Typically Cargo is an afterthought in most passenger airlines in terms of schedules, equipment, and profitability. Finding the value of cargo given a passenger schedule is a very cumbersome and laborious exercise for the cargo revenue management and network planning teams. In most airlines, the process kicks off with the passenger network team that passes out a medium-term schedule (2 – 3 years) and short-term schedule (up to 1 year) based on passenger demand on an origin-destination basis. The cargo team is expected to react and contribute in terms of anticipated cargo demand, changes in schedule favorable to cargo, and equipment type that is cargo friendly. This exercise is also time sensitive and hence the cargo team is generally scrambling to add some weighted input that can be backed by data to these schedules. This is an iterative exercise in negotiations between the two teams which can place the whole cargo team on a marching order for weeks.
Once the schedule is finalized, the next complexity that arises for most cargo organizations is to finalize revenue targets and sales targets and keep tracking them every week. Major airlines spend anywhere between 1 week per month tracking the cargo revenue and sales targets on an annual basis and this is on top of spending 6 weeks on network planning activities that is cargo friendly.
Our Recent First-Hand Account
In 2018, a major North American carrier reached out to RTS to add intelligence and automation to this process where the analyst can click a button and get the ball rolling. RTS cargo team sat down with its R&D team, operations research analysts, and ML/AI practitioners to come up with a solution that is flexible, scalable, and trustworthy.
We divided the problem into 3 major chunks including:
- How do we come up with the value for cargo given a schedule and how do we make it iterative and save all the different scenarios
- Intuitive approach to setting revenue targets that has built-in AI/ML algorithms.
- Assist in setting sales targets and track them periodically so that the cargo network planning team can update their executives on how close or far off are they from their targets.
As part of our DNA, RTS always takes a partnership approach in developing its solutions. As they say, it takes two to tango and our North American customer went all in with us taking a partnership approach.
Firstly, we wanted to solve the biggest puzzle in this area:- determining the value of the cargo schedule. Our team was able to develop algorithms using an innovative approach to coming up with an output that can also save different input scenarios and output scenarios.
Secondly, we evaluated 3 different approaches to assist in setting the revenue targets using inputs from the sales team, inputs from the executive team and the algorithms themselves. This gave our customers a lot of flexibility and confidence in playing with the numbers that eventually will reach the highest levels within an airline.
Finally, we had to solve and mathematically come up with a method to convert revenue targets into sales targets. This also included an easy way to track and report the progress of these targets as well.
It was a huge accomplishment to reach the finish line, but the solution had its initial struggles as we crossed the milestone. For the next twelve months, we tinkered with the algorithms to ensure the process time is reasonable as we are talking about a huge mathematical problem. We also added a lot of bells and whistles that we learned from working with our customers and pandemic-related air cargo challenges that have added significant value to our solution. We were also able to incorporate freighters in the mix and how the solution can help airlines that have freighters along with belly space.
We aptly named our solution as Foresight, and there we had the air cargo industry’s first revenue planning and sales budgeting solution after a long 12 months. With the help of the partnership of this customer, the Foresight customer community has grown over the last 4 years.
There is a famous saying that states ‘Happy wife, happy life’ and here we have a happy customer and a happy RTS.