Leading Edge R&D:

HOW DOES THE CUSTOMER REACT TO PRICE CHANGES?

Lufthansa Systems is currently developing a tailor-made Pricing Simulation Model (PSM) for the tour operator John Mason Cook, a leading European provider of package tours. The system forecasts the influence of price changes on customer behavior, i.e. on demand, on yields and on market shares. Such forecasts are becoming more and more important the less loyal customers feel to a certain brand.

At the heart of the system is a price elasticity model that portrays customer behavior as a function of different factors of influence like price, airline or time spent at the destination. The model combines all relevant key factors of the price finding process. It thus makes possible an optimum determination of tariffs taking also competitors into consideration. In a sophisticated calibration process historical data are analyzed and the characteristic figures and parameters necessary for a prognosis are identified. Major data sources are the computer reservation systems (MIDT) and Revenue Accounting systems (Actual Flown data).

The Pricing Simulation Model has already had its successful "Proof of Concept" at Lufthansa, i.e. the concept has been verified and the results evaluated. With the British tour operator Lufthansa Systems has gained an extremely important reference client in the travel industry. After the introduction of the prototype of the system at John Mason Cook in the fall of this year Lufthansa Systems will have become one of the leading providers in the area of price simulation and its integration into a Revenue Management System.

With its 17 subsidiaries the Lufthansa Systems Group is among the leading international information technology companies in the airline and aviation markets. Based on its process know-how in the aviation industry the group develops and operates flexible and innovative IT solutions that are increasingly adopted by other industries. The Lufthansa Systems Group employs 4,200 staff worldwide. Together the companies of the group generated a turnover of 600 million Euro in 2000. For further information please go to: www.LHsystems.com.

Contact Anette Ladage of Lufthansa Systems Airline Services, +49-0-69-696-89463, anette.ladage@LHSystems.com.