Interview with Roberto Ioriatti, director pricing and revenue management, International and Intercontinental, Alitalia

A flight is a commodity, says Alitalia's Roberto Ioriatti.

"Customers are more and more late booking, especially on European routes where there are low cost carriers, they are no more eager to pay high fares. They are always waiting the last moment for a "last-minute-offer". A flight is a commodity," says Ioriatti.
   
Ioriatti shared information about operations of his company in Europe and his viewpoint on trends related to revenue management with EyeforTravel.com's Ritesh Gupta in an interview. Excerpts:
   
What major initiatives has Alitalia taken this year for sustaining consistency in revenue management across all your distribution channels?
   
Alitalia completely reorganised its internal processes trying to focusing on the part where it lacks consistency. We reviewed all our pricing structures adapting them to the new market scenario, simplifying them, giving more flexibility to rules in terms of min and max stay, especially on those routes where there are low cost carriers.
   
We reduced buy-up levels and applied tailor-made pricing structure according to the O&D and the market scenario. At the same time we reviewed all our yield management settings, focusing on high yield markets, matching competitors' availability with some new tools. Together with the redesign of our network, we priced around 40,000 O&Ds for 6th freedom traffic, positioning AZ among the first carriers in the fare display with the most competitive pricing and with branded fares in the European market.
   
In 2005 we organised two important campaigns from our home market where we launched a promotional fare from Italy to all AZ destinations; in one of these we differentiate the availability for direct and indirect channels by applying 2 different booking codes.
             
How do you assess the emergence on online distribution channels including supplier website. Online travel agencies and meta-search engines? How has this affected this your planning over the years?
   
We try to take advantage of these new players by using them for pushing sales in low season and on low C/F flights.
             
Is there uniformity in rates offered across various channels? How do you handle rate parity or disparity across various channels? 
   
For the time being our policy is to guarantee a certain uniformity in terms of levels and rules on all the different distribution channels. We do not differentiate levels/rules according to channels, especially on our home market where the percentage of indirect sales is still high. During this year we experienced a promo where we differentiated the availability according to the channels by applying different booking codes but same levels.
   
How do you think revenue management has evolved with various distribution channels?
   
The strategy of Alitalia this year focuses on distributing fares through Cat.25/35 a very dynamic tool which gives the possibility to file fares tailor-made for the Corporate/Tour Operators based on a % of discount on published structure.
   
As for Yield management the evolution is in distressed inventory, the possibility to focus on low C/F flights by pushing it through specific channels.
   
What do you think are the major challenges from operations perspective? How do you think working on various markets or continents is throwing up new challenges?
Punctuality and Reliability.
   
How do you assess current scientific methods available today for establishing a superior pricing strategy?
   
The future of the pricing structures in Europe is the deregulation, especially on those markets where the competition is high, so it is really important to have yield management systems capable of managing deregulated pricing. Furthermore, it is important also to find a way to calculate the elasticity of the demand.
   
What tools can enable you to benchmark your prices against those of your competitors?
   
Alitalia uses a Sabre system called AirPrice through which we daily checked the most relevant O&Ds in terms of revenue and we consequently acknowledge the pricing changes made by our competitors.
   
What factors do you think are critical, for an organisation like Alitalia, in today's environment to optimise revenue management?
   
Competences and systems.
How is customer behaviour affected by changes in price and pricing strategy? And how can this information be used by RM departments to increase profits?
   
Customers are more and more late booking, especially on European routes where there are low cost carriers, they are no more eager to pay high fares. They are always waiting the last moment for a "last-minute-offer". A flight is a commodity.
   
What are plans going forward? What's going to be on your agenda?
   
Improvement/upadate of RM systems.