How airlines can gain a competitive edge through pricing strate

  • Airlines have been early followers of revenue-management (RM) technologies since the 1970s. They were among the first to use dynamic inventory pricing and some of the forecasting and inventory-management models. These models and other revenue management tactics successfully managed to attract customers and enhance their lifetime value, which generated significant additional revenue and contributed significantly to the success of the airline industry.


    Until recently, airlines had mainly focused on how to price the base fare of the tickets. However, this ignored a significant change- it was noted that a major percentage of revenue came from ancillary items such as extra leg space, premium seats, cabins, checked baggage, onboard food, among others.


    Considering the importance of ancillary sales, airlines of today cannot continue to only tweak their revenue management strategies and models at the surface level and expect it to turn out well. Instead, airlines must optimize total revenue by keeping in mind all the points that have an effect on the overall experience of the passenger and the direct implications they have on the revenue generated by the airline.


    In this day and age, Airlines have an opportunity to use dynamic pricing, bundling tactics, and product-suggestion analytics, in order to create customized suggestions for additional purchases, both at the original point of sale and while the journey is taking place. With the help of the right strategy, airlines can profile customers in ways not possible a few years ago.


    To move towards the next level of optimized total revenue management, airline industry leaders must simplify the complicated organizational factors. For instance, revenue management departments at most airlines are isolated from other departments, such as marketings, sales, tech, which hinders their ability to collect and use the customer data needed to optimize total revenue.


    If airlines work to address these issues they can really improve their total revenue. To achieve this target, however, airlines m[1] ust act soon, and if they wait along with all the other airlines to adopt changes, they will lose their chance at a competitive edge.


    Furthermore, airlines should consider where their competitors are moving, what their prices are, how they are changing their prices. This has a major effect on the performance as customers move to the competitors if they offer low prices with similar benefits. To realize the potential of total revenue management, airlines must adopt a bundled revenue management model such as AirGain by RateGain (a leader in providing travel technology solutions for hospitality industry).


    AirGain’s inbuilt dashboard allows airlines to easily track market position and understand their exact variance in pricing. It helps to seamlessly switch between channels as per user needs to get a view comparing all the airlines between the origin and destination across all dates.


    Moreover, it also helps a revenue manager to stay on trend by comparing their cheapest rate quickly to the cheapest rate in the selected market, the variance between their fare and the cheapest fare, see on which routes their competition is flying on, and how competitor’s rate changes for a specific departure date.


    To gain a competitive advantage, it's time that airlines change the way they approach and manage their revenue. It’s time they should opt for the best available right pricing strategy for airline industry.