How Airlines Should Decode the New Reality of Airline Pricing?

How Airlines Should Decode the New Reality of Airline Pricing?

COVID-19 is altering our daily lives as countries, citizens, and companies all struggle to contain the virus and its impact on the global economy. According to

COVID-19 is altering our daily lives as countries, citizens, and companies all struggle to contain the virus and its impact on the global economy. According to a report by the International Air Transport Association (IATA), it is estimated that the airline industry stands to lose close to $110 Billion because of the COVID-19 pandemic. As airlines recover slowly from this demand shock, the inevitable question of changing offerings to increase revenue would continue to haunt them.

As we look to help airlines stop revenue leakage, the airline industry is incomplete without OTAs. And, going back to history as we begin, every society has had one outsider to guard against, every society has thrived on the concept of "Us v/s Them"!

The internet, of course, has changed everything, including travel. Global distribution systems were spun off from their airline owners, thus opening a new wave of competition, and new ways to book online appeared, creating an entirely new category known to be online travel agencies.

The OTAs introduce different ways of booking and comparing prices all of a sudden, which open opportunities for consumers to evaluate different options. The competition between OTAs increased with time. As OTAs competed for customers, they sought ways to differentiate themselves. "Personalization" became a trend, as consumers began to experience the freedom of tailoring a la carte packages and paying only for what they wanted.

But in the airline industry, the OTAs have been given much of the blame when it comes to the concept of disparity. The gradual transition of travelers from being fully managed to fully independent has led to many more opportunities for price disparity across the chain.

With so many digital points influencing the consumer's purchase decisions, this era is also marked by the rise of revenue management tools and remarketing, thus creating many entry points for airline rate parity. The traveler era has given consumers access to more content, channels, and choice, accessible everywhere and on any device. There's no shortage of ways to search and book travel.

Each one of the above inputs influences how airfare is priced. With so many variables influencing airfare, there are ample points of failure. This complexity not only makes the user experience challenging, but it also has downstream impacts on how airlines market, merchandise, and sell their products.

With that in mind, here are the trend lines in the 2020s, plotted by the estimated time of arrival and peak impact:

New Distribution Capability will permanently change how airlines merchandise their wares across channels. No longer limited by static content, airlines can build dynamic packages, personalize ancillary offers, and create fare bundles, which can then be distributed across all channels in the same format.

However, this will create a plethora of options. As each airline's fare classes include specific amenities, it will be complicated to get to a true comparison. The disparity arises when consumers can't always directly compare similar products. And it will be equally difficult for airlines to track their compset and identify potential revenue-losing disparity.

By the end of 2020, Comscore, an American media measurement and analytics company, predicts that half of all online searches will originate by voice in 2020. And there are already 3.25 billion voice assistants in use, rising to over 8 billion by 2023. With so many voice software enabling personalized 1:1 commerce, voice assistants will accelerate disparity.

These platforms will leverage the immense amount of information at hand to tailor recommendations. Additionally, voice will develop into a paid channel as well, adding another facet to the voice-driven disparity. With that, consumers will never be quite sure which offer is the best; it will be hazy and further complicate the accurate comparisons that parity requires.

By 2026, Al-driven personalization will be the top driver of disparity. Advanced Al will rapidly analyze ever-larger troves of data to enable 1:1 fare personalization. This could be a boom to complete revenue management, but will also make maintaining parity more and more difficult as the decade progresses due to the sheer volume of fares (multiplied across channels).

For airlines to achieve the scale that personalization requires, they must fundamentally restructure and rethink the way that data is found, stored, and analyzed, as well as the way fares are distributed onwards to specific channels. Maintaining parity will be more challenging than ever, and airlines will need to build a new infrastructure to manage this level of personalization.

The rise of "flight shame" is an early clue of consumer pushback against the carbon footprint of aviation. Airlines should begin planning for a more sustainable future, as by 2029, consumers will expect it. Rising climate awareness will lead to the mainstreaming of carbon labelling in search results.

Travelers will be able to directly compare the carbon emissions of flight options, thus potentially preferring airlines with stronger sustainability practices. Emissions will become a core consideration, alongside the price. This additional search parameter may affect disparity by adding another layer of complexity in order to compare one fare to the other.

Preparing for personalized commerce and fighting disparity requires collaboration between marketing, revenue, tech, and distribution teams, to handle airline revenue management and share data to support an effective airline pricing strategy.

A simple three-point plan must be followed:

  • Build awareness and ownership among key stakeholders
  • Invest in technology that can handle data processing, extraction and analysis
  • Visibly benchmark performance to rally all teams around progress

The travel technology company with the help of different solutions will help airline companies seamlessly and automatically surface parity issues with instant alerts so that the tech, marketing, revenue, and distribution teams can focus on what's required

Lastly, remember, the disparity is here to stay, exacerbated by the growth of voice search, channel proliferation and the Al-fueled explosion of price and offer personalisation. The airlines that thrive in the decade ahead will fully leverage the power of technology to optimise revenues and maintain peak competitiveness.

It's less of a matter of if one should do it and more a matter of when. By starting sooner rather than later, the airline can maintain its competitive footing into the 2020s and beyond.