#07 – Responding to a Demand Downturn

Normally, a demand downturn means reducing capacity — but how do you respond when that downturn occurs during a period of massive operational disruption? The airline industry may offer some clues. Host Judson Rollins looks at how airlines sell capacity in uncertain times, and how to optimize service schedules and pricing in response to disruptions — in both your own and your competitors’ schedules. What you will learn in this episode:

  • Why airline commercial practices are relevant to cargo and freight carriers
  • How to sell capacity you might not be able to operate
  • Balancing risk vs. reward in selling capacity late in the booking cycle
  • Why “selling out means selling short”
  • Pros & cons of canceling service close to the departure date
  • How to price for your service advantages

Money Quotes “Canceling scheduled trips later leaves you with unhappy customers who question your reliability, which in turn reduces how much they’ll be willing to pay you for future shipments. You’re better off letting your competitors sell capacity they can’t operate. Wait for their displaced customers to come back to you at the last minute, when their cargo is left on the dock and they’re willing to pay you a premium to deliver it on time.” “If you sell all your available capacity far in advance, you’re probably missing opportunities to grab urgent business close to the departure date. You only have a limited amount of capacity to sell; once it’s gone, it’s gone!”  “Short-term cancellations are a *very* blunt instrument for managing capacity. Not only are they hard on your relationships with key contract shippers, they also might not be your most profitable strategy.”