Ai Editorial: Where do airlines stand today with continuous pricing?

First Published on 25th October, 2018

Ai Editorial: The plan is to lay a solid foundation for continuous pricing as part of the dynamic offer creation process. Offers are going to be relevant for the one who is looking for it, targeting their spending and would feature trip essentials including non-air ancillaries, writes Ai’s Ritesh Gupta

 

All aspects of pricing are being evaluated closely as carriers gear up for offer optimization. Being in control of the offer to the extent that it matches one’s willingness to pay and offers them trip essentials including non-air ancillaries is what is being targeted.

And for this, overcoming the limitation of static rule-based methods and real-time calculation of offers is must. Be it for the way fares are managed, retailing methodologies, acting on data and even what would it take to excel in the arena of ancillary offering pricing is being looked at to optimize pricing as part of offer optimization. All of this would eventually prepare airlines to target the passenger as per their willingness to pay.

Real-time decision-making

Airlines and technology companies have been working on ways to optimize pricing, without being stalled by the limitations posed by filed fares or booking class restrictions. The industry is trying to do away with limitations in terms of the number of price points offered and how to modify the same. Making offers by relying on pre-determined static price points to limited allocations of inventory is outdated. Companies like Farelogix assert that airlines should look for options where they can mark up or discount a starting price – whether that’s an ATPCO-filed fare, market fare, or bid price from an RM system. There is a need to apply pricing logic earlier in the process and without the limitations of booking classes.  

Systems are now emerging to respond in real-time. For instance, one way is to go for real-time fare adjustment to an existing price point by using a dynamic pricing engine.  

“The future is continuous pricing,” says Zachary Wynne, Lead Consultant, ATPCO.

In this model, the airline does not pre-define price points, prices are worked out in real-time based on particulars of a request and guided by data science.

Where does the industry stand today with continuous pricing? “We are getting there. We have the data elements in place,” mentioned Wynne, who also added that ATPCO has been engaging in industry discussions (running a working group for two years or so to set standards and work on system interoperability), featuring GDSs, RM system providers, airlines etc. for taking the same forward. The focus also has been on implementing dynamic pricing alongside existing processes like interlining.

Eventually the plan is to lay a solid foundation for continuous pricing as part of the dynamic offer creation process. Offers are going to be relevant for the one who is looking for it, targeting their spending and featuring trip essentials including non-air ancillaries.

Datalex highlight that airlines need the ability to dynamically work out several bundles, promotions and offers from a single fare; to apply much greater levels of customer segmentation, yet limit the fare management costs. As for NDC, it states this standard along with more scalable technologies means that airlines “will soon be able to leverage an unlimited number of price points that are set in real-time based on data-driven strategies”.

Some of the areas that are being explored at this juncture:

·          How continuous pricing and dynamic offer generation would impact forecasting?

·          How behavioral economics and AI algorithms are shaping up new commerce platforms?

·          How to manage requests from multiple channels as the static processes of schedule, fare and availability would be done away with?

·          How are efforts coming along to count on customer data and segmentation to work out desired offers?

·          Are airlines “organizationally ready” for modern commerce?·           

 

Hear from experts about NDC and retailing at the upcoming Mega Event Worldwide (Ancillary, Loyalty & Co-Brand Conferences) to be held in Long Beach, California (31st October – 2nd November, 2018).

Follow Ai on Twitter: @Ai_Connects_Us

 

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