Premium Economy Introduction
Company Size
1,000+
Product
- APT Test & Learn® software
Tech Stack
- In-market business experimentation
- Test vs. control analysis
Implementation Scale
- Pilot projects
Impact Metrics
- Customer Satisfaction
- Revenue Growth
Technology Category
- Analytics & Modeling - Predictive Analytics
- Analytics & Modeling - Real Time Analytics
Applicable Industries
- Aerospace
- Transportation
Applicable Functions
- Business Operation
- Sales & Marketing
Services
- Data Science Services
- Software Design & Engineering Services
About The Customer
The customer is a leading international airline that operates a vast network of flights across the globe. The airline is known for its commitment to providing high-quality service and innovative offerings to its passengers. With a diverse fleet and a wide range of cabin classes, the airline caters to both cost-conscious travelers and those seeking premium experiences. The airline continuously seeks to enhance its service offerings and optimize its revenue streams through strategic investments and data-driven decision-making. By introducing new seat classes like Premium Economy, the airline aims to bridge the gap between Economy and Business Class, offering an attractive option for travelers who desire more comfort without the higher cost of Business Class. The airline's focus on customer satisfaction and revenue growth drives its efforts to experiment with new products and services, ensuring that it remains competitive in the dynamic aviation industry.
The Challenge
A leading international airline introduced a new seat class, Premium Economy, for a subset of its flights, hoping to bridge the gap between Economy and Business Class cabins for cost-conscious travelers and generate incremental revenue. The airline sought to answer two key questions: Would significant trade-down from Business Class occur? Would the investment in Premium Economy pay back across our flight network? However, the airline faced several challenges to reaching actionable insights. Given the inherent noise in its daily revenue data, the airline found it difficult to isolate the impact of this single change. The company also struggled to eliminate the bias that existed in the group of flights that received the new seat class – flights where Premium Economy had been introduced generated lower than average revenue and carried a higher than average percentage of business passengers. In addition, analysis was not straightforward because of the multitude of entities involved – flights, aircraft, customers, etc. Further, the airline was unsure of how to incorporate operational complications (e.g., last-minute aircraft changes) into analysis. These challenges made it difficult to understand performance of the Premium Economy introduction and if future investment was justified.
The Solution
Using APT’s Test & Learn® software, the airline analyzed an in-market business experiment to measure the revenue impact of the Premium Economy introduction. The software compared “test flights” in which Premium Economy was added to highly similar “control flights” that did not have a Premium Economy class, in order to isolate the incremental impact of the new seat class. APT’s rigorous test vs. control analysis showed that overall the new seat class did not have a significant impact on total passenger revenue. The introduction of Premium Economy drove a revenue decline in Economy, Business Class, and First Class. While some passengers traded up from Economy, other passengers traded down from Business and First Class, resulting in flat overall program impact. The software also enabled results to be broken out by different customer characteristics to provide a better understanding of how Premium Economy effectiveness varied. This deeper dive revealed that flights with a high percentage of passengers that traveled frequently drove the greatest impact on revenue. The software then automatically analyzed hundreds of flight attributes to identify characteristics associated with a higher revenue lift from the new seat class. Specifically, the software revealed that the Premium Economy introduction drove a greater impact for flights that carried a high percentage of business travelers, had lower previous passenger satisfaction scores, and were longer-haul.
Operational Impact
Quantitative Benefit
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