title: The ten biggest mistakes in Revenue Management
author: Oliver Ranson
contenttype: article
publication: Airline Revenue Economics
published: 2026-02-27T07:31:03+00:00
sourceurl: https://revman.substack.com/p/the-ten-biggest-mistakes-in-revenue
word_count: 1010
Everyone loves a top ten. Airline lounges, popular novels or your favourite hit singles all fit nicely into a chart. So here are the top ten biggest mistakes that an airline revenue manager can make. Do you agree? Please let me know! Cue At the Sign of the Swinging Cymbal by Brian Fahey and his Orchestra: ♫♫ Doo dee doo doo doo dee Dee doo doo dee ♫♫ Advertisement: At number ten we have not closing out classes Yesterday American Airlines had one seat in Business Class left for their flight from Dallas Fort Worth to London. The availability below was shown on expertflyer.com when I wrote this article on Monday morning, three days before. C1 J1 R1 D1 I1 means that they will accept any published fare for their Business Class cabin, even though there is only one seat left. If there is only one seat left, a flight must be in high demand. So availability should have closed out. The thinking in American’s RM department will be that anything is better than nothing. But I disagree for two reasons. First, leaving availability open until the last minute teaches the market that they can wait before booking travel. In the long term this will reduce aggregate demand and so revenue, as some passengers will eventually decide to change their plans and not travel at all. American should look to instil some market discipline, especially from a fortress hub like Dallas Fort Worth. My second objection to leaving availability wide open is that travel booked at the last minute is likely to be urgent and important. Business buyers especially may well be willing to pay more than the I class fare. American will be leaving revenue on the table. Number nine, permitting refunds on every fare Gulf Air offer a fare valid from Kuwait to Mumbai via Bahrain. The fare basis code is WCLIT3KW. The price is a bargain $65.26 plus taxes and charges, plus a $91.40 YQ carrier surcharge. The trip comes in at 4.4 cents a mile. The problem I have with this fare is that it can be cancelled and refunded for a fee of $95. The total trip comes in at $243.46. If cancelled, the passenger would get $148.46 back. There are three issues with permitting refunds on fares like this. The airline needs to support costly infrastructure to generate and audit refunds. The more refunds there are, the higher this cost will be. Permitting refunds on many fares increases Gulf Air’s cost base. By allowing low-level fares to be refunded, the airline is inviting passengers to make speculative bookings. This risks passengers cancelling at the last minute and people who wanted to fly Gulf Air going with other airlines instead, or not flying at all. And as with not closing out classes, permitting refunds on all fares tells the market that the airline is not concerned about discipline and high quality relationships with it’s agents. Everything is price-driven. Airlines like Gulf Air would be better off not making refunds available on fares like this. You might say that airlines like Gulf Air need to be generous in markets where they are at a strong competitive disadvantage. This might be the case in Doha, Dubai or Ab-Dab, but nobody is particularly strong in Kuwait where the national carrier’s brand perception weaker than other Gulf-based airlines are at their homes. At eight, using baggage as a sales tool When things go wrong and bags are lost, it is not Revenue Management who need to find the bags and have them couriered to a frustrated passenger. All the handling and processing costs of baggage are incurred by airports and an airline’s Ground Services department. Pricing (a part of Revenue Management) traditionally owns baggage because the allowance is quoted on a ticket alongside with the fare. Under IATA Resolution 302, airlines can file special baggage allowances and rates with each fare type. As a result, Revenue Management and Sales teams sometimes see free or cheap excess baggage as a sales tool to raise market share at little cost to themselves. This is a mistake. One of my jobs at Qatar Airways was to tidy up a convoluted, unofficial and undocumented set of free excess baggage allowances. This took me just over two years, from late 2007 to early 2010. Some passengers were being permitted 50kg free of charge, others only 20kg. The whole process was unfair. I am not convinced there was no corruption in the system. In some markets, for example the trader routes between Asia and Africa, the free allowances were well documented and well advertised. In other markets the situation was entirely opaque. And for seven, not increasing prices to match inflation Every few months I see well-run airlines increase their fares by a small amount. Increasing prices regularly to match inflation is important because if not done, a large amount of revenue can be left on the table. And the longer the increase is delayed, the larger it eventually needs to be and the harder it gets to implement in practice. Increase your fares to match inflation regularly. Number six, forgetting the business plan When an airline launches a new route or sets it’s budget for the coming year, the management spend large amounts of time and effort establishing their best guess of how exactly each market will perform. They aim to forecast seat factors and average fares to give total revenue. And then there is the cost side too, but we don’t need to worry about that. Yet time and time again in my career, I have seen airline teams forget the business plan as they get tied up in the minute. As we’re half way through the top ten, let’s have more of At the Sign of Swinging Cymbal… ♫♫ Doo dee doo doo doo dee Dee doo doo dee ♫♫ Five alive, focusing on transactional rather than lifetime value Head to any Loyalty conference and you will hear issues about Revenue Management not making the space available for award seats. Read more