An AI-powered revenue operating system for aviation and beyond: FLYR Labs Lands $150 Million in Series C Funding
Would you like to be in the aviation business right now? For most people, this would be one of the worst places they could be in. For FLYR Labs CEO and Founder Alex Mans, crisis equals opportunity.
FLYR Labs, makers of the data and AI-driven Revenue Operating System for airlines, travel, and transportation, today announced it has secured $150 million in Series C. ZDNet caught up with Mans to find out more about the investment and FLYR's product and growth.
Software as a Service for the aviation industry
"Growth" and "airlines" are hard to use in the same sentence these days. As a recent McKinsey report put it, it's difficult to overstate just how much COVID-19 has devastated airlines.
According to the report, in 2020, industry revenues totaled $328 billion, around 40 percent of the previous year's. In nominal terms, that's the same as in 2000. The sector is expected to be smaller for years to come; McKinsey projects traffic won't return to 2019 levels before 2024.
So how come FLYR, a company whose business revolves around serving airlines, is getting substantial funding to "accelerate growth to meet strong demand and expand its product and service offerings"?
Mans has a gifted child background. He founded his first company at the age of 14, started investing in startups at 19, and moved to Silicon Valley at 22. His idea was to work on the intersection of two industries that he is passionate about: aviation and AI.
He started off the observation that "airline prices were all over the place". His first attempt was to try to predict the price of airline tickets to actually arbitrage the airline:
"We were trying to recommend to travelers -- when do you buy? How do you save money? But we realized that the opportunity was much greater on the enterprise SaaS side".
There have always been only three companies in the world that provide forecasting and pricing technologies to airlines -- Sabre, Amadeus, and Pros -- and their triopoly resulted in a lack of innovation, Mans said.
Mans' thesis was that using data more effectively, and deploying deep learning, neural network-based AI for airlines, would result in better forecasting and pricing for tickets, therefore better results for airlines. Fast-forwarding to today, what FLYR does for its airline partners and customers is integrate all of their commercial data into a standardized model for a SaaS company:
"We integrate all the data. Then we use deep neural networks to forecast the revenues, forecast demand, and establish the revenue optimal pricing strategy that creates opportunities for travelers by being much more reactive to how we price, but also increases the revenue opportunity for the airline. And then lastly, we provide a user interface to bridge the gap between our automation and the analyst, and give them an ability to understand what's going on across their network".
Pragmatic deep learning
Airlines can use FLYR's solution to make better decisions, Mans went on to add, on things such as pricing, adding or removing capacity or flights and marketing budget. It either informs or automates all of these commercial decisions, which is why it's called a revenue operating system.
What COVID-19 has done for FLYR, Mans said, was to make it clear that airlines need better technology. However, deep learning is not all advantages. Some of its well-known disadvantages are poor predictive ability for black swan events such as COVID-19, and lack of explainability.
Therefore, we wondered how well FLYR was able to perform in the face of COVID-19, and whether airline executives were comfortable with decisions they had no visibility on.
COVID-19 has been a major disruption, Mans acknowledged. The network is different, the competition is different, demand profile and pricing expectations are different. Still, he went on to add, FLYR is able to do very well in this very challenging environment. It all depends on what your baseline is.
There are three ways by which you can show whether you're doing a good job, Mans said: compare forecasts to reality, observe pricing and compare automated decisions with those made by analysts, and do AB testing against legacy systems.
The aviation industry is going through turbulence. That is a drive to increase efficiency, and introduce data-driven, deep-learning powered automation.
FLYR offers to run a percentage of prospective airline client flights on a trial basis, in parallel with their legacy systems, no strings attached, Mans said. What happens then is that is that FLYR outperforms legacy solutions across key measures, and is subsequently onboarded for a fraction of the uplift, he went on to add.
As far as explainability goes, FLYR takes a similarly pragmatic approach. The bottomline, Mans said, is whether the system performs well, and most of the time, it does:
"You are correct -- a deep learning system can't pinpoint exactly what is driving it. But we give the airline tools to do that exploration, and we help them focus in the area where they should focus.
What's happened historically, is an analyst goes through the market, tries to find issues and make interventions based on subjective interpretation.
We actually let the system run 95% plus of all the pricing decisions where it is doing well compared to expectations. And then we escalate potential concerns to the analysts and focus their attention on that 5%".
Up, up and away?
Mans said FLYR is managing flights for some of the biggest airlines in the world and seeing exceptional growth, however at this time he could only share one client name publicly - Air New Zealand. FLYR is looking at managing about $14 billion in revenue on behalf of airlines by the end of the year, Mans said.
But then again, if things are so bright for FLYR, why the fundraiser? The company is doubling its headcount every 6 months to keep up with demand, so scaling up is essential, Mans said, while reserving high praise for FLYR's investors.
FLYR's Series C is led by WestCap, a growth equity firm founded by Laurence Tosi, former CFO of Airbnb and Blackstone, with participation from Silver Lake Waterman, and WndrCo, along with insiders Peter Thiel, Streamlined Ventures, JetBlue Technology Ventures, and Gopher Asset Management.
Furthermore, FLYR is investing very heavily in its product to serve the broader airline organization. Not just revenue management and pricing, but also planning, marketing, leadership, cargo planning etc.
Last but not least, FLYR wants to enter the merger and acquisition game. FLYR recently acquired Faredirect and xCheck, an AI-powered ancillary revenue optimization system and airfare tracking and marketing technology, respectively, to further address capabilities requested from its customer base.
Mans believes there's lots of opportunity to go faster and provide capability to airlines by acquiring and bolting on other companies. But that's not all there is to it. In addition to airlines asking FLYR to come to their rescue during COVID-19, Mans said, they also got a lot of inbound interests from other industry verticals such as transport, rental car, cruise lines, railway companies, freight companies and hospitality events.
Mans believes the challenges, the data and the problems are similar. Therefore, FLYR is looking to take its core technology and deploy it into those verticals, and eventually go public. There certainly is no lack of ambition there, and to fuel it, further funding rounds may be expected.
Coming full circle, we asked Mans his opinion on the industry's prospect post-COVID-19. It's not just the fact that COVID-19 has put the viability and necessity of business travel under question. Sustainability awareness and regulation are expected to be mounting pressure on aviation and the transport industry. To quote the International Civil Aviation Organization (ICAO):
How can we adapt and enhance today's already-stretched mobility system for it to respond to our expectations and increased demands? How can mobility be reinvigorated for it to be sustainable and support the 2030 Agenda of Sustainable Development and its 17 Sustainable Development Goals (SDGs)?
Like the ICAO, Mans is on the side of optimism, despite acknowledging the challenges. He sees the total addressable market in the tens of trillions of dollars, and expects FLYR to be able to continue on its growth trajectory.
Whether the industry overall gets to rebound and address challenges remains to be seen. On its part, however, FLYR seems to be helping increase efficiency, which should enable it to carve a path for itself.