Investing in Data for an Accurate Price Quote

Investing is the art of capturing raw data and transforming that data with analytics.  This is the fundamental cornerstone for running a profitable charter business.  Why is data important? Ultimately the most important derived attribute from raw data is the price quote for a charter flight based on the parameters and preferences of the mission. Pricing is an immensely powerful tool. It encapsulates a charter operator’s mission and values, shapes customer beliefs, and drives customer emotion and perception of the product. Customers must receive value for the charter’s product commensurate with the customer experience.

Let’s review some of the data elements required for creating a price quote.

• Cost data is important to ensure that a charter flight can be priced profitably. The primary categories of costs that should be maintained are Aircraft Hull, Fuel, Maintenance, Cabin Crew, and Administrative. Aircraft Hull costs are unique to a tail number, while the remaining costs are the same across tail numbers for the same make and model. Administrative costs and Aircraft Hull costs are fixed, while the other three cost components exhibit some degree of variability. 
• Charter and Go’s Activity-Based (ABC) costing can capture this variability. ABC provides a more accurate picture of the total cost of operating a charter flight, thereby leading to more accurate pricing decisions. ABC is also a great tool to help charter operators understand and evaluate aircraft performance. Transparency into costs with activity-based costing provides a clear picture of the cost drivers of the charter operation and highlights nonessential costs that can be reduced or eliminated over time. Further, with the improved accuracy in the cost estimate, it ensures that every booking is a profitable booking.

There are different types of market data that can be leveraged to run the charter operations.

• Flight tracking systems track historical flight times. If an aircraft has an ADS-B transponder it can be tracked over most land and oceanic areas. If an aircraft is not equipped with an ADS-B transponder and if the flight is based on Instrument Flight Rules (IFR) or Visual Flight Rules (VFR), the flight can be tracked by radar if there is coverage. Historical flight times by aircraft make and model can be used to fine tune the estimated time required to fly from an origin to a destination. This has an impact on the cost of fuel for the mission and ultimately the price quote for the charter flight. Estimating the flying time accurately ensures that the charter operator can be confident when they present the price quote to a customer or a broker.
• Flight tracking data visualization is an important feature of any charter operation. When an aircraft has departed, the progress of the flight to its destination is required for charter operations staff to ensure the crew and passengers have arrived safely to their destination. Charter operators can also advise the pilot en route if the weather is turbulent and a change of course is required.
• Seasonal demand patterns by destination, are important to price a charter flight competitively. Low demand seasons and high demand seasons can be calibrated by destination using aggregated charter flight data. This calibration must be kept current for the immediate trailing twelve months.

Special events and holidays should be maintained on a forward looking 12-month calendar to calibrate demand patterns. There are various third-party products that provide information on special events and holidays for future years which should be integrated into the charter operator’s calendar. This is an important input to make any upward or downward adjustment to arrive at the final price of the charter flight.

Ben Vinod – Co-Founder and Chief Operating Officer