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The issues and challenges of a pricing system implementation

Research paper by Mike Mooney

Indexed on: 01 Jul '03Published on: 01 Jul '03Published in: Risk Management



Abstract

Midwest Airlines, as a medium-sized, specialty carrier operating in the midst of the highly competitive and dynamic US domestic market, must strive for both the cost efficiencies and the market competitiveness of the US majors and the new low-cost entrants. Pricing is one area where this dynamism is most noted, with huge numbers of fare and rule changes being implemented every day. Without significantly increasing staff, how can one ensure that the airline's fares are competitive in all markets? The potential for lost revenue is very large. Midwest Airlines decided that it was preferable to maintain a small, top-class pricing group but to leverage their effectiveness with advanced systems support, rather than increasing personnel, with the challenges of retaining efficiency and effectiveness that this brings. This paper describes the process, from both a business and a selection viewpoint, that was followed to implement the fare analysis control and tracking system–automated fares module (FACTS–AFM) product from SMG Technologies successfully into the Midwest Airlines pricing department. Although this process was completed nearly three years ago and applied specifically to the US market, the lessons learnt and the actions taken are just as relevant today and can also be applied to many of the international airlines still using largely manual processes.