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The Airline Industry - Inventory Control and Pricing [Part two]

Umit Cholak

Vice President, Revenue Optimization, Airlines Solutions, Amadeus IT Group

We asked the increasingly difficult question, particularly for airlines that compete with LCCs in one or more of their markets, of how they can balance low yield demand with the ability to price higher for certain market segments.

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In a previous blog post , we looked at how deregulation evolved and how the growth of LCCs influenced revenue management in the aviation industry.

What’s missing in this case is the airline's ability to accurately price their product for a particular market.

Today, in many cases, competitors define the value of an airline's product (price); this is commoditizing the market at an accelerated rate.

Furthermore, the world of airline fares is one of the most intricate and least understood from a consumer viewpoint.

Many travellers assume that the earlier a ticket is bought, the cheaper it is.  However this is not always the case, leaving the consumer confused and frustrated about the opaque world of airline pricing.

Looking at the situation from an airline perspective, most airlines have some idea about competitor pricing, however each airline goes to extreme lengths to conceal actual pricing strategies.

Even less knowledge exists about consumer choices in the airline world, which makes pricing somewhat of a hit-and-miss game.

Technically, airlines have been working on collecting data about consumers through different channels: for example, shopping data provides information on traveller shopping patterns.  However, consumer choice with respect to pricing is largely unknown.

Large airlines have been the best innovators and practitioners of revenue management, although it is LCCs, with their simple pricing practices that are shaping the future of the airline industry.

Large carriers have no choice but to review their pricing practices and respond to LCCs to maintain their market share and survive.

The big question facing the airline industry today is how soon their Revenue Management and Inventory Management systems can adopt the inevitable changes in pricing practices.

With years of experience and relevant IT expertise, Amadeus is ideally placed to address pricing and inventory challenges with the Altéa Revenue Management system .


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