Airlines have historically been cautious about adopting new technologies. So it's striking to hear any talk that carriers are buying new software during the pandemic-related revenue crisis.
Flyr Labs, which sells software to airlines to help them set their fares in revenue-boosting ways, has bought two smaller companies to expand its offering. The startup said on Wednesday it had acquired Faredirect, which collects and analyzes data to help airlines price ancillary products, such as seat upgrades and checked baggage, and xCheck, a marketing software firm for airlines.
The companies didn’t disclose the terms of the transactions but said the deals involved a mix of equity and cash. Flyr is a San Francisco-based startup backed by JetBlue Airways’ corporate venture arm JetBlue Technology Ventures. It has disclosed raising more than $30 million in funding from multiple investors to date.
“We set the pricing for many airline clients,” said founder and CEO Alex Mans. “But these deals will let us build out our services to cover ancillary revenue and airfare marketing technology. They’re part of us broadening our scope. We want to help with the decision-making processes in other parts of an airline organization.”
The pandemic has damaged the revenue-generating potential of airlines. Logically, that makes many executives cautious about investing in new technology projects. Yet Flyr claimed sales success despite that headwind.
“By the end of this year, the airlines using our systems will have the equivalent of $14 billion a year of passenger revenue,” said Matt Brown, Flyr’s vice president of growth. Brown called that a “revenue under management” figure, or the dollar volume of airline sales the startup’s systems “effectively have direct control of setting the price of.”
Flyr pivoted from a consumer offering to becoming a business-software provider three years ago. It said it’s continuing a bet on cloud-based applications for revenue management at a time when the pandemic has made pricing airfares more volatile. The company claimed that some airlines have this year seen revenue uplift in the 7 percent range after adopting its systems.
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Last December, Flyr said it was working with two low-cost carriers, three hybrid carriers, and two large network carriers. It has since added carriers, but it declined to disclose the names or descriptions of companies that use its systems. It did say at least one airline has completely cutover from a previous revenue management vendor.
“We’re in an expansion phase with several carriers,” Mans said. “Airlines usually split up the network into groups of analysts. We start with 10 or 20 percent of the network in terms of passengers flown and spread out like an oil spill until we get to 100 percent.”
The startup is also juicing its growth with aggressive sales techniques.
“We won’t charge you for the system until we have proven the revenue uplift or performance gain,” Mans said. “We will even go as far as subsidizing for the analysts and IT team resources needed to support the rollout. We make trying the system a financial no-brainer.”
Before the pandemic, Flyr had a harder time selling its products. Some airline executives offered theoretical pushbacks to its sales overtures. One concern was that the methodology of using deep learning was too new and that Flyr’s system was too much of a “black box” for airline pricing analysts to be comfortable trusting it.
“As devastating as Covid has been to the industry, it’s removed a lot of mental blocks airline executives had [about experimenting with outside tech players],” Mans said. “The sales cycle has sped up.”
If employee headcount is a sign of progress, Flyr is heading in the right direction. It began the year with about 65 people, today has about 130, and it plans to be at well over 220 employees by February.
Some of that growth will likely come from additional acquisitions, Mans said.
The latest deals may also help Flyr’s growth plans. One of its acquisition companies is xCheck, pronounced “cross-check,” which will let Flyr push its pricing recommendations to the airline’s Google ads or Facebook ads or email newsletters.
“This acquisition puts xCheck’s application right in the heart of revenue management,” said Tim Underwood, founder and CEO of xCheck. “Within a few months, we’ll have an integrated system letting airlines automate thousands of marketing decisions a day.”
Flyr is now looking at adding services for other airline commercial units that are unrelated to revenue management. It sees possibilities in automating tasks and common workflows for teams that work on flight crew management, cargo planning, and financial reporting and forecasting.
In a related push, the startup said it’s investing heavily in data-related services.
Each airline client provides the startup with access to all of its inventory, fares, search data, bookings, accounting, and so on. The company structures that data in a common format that is standardized for the startup’s purposes. One of the client airlines has recently asked if it could have its data back in the cleaned-up format. Offering that kind of product might be an additional service the startup could sell for other carriers interested in a similar data transformation.
“We definitely have a major interest in distribution as well, including NDC,” Mans said, referring to the new distribution capability (NDC) that’s been a popular topic for airlines for years.
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Photo credit: JetBlue's Mint Class Transatlantic service. JetBlue is an investor in, and customer of, Flyr, an airline tech startup. JetBlue