Airlines are amongst the versatile speculators you can find around when it comes to demand and supply economics. Through very sophisticated programs the airlines are able to monitor the demand elasticity on a real time basis and be able to manipulate the prices to maximize revenues. This process is known as revenue or yield management in airline parlance. Like the stock exchange market arbitragers the airlines have trained personnel who with the help computer programs are versed in controlling demand and supply to optimize revenue for the airlines.
Basically airline yield management is premised on what is known as marginal pricing in financial theory. Let us take the following example to amplify on this notion. An aircraft like a Boeing 737-200 with 100 seats all in economy class is divided in say five booking classes (not to be confused with economy, business and first classes) on a route Dar-Es Salaam-Mwanza and vice versa or return, if you like.
These classes are given alphabetical symbols like M, N, R, S, and T. The revenue managers would, for example, allocate 10 seats in M class to be sold at Tshs 150,000, allocate the next 15 seats to be sold in N class at Tshs. 175,000, then 20 seats in R class to be sold at Tshs. 190,000, another 25 seats to be sold in S class at Tshs. 200,000 and the balance of 30 seats to be sold in T class at Tshs. 215,000 all being return air fares in Economy class on the very same aircraft! These are technically known as fare buckets. What is to be noted here is that the lower the fare the fewer the seats that are allocated in a particular class and the converse is true.
Once the booking classes and fares have been constructed the flight (DAR-Mwanza) is then programmed into the reservation system ordinarily one year before the actual flight but the exact timeframe could be longer depending on the airline. The flight is subsequently opened for sale whereupon customers may start making bookings and buy tickets thereof. Tickets are sold subject to seat availability in a particular class.
To benefit from the cheapest fare, for example, in M class at Tshs. 150,000 you need to book early because once the 10 seats allocated in M class are all sold out the system will automatically close that class and the next cheapest fare available is in N class at Tshs. 175,000 and so on and so forth. So the more we get closer to the flight departure date chances are that all the seats in the relatively lower classes (and fares) may have been snapped up and a late comer traveller will most likely end up getting a seat in the high class of T thus forking out Tshs. 215,000 for a ticket.
It is like a typical case of a big soccer match. If you purchase your ticket early at pre-determined sales outlets you will get a ticket at a relatively low price as fixed but if you wait and buy it at the stadium entry gate chances are you will most likely pay a higher entry fee.
Dear reader, do not be surprised that you may actually be seating on the same aircraft seat row, travelling to the same destination but the person seated next to you has paid far much less than you while both of you are literally enjoying the same on-board services! In fact it may also happen that you walk to the airline or travel agent with your colleague at work, seat on two different booking counters only to come out with two different set of airfares for the same journey. This often brings a lot of confusion and complaints against the airlines or travel agents but this happens because your colleague may chance the last seat in lower fare bucket (or class) while you end up with a higher fare bucket.
There are some rare occasions when a late comer customer may chance a ticket in a relatively lower fare bucket even when the flight is fully booked and ticketed. This happens when there are last minute cancellations and a seat may in this case be available for sale. However, it is very unlikely that last minute seat availability may be found in the bottom end of the booking classes such as M and N. This is because lower fares have strict conditions. Fares in M and N classes may be restricted to no change of travel date, heavy penalty for no-show and non-refundable whatsoever. The higher the fare the more flexible are the conditions and the converse applies.
Again do not be taken aback when it happens in a situation like an overbooked flight the priority is usually given to Very Important People (VIPs), frequent flyers and high fare paying passengers. So low airfares have their downside as well and that is why they are not recommended for corporate clients like Government and Parastatal travellers because of the risk involved. So when you get bumped off the flight or left behind before you cause a commotion at the check-in counter first think about money matters in terms of what you bargained for a seat. It is quite unfortunate that most airlines especially the local ones such as Air Tanzania and Precision Air (including some travel agents) do not disclose this vital information to their clients beforehand hence complains and recriminations we often see at the airports.
Having said this, it is important to underscore the fact that customers can greatly benefit from cheap airfares provided they follow the rules of the game. What is required is to plan your trip in advance, make a booking and immediately follow it up by purchasing the ticket because simply making a booking does not guarantee you a confirmed seat. A booking is just an intention to travel but not a monetary or business transaction as far as the airlines are concerned.
An airline will guarantee you a confirmed seat once it has been concluded with the actual sale. That is why the reservation system will give you a ticketing time limitation and if you do not purchase the ticket within that timeframe your booking will automatically be deleted to give priority to customers who are ready to transact.
Ladies and gentlemen, next time you want to take your families to a holiday trip make sure you plan, book and purchase your tickets early to benefit from cheap airfares.
Byase Luteke
Basically airline yield management is premised on what is known as marginal pricing in financial theory. Let us take the following example to amplify on this notion. An aircraft like a Boeing 737-200 with 100 seats all in economy class is divided in say five booking classes (not to be confused with economy, business and first classes) on a route Dar-Es Salaam-Mwanza and vice versa or return, if you like.
These classes are given alphabetical symbols like M, N, R, S, and T. The revenue managers would, for example, allocate 10 seats in M class to be sold at Tshs 150,000, allocate the next 15 seats to be sold in N class at Tshs. 175,000, then 20 seats in R class to be sold at Tshs. 190,000, another 25 seats to be sold in S class at Tshs. 200,000 and the balance of 30 seats to be sold in T class at Tshs. 215,000 all being return air fares in Economy class on the very same aircraft! These are technically known as fare buckets. What is to be noted here is that the lower the fare the fewer the seats that are allocated in a particular class and the converse is true.
Once the booking classes and fares have been constructed the flight (DAR-Mwanza) is then programmed into the reservation system ordinarily one year before the actual flight but the exact timeframe could be longer depending on the airline. The flight is subsequently opened for sale whereupon customers may start making bookings and buy tickets thereof. Tickets are sold subject to seat availability in a particular class.
To benefit from the cheapest fare, for example, in M class at Tshs. 150,000 you need to book early because once the 10 seats allocated in M class are all sold out the system will automatically close that class and the next cheapest fare available is in N class at Tshs. 175,000 and so on and so forth. So the more we get closer to the flight departure date chances are that all the seats in the relatively lower classes (and fares) may have been snapped up and a late comer traveller will most likely end up getting a seat in the high class of T thus forking out Tshs. 215,000 for a ticket.
It is like a typical case of a big soccer match. If you purchase your ticket early at pre-determined sales outlets you will get a ticket at a relatively low price as fixed but if you wait and buy it at the stadium entry gate chances are you will most likely pay a higher entry fee.
Dear reader, do not be surprised that you may actually be seating on the same aircraft seat row, travelling to the same destination but the person seated next to you has paid far much less than you while both of you are literally enjoying the same on-board services! In fact it may also happen that you walk to the airline or travel agent with your colleague at work, seat on two different booking counters only to come out with two different set of airfares for the same journey. This often brings a lot of confusion and complaints against the airlines or travel agents but this happens because your colleague may chance the last seat in lower fare bucket (or class) while you end up with a higher fare bucket.
There are some rare occasions when a late comer customer may chance a ticket in a relatively lower fare bucket even when the flight is fully booked and ticketed. This happens when there are last minute cancellations and a seat may in this case be available for sale. However, it is very unlikely that last minute seat availability may be found in the bottom end of the booking classes such as M and N. This is because lower fares have strict conditions. Fares in M and N classes may be restricted to no change of travel date, heavy penalty for no-show and non-refundable whatsoever. The higher the fare the more flexible are the conditions and the converse applies.
Again do not be taken aback when it happens in a situation like an overbooked flight the priority is usually given to Very Important People (VIPs), frequent flyers and high fare paying passengers. So low airfares have their downside as well and that is why they are not recommended for corporate clients like Government and Parastatal travellers because of the risk involved. So when you get bumped off the flight or left behind before you cause a commotion at the check-in counter first think about money matters in terms of what you bargained for a seat. It is quite unfortunate that most airlines especially the local ones such as Air Tanzania and Precision Air (including some travel agents) do not disclose this vital information to their clients beforehand hence complains and recriminations we often see at the airports.
Having said this, it is important to underscore the fact that customers can greatly benefit from cheap airfares provided they follow the rules of the game. What is required is to plan your trip in advance, make a booking and immediately follow it up by purchasing the ticket because simply making a booking does not guarantee you a confirmed seat. A booking is just an intention to travel but not a monetary or business transaction as far as the airlines are concerned.
An airline will guarantee you a confirmed seat once it has been concluded with the actual sale. That is why the reservation system will give you a ticketing time limitation and if you do not purchase the ticket within that timeframe your booking will automatically be deleted to give priority to customers who are ready to transact.
Ladies and gentlemen, next time you want to take your families to a holiday trip make sure you plan, book and purchase your tickets early to benefit from cheap airfares.
Byase Luteke
