The unbundled fare is the airlines' new best friend, enabling them to boost revenues through fees for checked bags, seat assignments and other items that used to be included in the fare. And while the airlines know that the fees can be a lifeline -- the industry collected $669.6 million in baggage fees in the second quarter, according to the Bureau of Transportation Statistics -- they have difficulty pinpointing which flights are ancillary revenue generators.
The "limiting factor," according to Chris Vukelich, senior vice president of business development for Radixx International, is that most passenger service systems "are inventory management systems at their core." Ancillary revenue is handled by other airline databases, he said, and the twain does not meet on its own That can skew a carrier's view of route profitability, Ron Peri, Radixx president and chief executive officer, said.
"An airline was collecting bag fees at airports and miscellaneous charges orders, and they never accounted for it other than throwing it all into a big bucket," he said. "They started looking at it more closely and realized that there were routes where passengers didn't check bags very often and others where they did," Peri said. "They'd been planning on exiting one particular route, but they realized that if they added in the checked-bag revenue, it was profitable."
Vukelich, who several years ago served as general manager of global distribution at British Airways and more recently as vice president of distribution and e-commerce at OpenSkies Airlines (a Radixx customer), added, "At BA, we always had a dream of knowing how much revenue we had on board when we closed the door." But "you had to go back into revenue accounting" to glean that knowledge, he said.
"The corner grocery knows what products are making money, but an airline doesn't," he said. That is one of the key differentiators of Radixx International's passenger management system, Vukelich said. The system was designed to provide a complete revenue picture of each flight even as it taxis out. Another difference, Peri said, is Radixx's ability to adapt to changing needs.
He noted that several low-cost carriers have evolved from the direct-distribution model to a more "hybrid" state, particularly as they broaden their reach in the business travel market. That has led several carriers to switch from passenger service systems that don't work and play well with GDSs.
"Radixx handles low-cost carriers, but it has the built-in capability to distribute through the GDSs," Peri said.
Traditional low-cost carriers are ticketless (not to be confused with carriers whose tickets are electronic). Radixx allows OpenSkies to have both ticketless direct sales and ticketed sales by travel agencies.
It also has addressed payment issues for areas of the world that lack settlement plans, credit cards or both. The large population of guest workers in Dubai, for example, can reserve a flight on FlyDubai Airlines' Web site or through a call center and pay in cash within 24 hours at a collection points.
"You can't do that off a traditional system," Peri said.