Since electronic tickets almost
took over the ticketing world, in many cases the reservation number is sufficient for your travel. These
codes and combinations are different for each airline.

10- TICKET RESTRICTIONS

Abbreviated form of basic ticket restrictions and rules such as changeable or not, refundable or not,
penalty/fee amount if any, and airline validity.

11- FARE BASIS

This is a code or a number of rules and restrictions for a particular flight on a certain airline. Usually only
the airline agent or travel agent can access and provide you with information on these rules and
restrictions.

12- BAGGAGE ALLOWANCE

43
Numbers or letter in this box tell you how much you are allowed to check-in at no cost. Usually this is
either in kilograms (e.g. 20kg ) or piece concept (PC) especially within the US and on Transatlantic flights.
Each airline may have different baggage allowance, so be sure to ask your agent about each travel
segment allowance.
Note, on many occasions you will have different baggage limit allowance, especially if you travel outside
the US. For example, if you travel to Europe with one connection, but have 2 separate tickets issued, it is
very likely that both tickets will have different baggage allowances. This will definitely be the case if you
stop in European city for more than 24 hours (=stopover) and you will need to pay excess baggage fee
because most flights in Europe allow only 20kg checked-in baggage per passenger at no cost.

44
Generating Reports from a Ticket
Consider the scenario, Pat Greene, the Chief Financial Officer of Imperial Airlines wan to find out
the revenue earned from scheduled passengers. According to him, Imperial Airlines made lower
profits in the previous year. The ticket sales were affected from many quarters, including travel
agents, fraudulent cases, and high fare of international bound tickets. Pat wants to identify how
much money is paid as commission to the tray agents, detect the fraudulent cases, and determine
the appropriate fare to attract passengers.

To gather information for each task, Pat requires reports periodically on the travel agencies,
selling fare of tickets, and mode by which passengers pay. These reports are generated from
airline tickets and may be scheduled, real-time, or on-demand reports.

Scheduled Reports
The various types of scheduled reports, such as the agency report, ticket report, and form of
payment report are generated daily.
The agency report is created to manage the travel agency commissions and payments of
overrides, and to determine the market share of travel agencies. It comprises parameters,
such as the agency name, contact details, commission paid to the agents, total number of
tickets sold, total ticket fare, airline name, class of the tickets, gross fare, and selling fare.
The following figure illustrates the parameters of an agency report:

The Parameteres of an Agency Report

45
The ticket report comprises parameters, such as the ticket number, ticket code, date and place of issue,
passenger's name, gross fare, selling fare, and total fare. This report helps airlines to identify the fares
set by travel agents and to set the appropriate fare to attract passengers. The following figure illustrates
the parameter of a ticket report :

Ticket Number

Ticket Code

Date and Place of Issue

Passenger’s Name

Total Ticket Fares Ticket Report

Gross Fare

Selling Fare

The Parameter of a Ticket Report

46
The form of payment report helps to identify the swindled amount and the fraudulent passengers who
have paid through credit cards. These reports comprise parameters, such as the ticket number, the
passenger's name, the net fare, the form of payment, and the total fare of the ticket.

The following figure illustrates the parameters of a form of payment report:

Ticket Number

Passenger’s name

Net Fare

Form of Payment
Form of Payment Report

Total Ticket Fare

The parameter of a Form of Payment Report

Real—time and on—demand Reports

47
The sale of airline tickets is based on real-time information. The fewer the seats, the
higher is the price of tickets. On-demand reports are rarely generated. If at all, these
reports are generated only in critical situations. For example, passengers’ data may be
screened to find out details, such as the itinerary, the mode of payment, and the origin city
to detect a fraudulent case.

These types of reports help the senior management to take certain strategic decisions.

Understanding the Information System in Airline Ticketing

In the airline industry, the ticket contains all the information related to a specific booking. This type of
information is valuable because it helps to analyze multiple aspects, including human behavior and
security. For example, some passengers book tickets directly through Imperial Airlines, while others
book tickets through travel agents of the airlines. In either case, this information will be transferred to
the airlines database

Travel agents and the airlines follow a simple ticketing process, which includes creating and storing
ticket data, as illustrated in the following figure:

48
 Information System of Ticketing

Data Transmission Process of Ticketing

The passenger purchases an air ticket either through a travel agent or the airlines counter.
 When a passenger requests the travel agent for an air ticket, the travel agent updates the data
to the travel agency's server. The data is transmitted from the server to t GDS as an XML TAIR
file. Next, the data is transmitted from the GDS to t airlines database (OLTP), which is
maintained and used by the IT department of the airlines.

 Similarly, in the case of booking through airlines (reservation counters or websites), the data is
transmitted to the OLTP. Next, the data is transmitted to the GDS as an XML TAIR file.

An XML TAIR file is an encoded form of a ticket. The TAIR file of a ticket contains fields, such as
the passenger name, date and time of travel, hotel booking, car rental, and mode of payment.

49
 The fields are randomly arranged, and each field is followed by a backslash. Each GDS generates
a different TAIR file format. For example, the TAIR file of Sabre is different from that of the
Worldspan TAIR file.

The following figure illustrates an XML TAIR file of an air ticket:

Note:

When a prospective passenger shares the itinerary with a travel agent, the agent accesses
the GDS to enter information either through an Internet portal protected by a technology or
through a direct communication link. The GDS then electronically contacts the airlines to
ensure the availability of the required flight. If a booking is available, the travel agent
completes the reservation in the GDS, which in turn transmits the data back to the travel
agent.

The Verification of an Air Ticket

50
The OLTP or the airlines database is complete after a passenger's Id is verified and finally updated by the
airport ground staff at the check-in counter. This verification also confirms that the passenger has
boarded the aircraft.

The following figure illustrates the verification process at the check-in counter at airports:

Passenger checks in at
the counter

Verification of the
Airlines
passenger ticket
OLAP

Counter Assistant

Verification at the Check-in Counter

Understanding Factors of Published Fares

To retain their market share in the India — Australia sector, the sales and marketing
department of Imperial Airlines decides to offer competitive fares. Therefore, the
department needs to understand the profile and purchase pattern of passengers to
determine the published fare in this sector.

Mr. Edward Jones, the CEO of an MNC company travels extensively through the year for
business. Edward wants to book an air ticket from Delhi to Australia. Imperial Airlines
examines the various factors of data in the OLTP to determine the published fare for Mr.
Edward. The factors required to determine the published fare are:

 Route
 Demand density versus time of travel

51
  Demand density versus day of travel
 Passenger‘s profile

Understanding Route and Demand Destiny

Consider the scenario where the fare paid by Mr. Edward Jones is higher as compared to
another passenger who is traveling to the same destination, Australia. Edward’s ticket is a
round trip ticket with multiple stopovers. In addition, his booking has been scheduled on a
weekday, which is peak time. In addition, Edward’ is to fly during holidays, when
maximum number of passengers stream into the Imperial office reservations.
Conversely, the other passenger’s ticket is one-way and direct to Australia. Therefore, it is
inexpensive.

Understanding Route

Each flight has a route from the origin point to the destination point. There may be
intermediate stops; either single or multiple, between the origin and destination points
alternatively, routes may be direct. In a direct route, also known as a one-way trip,
flight stops for few hours, but the aircraft and flight number do not change. A round
or a multiple-stopover trip has a booking for the passei1ger’s return journey. Again, open-
jaw refers to a trip, which has no air-travel between the two points of an itinerary.

Travel agents and airlines use many terms related to routes. Some commonly used terms
of routes, such as:

 Flight Leg: With an associated flight number, one take-off and one landing
aircraft is called a flight leg. For example, DEL-AUSIAl23 is referred to as the
flight leg.
 Flight Segment: Ticket booking on one flight number may include one or more flight legs. For
example, if a passenger travels IC 123 DEL-BOM-TRV, the flight segment would be IC 123 DEL-
TRV.

52
 3 iqy Irrh
3C21k.71, WI-7M
CeD x Da234 fait; - bat-rta
kw raw 08: 1.-W•IE1

 City-pair routes and code: When a passenger travels from one city to another, the itinerary
is known as a city pair route. Each city has a unique code, usually of three alphabets. Some
examples of the city code of Boston, Philadelphia, and Memphis are BTN, PHL, and MEM,
respectively. Code eases communication for ticketing. The travel/reservation agents
require city code to check the time and rate for the available seats on flights.

Understanding Demand Density

Ticket fares fluctuate in different seasons. This creates an impact on the travel patterns of the
passengers. Summer and winter months are the peak seasons because passengers holiday during
these seasons. However, the demand in the fall season is low.

As a result, airline revenues rise and fall significantly through the course of a year. During peak
season, airlines can enhance their revenues by increasing fares. Similarly, during the low season,

53
airlines can increase capacity utilization by offering lower fares.

Demand also increases a few days prior to the departure of flights. Demand forecast is the
estimated number of passengers an airline expects to fly in the future on a specific date and flight
number. These forecasts are based on the fare classes to arrive at a fair mix or on the O&Ds to
arrive at an O&D mix to maximize the airline revenues.

In addition, the demand during weekdays is high. Conversely, on weekends airlines fewer
passengers. Night flights also have fewer passengers as compared to the flights during daytime.

Understanding the Profile of an Airline Passenger

Consider the scenario; Imperial Airlines handles different categories of passengers. In the fourth
quarter of the previous year, the airline carried more than 1.8 million passengers which the
business passengers were a major segment.
Ken Burton, CCO of Imperial Airlines, wants to identify the frequent business pass of various
companies who avail the services of Imperial Airlines. Ken wants to offer special services, such as
comfortable seating, and attractive holiday packages to bull lasting relationship with the frequent
business passengers.
Therefore, Imperial Technology develops a passenger profile database to identify a retain business
from these business passengers.

Profiling Passengers

Profiling is the ability to build information or data about an individual. Air passengers may be
grouped in specific passenger groups. Profiling usually relies on volumes of information gathered,
stored, and shared. Profiling broadly separates passengers into types, leisure and business
passengers.
 Leisure passengers: Are those who opt for cheap tickets. In return, the airlines requirements
and restrictions, such as the need for advance purchase, restrictions on cancellations and

54
 refunds, and an itinerary with an overnight stay on Saturday.
 Business passengers: Are charged high-priced tickets. As a result, they flexibility for
cancellations or changing flights close to the flight departure They are not restricted to
overnight stay during weekends.
This type of differential pricing for passengers is common. It increases the revenue airlines and
provides a good understanding of passenger profiles.

Identifying the Characteristics of Profiling

Airlines gather passenger information from various sources such as, travel agents, database,
computer reservation systems, GDS, and data warehouses. In addition, there are other sources,
including the front-line staff, call centers, and websites.

The information about passengers helps to profile passengers' characteristics. These

characteristics help to analyze their needs and behavior. Some characteristics obtained by profiling
passengers are:
 Travel patterns
 Routings
 Competition
 Probability of a booking maturing into a ticket and resulting in revenue
 Mode of booking
 Frequency of change of travel dates/cancellation
 Time of cancellation
 Frequency of requests for special meals
 Class
 Number of passenger/kilometers
 Age
 Gender
 Number of years at the residence
 Owner/renter of the residence
 Economic status/income
 Marital status
 Occupation
 Ownership of vehicles

55
Identifying the Purpose of Passenger Profiling
Profiling of passengers enables the airlines to analyze data to ensure security and revenue for airlines.
Some of the benefits of passenger profiling are:
 Identifying people who could pose a threat to the security of the infrastructure of the airlines
and its passengers. A new form of profiling that has been developed in the United States for
controlling terrorism is called the Computer Assisted Passenger Pre-Screening (CAPPS).
 Building a lasting relationship with passengers. Good customer relationship generates an
adequate return for investors in the airline industry.
 Reserving an adequate number of seats for the customers with last minute requests or
urgent requests. Airlines can find out the possible frequency of such passengers by analyzing
the database.
 Retaining the regular fliers through the loyalty programs.

56
Exploring Published Fare Factors for Analysis

Consider the scenario; Ed Young is a regular flier of Imperial Airlines. He books a

business class air ticket from London to San Francisco through www.imperial.org. The
round route ticket has a single stopover and Saturday night stay over at Washington D.C.
He is charged a fare of $954. Consider another scenario, Debbie Howe would take the
same flight for a leisure route from London to San Francisco and would be charged a fare
of $199. The amount that Ed Young pays for the flight from London to San Francisco is
not what Debbie Howe would pay.

Even passengers flying in the same class or section pay different fares for their tickets.
Ticket fares can confuse most passengers. Fares are constantly changing due to
competition. Each airline wants to maximize business and retain the market share. The
marketing departments of airlines continuously monitor their competitor’s fares. Further,
an airline’s fares are drawn on the basis of the rates determined by IATA.

How is this published fare determined? The senior managements of airlines take into
consideration certain parameters to construct published fares of routes, such as city pair
routes. Passenger data gathered from these parameters is analyzed by the airlines to arrive
at the appropriate published fare for generating revenue. These parameters are the airline
route, the demand density for the route, and the profile of the passenger.

Examining the Airline Route for Information Analysis

Consider the scenario, John Barrett, the CEO of Imperial Airlines, wants to be in the lead
position against his competitors. He raises a query to the econometrician about the
amount of published fare from London to San Francisco. The econometrician needs to
study the parameters and determine the published fare for the route.

Fares of routes are affected by several parameters. Airlines analyze data from these
parameters on routes to maximize revenue. For example, the more the number of
stopovers included in a route, the more the airlines will earn from the published fare.

57
The following figure depicts the various parameters of a route:

Distance

Stopover

Circle/Round Route

Direct Route
Published Fares

Demand

Flight Legs & Segments

Competition

Parameters of a Route

58
  Distance: Fares per passenger-kilometers vary considerably with distance. The greater the
distance of a destination from the origin, the higher is the published fare. For example, the fare
from Melbourne to Los Angeles is higher than the fare from Melbourne to Sydney.

 Stopover: A stopover is when a passenger does not leave the hub by the next flight or spends
more than four hours at the hub. The passenger pays for the stopover. In a route, there may be
single or multiple stopovers. Some routes include free stopovers, while other routes include
stopovers for an additional fee, but many routes exclude stopovers.

Note:

Hub and spoke system of airlines offers better routes to passengers and saves costs for airlines. A hub is
a central airport through which flights are routed. Spokes are the routes that aircrafts take from the hub
airport.

 Round Route: Passengers holding round route tickets fly from point A, the origin to point B, the
destination, and fly back to origin using the same fare basis code. The ticket fare of a round
route is lower than a one-way fare. Round routes have more restricted fare rules.
 Circle route: In a circle route, the passenger flies from point A, the origin to, point B, the
destination, and flies back to the origin using different fare basis code. The passenger may also
travel from A to B, B to C, and then C to A, using either the same or different fare basis code. In
other words, a circle route starts and ends in the same city and includes three flights to two or
more cities. For example, a passenger travels from New York to Detroit, from Detroit to
Houston, and from Houston to New York.
Circle routes permit two stopovers and are priced as a series of one-way flights. Usually, airlines
charge discounted fares for the circle route and the cost is less than the round route ticket.

A
59
 Circle Route

 Direct route: A direct route involves traveling from point A, the origin to point B, the
destination, without changing planes. The route may have one or more stops. On many long
distance routes, airlines offer discounts to passengers who connect though a hub rather than
use a non-stop flight.

A B
Direct Route

 Demand: The higher the demand for the route, the greater is the
competition between airlines. As a result, fares are lower. For
example, the fare of a ticket for all airlines operating on a specific
route falls when a major airline begins services on the same route
and lowers fares to capture the market share. Other airlines follow
by reducing fares. For unfrequented routes, airlines offer either

60
 discounted fares or attractive travel packages.

 Flight legs and segments: A leg is part of an air itinerary. A segment

refers to a single flight with the same flight number. For example, if
the passenger travels from A, the origin, to B, the destination, and
changes aircrafts at B to travel to C, the passenger will have flown
two segments. On the other hand, if the passenger travels from A
to C and the flight stops at B, but there is no change of planes, the
route from A to C is considered as one segment

 Competition: The level of competition in a given city pair route

affect fares. Level refers to the number of competitors. Generally,
the fewer the competitors, the higher is the fare charged.

The factors that affect the level of competition are distance and
market density or size. Thin, short-haul routes have few
competitors because their markets are small and cannot support
more than one airline. In contrast, long-haul flights have more
competition due to the wide choice offered by connecting hubs.

61
Examining Demand Density for Information
Analysis

Consider the scenario, which explains the difference in published fares. Imperial Airlines
displays airfares for various routes on the Website, www.imperial.org. For different
routes, the website displays varied fares at different times of the day. This is because
airlines analyze data in terms of route during lean hours, such as afternoon and therefore
offer lower fares for the afternoon hours.

Further, the Website displays information under the fields titled Reservations, Schedules,
and published Fares. In addition the website displays date, time of departure and arrival,
and fare. For example, for reservation, passengers need to select a destination to view a
drop-down list of destinations where the airline flies. Passengers can then select the
desired destination from the list.

Interestingly, the fares vary with respect to the time and type of the route. For example,
the published fare for a city pair round route from Philadelphia to Sari Jose (Pl-IL — SIC —
Pl-IL) departing at 9:05 A.M. is $524, but the published fare for a one-way route on the
same route is $319. Moreover, the published fare for a round route departing after 12
noon is $321.10. These differences in fares are because the demand is lower during the
afternoon as compared to the daytime.

62
To understand how the published fare is determined by demand density, let us take a look at the
parameters of demand density. The following figure depicts the various parameters of demand density:

High Season

Low Season

Shoulder Season

Published
Weekdays Fares

Saturday Stay Over

Time of the Day

Parameters of Demand Density

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The parameters that affect demand density are:

 High/Peak Season: Each year has two peak seasons, the summer from May 16 to
August 15 and the holiday season from November 16 to January 15. The date of
departure is used to calculate the published fare in the peak season. In this season, the
airline can increase its revenue by increasing the published airfare.
 Low/Lean Season: Airfares are not high in the low season. During this period, airlines
try to fill the seats by offering low fares to passengers.

 Mid/Shoulder Season: The airline industry considers the months before and after the
summer season as mid season or shoulder season. Fares are low in the shoulder
season.
 Weekdays: Fares are high on certain days of the week. As compared to Tuesday,
Wednesday, and Thursday fares are high on Monday and Friday. This is because
business passengers fly frequently on Monday and Friday, especially on Monday
mornings and Friday afternoons. Conversely, there are fewer frequent fliers on
Saturday and Sunday. The occupancy during the weekends is low, and therefore, fares
are low.
 Saturday Stay Over: Business passengers who travel during the week prefer not to stay
over on weekends. Conversely, leisure passengers choose to stay over on Saturday, but
they have to compromise with more restrictions on the fare of the ticket.
 Time of the Day: Demand fluctuates at certain times of the day. When compared to
day flights, night flights have low fares.

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The following figure depicts how the demand fluctuates with different seasons:

200

160

120

No. of passengers 80

60

20

Summer Fall Season Winter

Fluctuation in the no. of passengers with different Seasons

Note:

 H or L in the Fare Basis indicates high season and low season respectively.
 Demand forecast is based on historical travel patterns

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Examining Profiling for Information Analysis

Consider the scenario, Imperial Airlines offers a full fare of $1500 to a business
passenger and a discounted fare to a leisure passenger. However, both the
passengers are traveling from Chicago to New York.

The airline industry generally segments potential passengers into two

categories, passengers traveling for business purposes and passengers
traveling for leisure purposes. These passengers have different travel
requirements. Often, business passengers need to make last-minute travel
arrangements, make changes to their itineraries, or cancel reservations.

Leisure passengers travel for personal reasons. They tend to make

reservations in advance and conform to fixed plans. They are also more
sensitive to the cost of travel and are likely to forego travel that does not fit
their budget.

The published fare is dependent on the profiles of these two types of

passengers. Data related to the passenger profile is extracted from the airlines
database. This data is used to analyze differences in passengers in terms of
budget, time sensitivity, and travel itinerary. These profiles also play an
important role in balancing the business of supply and demand in airlines.
Airlines use the results of the analysis to strike a balance to satisfy passengers,
enhance competition, and generate returns on investment.

The following figure depicts the variation in fares with respect to the profiling of
passengers:

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 Passenger’s High
last minute Published
request Fare

Airline Business High

Database passengers Published
book flights Fare

Leisure
High
passengers
Published
book flights
Fare

Passenger’s Profile

Note:

Airlines have a captive market in business passengers who often arrive at the last minute for various
services.

67
Several parameters are used for profiling passengers either as business or as leisure passengers.

The following figures depict the parameters that are considered while profiling in an airline database:

Leisure Passengers Published

Fares

Advance Reservation

Inflexibility in schedule

Flight Time

Saturday Stay Over

Non-refundable

Class

Parameters used for Profiling Leisure Passengers

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Business Passenger

Published Fares
Last-minute reservation

Flexibility in schedule

Flight Time

No Saturday stay over

Refundable

Class

Frequent Fliers

Parameters for Profiling Business Passengers

69
They parameters depicted in the figures shown are:

 Advance Purchase: A ticket with low fare needs to be purchased in advance. It is known as an
apex fare ticket and can be purchased 7 to 30 days ahead of departure. Such tickets are also
called excursion or discount fare tickets.
 Flexibility and Restrictions: Passengers can reschedule and change flight dates and stopovers
during a journey. Generally full-fare tickets have few or no restrictions.
 Flight Time: Day flights, especially, 9:00 A.M. to 5:00 P.M. cost more as compared to night
flights. Fares of off-peak hours are lower because there are fewer passengers.
 Saturday Stay Over: Passengers can avail Saturday night stay over (SS) to obtain low published
fares. SS is calculated based on the date of departure and the date of return. Business
passengers willing to pay higher fares are unwilling to spend the weekend away from their
families.
 Refundable and Non refundable: Refundable tickets can be returned for a refund to the credit
card account. Such tickets allow passengers to make changes without paying a penalty.
Non refundable tickets are "No money back" purchases. They cannot be returned for a refund,
but the value of an unused non refundable ticket may be applied to future travel. Airlines may
charge a service fee to modify a non refundable ticket.
 Class: There are three types of classes that create an impact on the published fare. The business
class exists between the first class and economy/coach class. The business class is most
commonly offered on international flights as an alternative to the first class, which is more
expensive. The first class is coded as F or P, the business class as C or J, and the full- fare coach
as Y.
 Frequent Fliers: They are business passengers. They also tend to reserve tickets at the last-
minute. The airline industry sets a higher fare for these types of passengers. Airlines analyze
data related to last-minute reservations to determine the percentage of last-minute
reservations to charge a premium on fares.

Consider the scenario, a travel agent of Imperial Airlines searches options for a prospective passenger
who wants to book a round route ticket from Ottawa to Vancouver. The travel agent uses certain
options to set the published fare for the passenger.

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Analyzing Profiling for Strategic Business Decisions

In the airline industry, the profile of a passenger is analyzed to implement certain business
decisions. The profiles are analyzed to understand the types of the passengers. The
objective is to provide optimum services to passengers.

Keeping the satisfaction of passengers in mind, loyalty programs are launched by the
airline industry. These programs not only retain loyal passengers but also attract a large
volume of business passengers. Further, these strategies ensure profitability for the
industry.

Consider the scenario; Imperial Airlines introduced low fares for regular passengers. The
results were encouraging. Imperial Airlines generated higher revenue and won an award
from the Aviation News magazine, a leading publication circulated among the members
of FFP.

Ken Burton, the Chief Commercial Officer of Imperial Airlines, asked Tom Wilkins, the
Chief Information Officer, to analyze the data of passengers who have been flying with
the airline for the past two years. The analysis indicated two types of passengers, business
and leisure. To retain loyal passengers who flew frequently with the airline, Ken Burton
initiated the launching of the loyalty program - FFP.

Analyzing Loyalty Programs

The two events that occurred before loyalty programs were deregulation and computerization.
Deregulation opened the doors for private players to market air services. This resulted in a larger airlines
network with more frequent services. The larger network, in turn, led to an increase in demand.

Computerization created the necessary systems infrastructure to profile and store passenger data. For
example, FFPs would not have been successful without the data warehouse and sophisticated databases
to manage and store passenger data. Stored passenger data could be used to analyze the profiles of
frequent fliers.

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Types of Loyalty Programs
There are several types of loyalty programs:

 FFPs: These programs reward loyal passengers with free travel and are targeted primarily at
business passengers. Such programs operate on the principle of volume discount. After the
passenger has flown with a particular airline with a FFP, the value of subsequent flights is
enhanced by the increased opportunities of free travel. These programs offer a bonus miles
benefit scheme to loyal passengers by the participating airlines. Passengers can redeem these
miles through participating member airlines, when desired.

These programs require efficient operational systems such as e-helpdesk, analytical systems
such as query, data mining, customer research, and customer relationship management (CRM).
The programs demand high management standards and an efficient quality of service to be
provided to members.

The size of loyalty depends on the following parameters:

• Frequency of free travel and the size of the airline's network: The larger the network, the more
valuable is the free travel, because more opportunities are available to the passenger.

• Location of the passenger: The larger the number of flights offered by an airline at the
passenger's home city, the more likely is the passenger to travel on the routes.

 Fast accumulation of awards: The faster the accumulation of loyalty points, the greater the
range of possible free-travel destinations and nonstop flights to the desired destination.

 Travel Agent Incentive Programs: These programs are also called Travel Agent Commission
Override (TACO) programs. These programs reward travel agents for directing the bulk of their
bookings through a specific airline. Further, these programs enhance the demand for the
airline's services. Most travel agents earn increased commission overrides from at least one
airline in return for steering passengers to those airlines.

 Corporate Programs: In these programs airlines negotiate special arrangements with large-scale
corporate passengers and provide incentives to them for taking all their travel services. A
significant proportion of business traffic travels on contract fares.

Most travel managers favor airlines with extensive route networks that are easily accessible
from their company's locations. Airlines that offer large discounts, but do not offer attractive
route networks with adequate non-stop services are unable to obtain corporate contracts.

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Key Concepts of Loyalty Programs
There following key concepts are used while executing loyalty programs:

 Enrollment: This factor is an important concept for loyalty programs because it leads to the
creation of the passengers' database. The database helps track passengers, analyze their profile,
communicate with passengers, and target the potential passengers with incentives.

 Activation and re-activation: The database enables the airlines to track regular passengers and
erstwhile passengers. A regular communication is maintained with passengers through
newsletters, direct mails, e-mails, and statements. Communication ensures passengers who
have crossed the threshold of points for a free trip are notified.

 Evaluation of the lifetime value: This aspect evaluates how much the passenger can spend over
the passenger's lifetime. For example, a business passenger is likely to spend more than a leisure
passenger.

 Retention of loyal passengers: It is less expensive to retain loyal passengers than to acquire new
ones. For this reason, if a loyalty program succeeds in protecting a significant portion of the
company's proven passenger base; it will have made an important contribution to revenue
earning.

 Conformation to the 80-20 rule: According to the 80-20 rule, 80 percent of a company's
revenues are likely to be generated by 20 percent of its passengers. In the airline industry, 20
percent is the business passenger segment. This segment's frequent flights, stays and rentals, at
high-yield rates, account for a large portion of the revenue. Loyalty programs allow the
marketing department to identify elite passengers and provide them with recognition and
benefits according to their revenue contribution.

 Maximization of the share of the passenger: To maintain a long-term relationship with a

passenger, loyalty marketing seeks to maximize the share of the passenger's spending. For
example, if Imperial Airlines observes that most of their passengers are flying with other airlines,
Imperial Airlines would aim at increasing the passengers' contribution to 100 percent. This
would reduce the passenger's spending on other airlines.

Analysis on Passenger Data for Loyalty Programs

To understand loyalty programs, it is essential to know how these programs are implemented.

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Loyalty programs are initiated with the following queries raised by the senior managements of airlines,
such as:

 Which type of passengers are regular or frequent flyers?

 What is the passenger's buying pattern?
 How much is a loyal passenger worth to the airlines business over time?
 How much time would be spent on acquiring new passengers, as compared to nurturing the
existing passengers?

Based on these queries, information analysis is conducted on the passenger data on selected
parameters. These parameters conform to the domain of the business query. The analyst creates
dimension cubes, and the industry makes strategies and implements business decisions based on the
output from the dimension cubes.

The following figure depicts the general pattern of information analysis in the airline industry:

Business inquiry by
the Senior Parameters Analyst creates
Management selected by the Data mart
econometrician

Based on output,
business strategies Analyst forms
are created and dimension cubes
implemented

Data Analysis

Consider the scenario, Imperial Airlines has established a data warehouse to strategically use and conduct
information analysis on passenger data. To increase the passenger revenue and to set the appropriate
published fare for those passengers, Ken Burton raises a query to the econometrician.

74
The following figure depicts the query raised by the senior management:

The query raised by the senior management

Next, to solve the query, the econometrician deduces the parameters and sends the parameters to the analyst.
The following figure depicts the econometrician's role in analyzing the passenger data:

75
 The Econometrician's Role in Data Analysis

The analyst receives the list of parameters from the econometrician and extracts the parameters from the data
mart created from the data warehouse to form dimension cubes. The solved query is then sent back to the
econometrician, who in turn makes a report and sends it to the senior management. The following figure
depicts the role of the analyst in data analysis:

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 Receives the parameters
from the econometrician

Extracts parameters from

data mart of data
Data warehouse
Warehouse
Forms dimension
cubes
Analyst

Sends the solved query

to the econometrician

The Analyst’s role in Data Analysis

Based on the report, the senior management implements strategic business decisions, such as the
launching of FFPs.

Understanding Loyalty Programs - FFP

Consider the scenario; Imperial Airlines devises a strategy of FFP. A passenger has to take 6
round trips, equivalent to 25,000 miles, in 12 months to earn a reward ticket. Passengers can
also earn bonus miles towards reward tickets by using the services of rapid rewards preferred
partners, which include hotel chains, car rental, credit card services, and telecommunication

77
 companies.

A special promotion at www.imperial.org gives passengers double points provided they book
tickets online and travel before October 15, 2005. Moreover, Imperial Airlines has a tie-up with
Magnum Chartered Bank, where any purchase with their credit cards earns bonus miles towards
free tickets.

To maintain regular communication with passengers, the airline mails program statements and
special offers to members.

Understanding Features and Criteria of FFP

FFP is an incentive program; operated by the airline industry to reward passengers for their sustained
concept of FFP is that airlines want their passengers to become lifetime passengers.

FFP is a so popular strategy of the sales and marketing department of the airline industry.
This program has enabled several passengers to avail free flights and free trips to various destinations.
For passengers, regardless of whether the trip is for business or leisure, mileage, bonus points, and
rewards take the primary seat. Competitive fares are also an important criterion for passengers to select
airlines.

Some of the basic features of FFP are:

 Targeting Business Passengers: Frequent business passengers represent the biggest group of
passengers. Therefore, these passengers are rewarded with an effective system of upgrades
called the elite rewards program
 Rewarding Elite Status: This is a special package of benefits given to an airline's elite passengers,
the ones using it most frequently. It involves three tiers of upgrades, silver, gold, and platinum.

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 In the first tier, a passenger may receive a free upgrade or bonus miles. Second-tier passengers
may receive unlimited domestic and international upgrades, along with lucrative mileage
bonuses. Top-tier passengers are rewarded with companion tickets, international flights, and
lounge privileges

To attain the elite status, the passenger must score 25,000 frequent flyer miles. At this stage of
membership, the passenger earns the maximum number of miles and points. Each subsequent level
requires more mileage, and therefore, earns more business for the airline.

 Earning Bonus Points or Miles: Members earn points instead of miles for flights flown in some
airlines. Members of airline FFPs, who book tickets directly, often get bonuses of 1,000 points or
more for new routes, or during special promotions. The figure can reach 5,000 points. Certain
major airlines offer mileage bonuses for redeeming reward trips online instead of offering points
and informing the passengers on the telephone or by mail. To encourage online usage, many
airlines offer substantial point bonuses for online flight check-in as well.

In addition, passengers earn points for each one-way trip. For example, two points for a short flight, four
points for a medium flight, and six points for a long flight. A free roundtrip ticket, good for any
destination to which the airline flies, is rewarded once a passenger reaches 100 points. When the
threshold is reached, the passenger is immediately notified.

 Claiming Car and Hotel Bonuses: At the onset, hotels were partners in airline programs.
Gradually, they started launching their own FFPs. Program affiliations allow passengers to earn
bonus miles for hotel stays and car rentals. Sometimes, passengers do not even require a flight
in conjunction. At 300 to 1,500 miles for a single car or hotel transaction, the passenger could
earn more miles while driving.
 Earning Points with Credit Cards: After miles for airline flights, the next-most-important source
of miles for most frequent flyers is the credit card. There are two types of Credit cards that
earn miles or points, airline and hotel affiliated credit cards and bank issued credit cards with a
travel rewards program. Cards with a mileage-earning component give users a way to earn miles
for the flight, the hotel, or the car rental, and for the dollar value of the charged purchase. In
addition, such cards present an opportunity to earn miles for credit card purchases, which
would otherwise not fall under the mileage criteria.

Note:

Apart from credit cards, there are other cards that enable passengers to earn miles or points. These
cards may be charge cards, such as, American express card, Diners card, and debit cards

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For example, passengers of Imperial Airlines who book a trip with the credit card company, Magnum
Chartered Bank, receive double flight credits.

 Redeeming Points : The FFP miles reside in the passengers' account. These miles accumulate as
passengers frequently travel from place to place. When the mileage reaches a certain amount,
the passenger can redeem those miles for a reward, usually a free trip.

The success of FFPs is apparent because there are over 70 FFPs that are spread worldwide. What makes
FFP a success is that it also maintains a balance between the passenger and airline interests. In general,
airlines allocate five percent of the seats to FFP members who use free tickets.

Note:

Most FFPs in United States enable passengers to continue accumulating miles indefinitely, provided a
member has some account activity during a three-year period. Programs outside the United States
expire miles three years after they are earned.

Identifying Information System for Analysis

Most airlines parse data from the PNR into separate files to meet the requirements of various
departments, such as sales and marketing, financial services, and fleet management. The PNR consists of
information about passengers, such as flight booking, sales, ticket, passenger’s preference itinerary,
non-flight booking, and miscellaneous information, including a third person who makes the booking for
the passenger.

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Therefore, the PNR data captures relevant data on passengers to answer the following business queries:

 How many days in advance does the passenger book a ticket?

 Which type of booking does the passenger use most frequently?
 How often does the passenger alter travel dates?
 How often does the passenger rebook a ticket?
 What are the passenger's preferences?
 How frequently does the passenger travel?

However, the PNR captures incomplete information. Other essential sources of information to capture
passenger data are: the reservation systems, DCS, FFP, revenue accounting, baggage management, and
websites.

The information systems use the various fields to collect information for analysis. The types of
information systems used are the Computer Assisted Passenger Screening Systems (CAPPS) or CAPPS II
to identify threatening passengers, the Early Warning Systems to deliver real-time information on
suspected terrorists, and Customer Relationship Management (CRM) to retain customers and provide
enhanced services to customers.

Good customer relationship is the key to an airline's business growth. This includes the tasks to track
customers' needs, behavior, and lifestyles and use that information to create customer loyalty. Several
customer-centric initiatives taken are a result of the CRM. FFP is one such initiative.

Using CRM Systems for Information Analysis

Consider the scenario, Imperial Airlines is recognized by the airline industry for good customer
relationship. The airline believes in delivering high quality cordial customer service. This service has
enabled Imperial Airlines to receive the highest customer satisfaction rating in the industry. According to
John Barrett, the CEO of Imperial Airlines, the airline has developed a holistic view of every customer,
which has led the airline to develop an intrinsic one-to-one relationship with customers and cater to
their requirements.

Further, the airlines use data warehouses to improve customer services and increase operational
services. A strategic initiative in this direction has been the launch and effective management of FFPs.

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Understanding CRM in the Airline Industry

CRM is known by various names, such as Customer Management, Customer-Centric Management, and
Customer-Centricity. CRM is more than an information system. It is a process to ensure improvement. In
the context of the airline industry, CRM consists of acquiring and using the knowledge about customers
for enabling an airline to sell its services more effectively.

There are two types of CRM, operational and analytical. The operational CRM covers sales force
automation, call centers, and marketing, while the analytical CRM provides critical knowledge to
undertake strategic business decisions to beat competitors, and to obtain customer satisfaction.
Further, it provides executives and managers the ability to measure the performance of the sales and
marketing department. In addition, it gives tools to analysts to enhance the department's operational
effectiveness.

Note:

The analytical CRM also leverages the customer database and uses the database for business
intelligence and analysis.

The following factors led the airline industry to implement CRM:

 The need for customer retention is paramount. With a highly competitive market place, airlines
feel the need to respond effectively to the continual changing patterns of customer demand.
 The upcoming technologies are making CRM more practical, viable, and cost-effective.
 CRM helps the airline industry to gain an insight into the behavior and value of customers.

In the airline industry, CRM is an integration of the processes, people, and technologies. The success of
an integrated CRM is determined if airlines can attract and retain the loyal customers. The deeper the

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relationship the airline holds with these customers, the more opportunities there are for selling the
additional airline products and services.

The principles of CRM are:

 Acquiring customers: CRM identifies the profitable customers, and develops marketing
campaigns to attract customers to use the airline services.
 Meeting customers' needs: CRM analyzes customers' needs and provides services to suit their
needs, but at the same time makes sure that there is an adequate return on investment.
 Retaining customers: CRM includes the tasks to build and sustain customer loyalty.

The following figure depicts the maximum value of the customer through the three principles:

83
 3-D Model of the Three Principles of CRM

Note:

The most effective way to create an integrated CRM environment is by implementing a

customer data warehouse. The data warehouse collects relevant data from each customer

84
touch point to provide a unified view of each customer. The customer touch points are tapped
through phones, call centers, self-service, e-mails, and mails.

The types of data that CRM normally collects include the response to campaigns such as loyalty
campaigns, sales and purchase data travel data, contact information, service preferences, online
behavior data, and demographic data.

The data is analyzed using specific parameters to make strategic decisions and maintain an
informal and one-to-one relationship with customers. The results of this analysis activity are
stored in CRM.

The analysis can be categorized into three groups:

• Segmentation of customers according to behavior

• Profiling customers according to preferences to launch new programs and activities

• Predicting future customer characteristics to track new customers

The following figure depicts the CRM architecture in the airline industry:

85
 PNR

Reservation System Customer

Profiling
Departure Control System
Customer
Customer
Segmentatio
Revenue Accounting Database
n
Forecasting
Baggage Management System
New
Customers
Website

CRM Architecture

Note:

Several major airlines are adding more detailed information to their growing customer database. For
example, airlines are adding the following information: Do passengers want to receive flight-status
alerts? Are passengers willing to forgo their seats on overbooked flights or would passengers take
advantage of seat upgrades?

Analyzing Customer Behavior

To define customer behavior into segments, the sales and marketing department of the airline industry
requires a robust database that provides a complete view of the customer. The database is used to
identify the types of passengers, develop flying loyalty information, accord privileges to the business

86
passenger, and build a long-term relationship with passengers. The CRM analysis is used to segment
passengers based on their value, demography, and the miles flown, known as value-based
segmentation, demographic segmentation, and frequent-flyer segmentation respectively.

Value-based segmentation enables the airline to understand the profitability of each customer. This
segmentation helps the airline to determine which customers should be retained and also marks the
probability of low-value customers escalating to high-value customers. In addition, such segmentation
helps group customers based on monetary value and travel frequency.

Further, value-based segmentation helps determine how much passengers can spend on airline services.
This knowledge, in turn, enables the industry to launch customer-oriented initiatives. For example, some
passengers may emphasize on wider baggage space, while others may want nonstop service. These
initiatives help airlines to improve their value proposition.

The demographic segmentation enables the airline industry to determine the profession and location of
business passengers, and the destination or vacation preferences of leisure passengers.

Frequent flyer segmentation enables airlines to provide the business passengers with incentives, elite
status, and automatic upgrades. FFPs allow airlines to extend the loyalty program by selling points or
miles to third parties, and, in the process, create a new revenue stream.

Initiatives of CRM

Customer information is the foundation of the CRM initiative because it provides an insight of the
customer's requirements. This information is usually gathered from various sources, such as PNR,
reservation systems, DCS, customer loyalty, websites, customer contact, and feedback. However, the
data needs to be centralized in the customer database, so that all the information details can be used
for various CRM initiatives. Sometimes, an enterprising airline sets up a data warehouse to support the
CRM initiatives.

Most airlines are turning to CRM as a tool to manage customer relationships. There are several CRM
initiatives, such as FFPs, RFLD baggage tags, e-mail campaigns, kiosks, flight notification systems, and
Internet check-in.

The following figure illustrates the various initiatives of CRM in the airline industry:

CRM INITIATVES

87
 Various CRM Initiatives

Some of the CRM initiatives are:

 Self-service kiosks: Several airline industries have introduced kiosks that enable passengers to
do self check-in. This not only saves time for passengers, but also enhances the efficiency of
services. These kiosks are linked with the CRM system that helps the airline to keep track of

88
 checked-in passengers. For example, the customer database gets an update whenever a
passenger accepts a seat-upgrade offer at the kiosk.

 RFID baggage tags: These tags help the airline industry to identify the baggage of passengers
and, as a result, reduce the likelihood of baggage loss. They are tiny attachable chips capable of
sending digital information on secure wireless networks. The RFID tags are attached to the
passenger's baggage instead of the normal paper tags.

 E-mail campaigns: These campaigns are a rage in the airline industry. A weekly message related
to all types of information, such as ticket sales, and FFPs is sent to the airline member
passengers. This not only keeps the passengers updated on the current scenario, but also helps
the airline to personalize customer relationship.

 Flight Notification System: This system offers proactive notification of flight schedule changes,
flight arrival and departure time, baggage claim, and location information. The details are
communicated through various wired and wireless devices, such as phone, e-mail, and the
Personal Digital Assistant (PDA).

 Internet Check-in: Some airline industries have used an innovative way of checking in
passengers by using a very distinctive form of Id, their face. The passengers' faces are scanned
when they check in the departure lobby. This is done by e-check in machines using biometrics
technology to validate the identity of the passengers.

The following figure depicts how the PNR parameters can be used for CRM initiatives:

Flight booking details when booking was

made, status, seat requests, special meal
CRM Initiatives
services
89
Sales information – travel agents, campaigns, Self-check-in
promotions, sales commissions
 Various CRM Initiatives from PNR fields

Understanding CRM Software

The CRM process is enabled through the CRM software to collect information about customers, sales,
and marketing effectiveness, responsiveness, and market trends. The technological components of
CRM enable the airline industry to increase revenues by tracking new customers, retaining loyal
customers, selling products more effectively, helping sales staff to close deals faster, and simplifying
the sales and marketing process.

The technological components of the CRM software are:

90
  Sales Force Automation: Comprises the Contact Management and the Lead Management
software. The Contact Management software stores, tracks and manages contacts of an
enterprise, and the Lead Management software enables an organization to manage, track, and
forecast sales leads.

 E-CRM: Involves the automating processes in sales and marketing and revenue, and increases
efficiency.
E-CRM comprises the Self-Service CRM and the Survey Management software. The Self-Service
CRM software helps interact with customers through the Internet to implement the e-business
application and the CRM strategy. The software also tailors the customer's needs on a one-to-
one basis, automates e-mail, enables website analytics, and manages campaigns. The Survey
Management Software helps automate the airlines electronic surveys, questionnaires, and polls
to understand the customer's likes and needs.

 Partner Relationship Management: Comprises the Contract Management and the Distribution
Management software. The Contract Management software enables airlines to create, track,
and manage partnerships, contracts, and agreements.

The characteristics and features of CRM show that CRM not only builds a customer relationship but also
enhances the travel experience of the customer. To arrive at that level, a series of events occur, which
have been illustrated in the following figure:

91
 Customer Relationship Management Enhancing Travel Experience

Using Profiling Software for Information Analysis

Currently, several customer profiling software that can be used to find new and innovative methods to
acquire and retain customers are available. One such customer profiling software has been discussed
below.

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Profiling Software for Corporate Bookings
In the airline industry, profiling software is used for corporate bookings. Here, the options get
automatically customized over time as data gets collected in the back-end. Through a .dll file, actual
information processing is conducted at real time. It is a privilege interface for corporate customers. For
example, when a corporate customer revisits the website, the customer gets the required information.
In case of new customers, the screen will show different options but these options get customized as
the customer revisits the website.

The software enables the airline industry to profile employees of corporate who are regular fliers. This
software helps personalize, customize, and tailor the information according to the customer's needs.

COLLABORATION DIAGRAM FOR AIRLINE BOOKING SYSTEM

The Collaboration Diagram presents an alternate to the Sequence Diagram for modeling interactions
between objects in the system. Whereas in the Sequence Diagram the focus is on the chronological

93
sequence of the scenario being modeled, in the Collaboration Diagram the focus is on understanding all
of the effects on a given object during a scenario.

Objects are connected by links, each link representing an instance of an association between the
respective classes involved. The link shows messages sent between the objects, the type of message
passed (synchronous, asynchronous, simple, balking, and time-out), and the visibility of objects to each
other.

Collaboration Diagram for a Group of Objects

Modeling Class Behavior with State Diagram

While interaction and collaboration diagrams model dynamic sequences of action between groups of
objects in a system, the state diagram is used to model the dynamic behavior of a particular object, or
class of objects. A state diagram is modeled for all classes deemed to have significant dynamic behavior.
In it, you model the sequence of states that an object of the class goes through during its life in response
to received stimuli, together with its own responses and actions.

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For example, an object’s behavior is modeled in terms of what state it is in initially, and what state it
transitions to when a particular event is received. You also model what actions an object performs while
in a certain state. States represent the conditions of objects at certain points in time. Events represent
incidents that cause objects to move from one state to another. Transition lines depict the movement
from one state to another. Each transition line is labeled with the event that causes the transition.
Actions occur when an object arrives in a state

Modeling Dynamic Behavior of Flight Object with State Diagram

OBJECT DIAGRAM FOR AIRLINE BOOKING SYSTEM

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Modeling Software Components

The component diagram is used to model the structure of the software, including dependencies among
software components, binary code components, and executable components.

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In the component diagram you model system components, sometimes grouped by package, and the
dependencies that exist between components (and packages of components).

Modeling Components with Component Diagram

DEPLOYMENT DIAGRAM FOR AIRLINE BOOKING SYSTEM

Modeling Distribution and Implementation

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Deployment diagrams are used to model the configuration of run-time processing elements and the
software components, processes, and objects that live on them. In the deployment diagram, you start
by modeling the physical nodes and the communication associations that exist between them. For each
node, you can indicate what component instances live or run on the node. You can also model the
objects that are contained within the component.

Deployment diagrams are used to model only components that exist as run-time entities; they are not
used to model compile-time only or link-time only components. You can also model components that
migrate from node to node or objects that migrate from component to component using a dependency
relationship with the becomes stereotype.

Modeling Distribution of System with Deployment Diagram

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 References:

1. Information System Management, NIIT

2. Internet

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 Conclusion

Although the project has been designed with great care and keeping all the points
in mind; still there may be certain points left away and can be added. So the
project allows various amendments in future. Suggestion and advices are always
welcomed.

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