Revenue Management: Plan Versus React
One of the greatest challenges for x was matching their advertising activities to their revenue management activities.
Wright explained :
There have been times in our history that the day the advertisement came out the fare advertised had already been sold out. While that’s not perfect, it’s much better than where we find ourselves often, and that is to always be reacting to this week’s unsold ticket numbers. We are reaching a scale now that to sell off any seat at a ridiculous fare just to fill it will not enhance our brand value in the long term. We need to start leveraging our brand a little more than our fares.
In November 2010, while profitable for the year and with 85 per cent of all remaining seats already sold, X was 50 million Malaysian ringgit or US$15 million short of its projected revenue for the year. Wright met with his revenue management team to devise a strategy to meet the yearend target. Meeting the target was extremely important to Osman-Rani as well; he wanted to confidently stand in front of the board of directors and demonstrate the airline was ready for an IOP. “Without proving we can meet our budgets, it will become difficult to convince investors we know what we are doing and that we are a promising investment,” explained Wright. X met their 2010 budgeted revenues.
From its inception, all major items acquired by the company were expensed. At the time of the operational split from AirAsia in august, 2010, Osman-Rani recruited a new CFO and gave her authority to overhaul anything and everything to get set for the future IPO. One of the first initiatives she undertook was to establish an inventory system that utilized amortization and depreciation in order to improve financial ratios. At the same time, Osman-Rani decided that quality control of in-flight meals and merchandise could best be managed by taking the procurement duties away from AirAsia and external suppliers. He created an in-house position dedicated to quality management. From a technology perspective , X began to investigate a new handheld inventory tracking system to be used in flight by cabin crews. The new tool would allow X to be more like a retailer and digitally track inventories and wastage real time. They could also find merchandise more easily across different carts on one aircraft. This system helped to stock up on merchandise at the airport more quickly and effectively.