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What Radio Can Learn from the Airline Industry

June 25, 2015

As long as I have been in radio, I have heard the comparison of radio inventory with airline seats. Just like empty seats on a plane that has taken off, the value of a radio spot that goes unsold is zero. There is no way to regain that inventory once the plane has taken off or the stop set has run.

Let’s take the opportunity to learn from the airline industry. How are they adjusting their sales strategy?

A great deal has been made about programmatic selling. There are numerous elements of programmatic selling. Many airlines have adapted to one of these elements. They load the flight information and rates onto third-party web sites. Then, the traveler can theoretically go to one place (ex. Expedia or Travelocity) and make a buying decision without further input from any of the airlines.

Many consumers have felt that this made the buying decision easier, and that they could get the most for their money. However, that is only part of the story. What about the airlines? How do they feel about this? If they participate, it’s a race to the bottom. If they don’t participate, they could lose out on travelers.

Southwest does not participate in this segment of e-commerce. They do not appear on any third-party websites. The only place you can price or buy a Southwest ticket is directly through them. Even though customers only have this one option, Southwest’s planes are full, and over the past few years they have led the industry in profitability.

A recent Washington Post article, “Why airlines are making it harder for us to buy a cheap ticket,” reports that other airlines are following Southwest’s example and abandoning third-party outlets in order to make consumers come directly to them to buy a ticket.

There is no question about it; there is a definite risk for airlines to limit their ticket availability, and not allowing various websites to act as their digital broker. However, some are saying that the reward of rate control is worth it.

I’m not 100% opposed to programmatic transactions, but broadcasters need to have the control to sell their valuable inventory at a reasonable rate. No supplier truly wins in a “negative auction” environment.

For more on programmatic selling, see my blog from last week.

-Charlie Sislen, Partner