More Notice = More Money

November 27, 2018 | Author: Volantio Inc.

As discussed in our previous newsletter, Volantio passed a significant milestone this quarter with the full automation of our platform, leading to a ~10x increase in product usage while eliminating manual work required by airline staff.

This increase in platform throughput (we’ve now contacted more than 1.5 million passengers), combined with significant improvements in how Volantio tracks value creation (we’re able to track the revenue uplift down to a flight-by-flight basis), means that we can start to better understand the factors that drive the profitability of the platform.

A few months ago, we noted that acceptance rates increase the further from departure that passengers are notified. This makes intuitive sense - the more notice you give someone, the more likely they are to accept an offer.

Our models are now showing that beyond simple acceptance rates, the profitability of offers also increases the further from departure you contact passengers. Profitability (at a high level) is calculated based on the following equation:

[Resell success rate] * [Average Resell Amount] - [Average Compensation] = Profit

It makes intuitive sense that profitability would also be higher the further from departure you contact passengers, as increased notice allows for more opportunities to resell the seat. Additionally, passengers tend to be more flexible (and thus require less compensation) the more notice you give them.

We’ve displayed this relationship below, using a Violin Plot. Unlike traditional plots such as the box-and-whisker plot, the Violin Plot creates a more accurate display of information, especially for a non-parametric data distribution, by showing the full probability distribution of the data in each category. The thickness of the plot represents the probability of the value occurring, where thicker areas are more likely to occur.

The plot below shows that in cases where passengers are contacted further out from departure (which we define as about one week or more), there is a much higher probability of more profitable outcomes. This is evidenced by the “second bulge” in the graph (above the “base bulge” which is slightly above 0).

Violin-Plots-2-02-02

While it is still early to draw definitive conclusions, as Volantio’s platform continues to grow, our profitability algorithms will also continue to improve, enabling airlines to drive increasingly profitable performance while also providing an amazing customer experience. Stay tuned as we explore these topics further in the months to come.