Optimising Airline Pricing: the key to unlocking increased airline profitability
Rising fuel prices, fierce market competition, soft customer demand and a less positive global economic outlook are all combining to squeeze airline profitability making airline pricing all the more so important in the Age of NDC.
In this tough trading environment, optimising airline pricing to generate maximum revenue is more important than ever. In a keynote speech at the Arabian Travel Market in Dubai on May 1st, our CCO Harald Eisenaecher took centre stage and explained exactly how pricing intelligence solutions can bring profitability gains to airlines today, and also how big data and data-driven personalisation will be vital for the future success of airlines.
Infare on stage: Harald Eisenaecher, CCO at Infare, delivering a keynote speech at ATM 2019
As consumers, personalisation is all around us. The use of customer data to shift content offered to users according to their preferences is commonplace in the B2C eCommerce world. On-demand media platforms such as Netflix and Spotify personalise their offering by gathering data on user behaviour based on what they know about individual viewers or listeners. The result? Customers return again and again knowing that they will receive recommendations based on their own preferences.
When was the last time that you bought a product on Amazon? Was it priced competitively? Amazon is probably the world’s best-known example of sophisticated dynamic pricing intelligence in eCommerce. Amazon can change the prices of their products multiple times every single day and in real-time, based on live system pricing reaction to both competition and demand. Using customer data processed by their own algorithms, Amazon can beat the lowest competitor price at any given time.
Smart airline pricing strategies are all about the use of real-time data, historical route and airfare data and insights on current market-level pricing to determine optimal pricing for both airline tickets and ancillaries. Think about a typical customer search. If a large number of customers are searching for a particular flight, at a particular time and date, airlines can respond by raising ticket prices in line with demand. Conversely, if the pricing intelligence system detects that competitor airlines are offering the same ticket at a lower price, the airline can respond by reducing prices to stay competitive.
It sounds simple but there are challenges to face. The airline industry is competitive, complex and with a distribution landscape that requires effective strategies to be implemented across multiple sales channels; online direct, mobile, GDS, metasearch, OTAs, all travel intermediaries and now, NDC (New Distribution Capability).
The airline industry has definitively moved on from the original GDS distribution model which prevented successful personalisation through a lack of meaningful data and insights.
Data today can be captured, interpreted and applied by airlines in a similar way to market-leading retailers. Based on analysed historical data from the wider industry:
- Is a new route likely to be profitable?
- What are the customer’s true preferences at the time of purchase?
- What are they prepared to pay extra for?
- Premium Economy or Business?
- Specific flight timings, schedule and route preferences?
- And what about seasonal adjustments that factor in special events like sporting finals or popular vacation dates?
Put simply, with better customer and market pricing data airlines can design schedules, routes, tickets and overall offers including ancillaries, that customers really value and are prepared to pay for. That’s good news for revenues and profitability.
And with more customers buying directly from airline websites it’s never been easier for airlines to build customer relationships directly.
Here at Infare, we’re seeing how our customers are consuming exponentially more data every year. In fact, the world’s top 10 airlines have increased their data consumption by 50% per annum in just the past two years. Multiple sales channels, increased offer complexity with bundling and unbundling and richer data will increase this data demand and flow dramatically in the coming years.
Infare is prepared for this exciting future; working to support airlines in implementing and executing successful pricing strategies. We use 1400 data sources, along with Artificial Intelligence and Machine Learning, to extract and apply the valuable data that our airline customers need, – quickly and easily.
If you have missed the keynote by Harald Eisenaecher in Dubai but you are at the IATA Symposium in Athens on 25th June be sure to come and hear what Infare’s CEO, Nils Gelbjerg-Hansen, has to say on the topic, as he will be on stage. And of course, for more information and to discuss how you can increase profitability with smart pricing intelligence strategies please contact us here at Infare.