The airline industry is experiencing a shift towards dynamic offers in pricing, with approximately 25% of airfares, ancillaries, and airfare bundles currently being dynamically created, according to estimates by ATPCO. This figure marks a significant increase from approximately 15% in October 2022, showcasing a growing trend towards more dynamic pricing strategies in the industry. ATPCO CEO, Alex Zoghlin, predicts that this number will continue to rise, with a goal of reaching 80% by the year 2026.
Dynamic offers are defined as those where either the price or the ancillary options presented in response to a flight query are modified or created at the time of the query. This approach differs from the traditional airline pricing system, where carriers respond to flight searches from a predefined selection of fares filed with ATPCO. Airlines that implement dynamic pricing can offer a wider range of fare products, up to 100 times more, compared to those using legacy pricing systems limited to 26 fare classes.
Carriers that adopt dynamic pricing strategies claim that it enables them to optimize revenue while providing more appealing options to consumers. By being able to adjust prices and ancillaries in real-time, airlines can better meet the demands of the market and offer more personalized and competitive fares to travelers. This approach is seen as a way to not only increase revenue but also enhance customer satisfaction and loyalty.
ATPCO reports an increase in the number of airlines embracing dynamic pricing, with 258 carriers currently implementing some form of dynamic pricing compared to 220 in the fall of 2022. Additionally, 16 airlines or airline groups, including major players like United and Air France-KLM, have adopted a more sophisticated version known as adjusted pricing. This approach involves making real-time adjustments to filed ATPCO fares to generate dynamic offers.
To facilitate the growth of dynamic pricing, ATPCO is introducing tech enhancements such as Product Catalog, an electronic solution set to launch later this year. This tool aims to simplify the implementation of dynamic pricing for airlines by providing a platform to easily incorporate fare attributes, like cabin class and ancillaries, into existing fares. By separating fare attributes from the price, airlines can quickly create a variety of products without the need for extensive manual processes.
ATPCO’s goal is not to mandate airlines to adopt dynamic pricing but rather to make the process more accessible and efficient. By reducing friction and barriers, the company aims to empower more airlines and technology providers to leverage dynamic pricing capabilities. This approach is intended to streamline the development of dynamic pricing strategies, making it easier for both new and advanced airlines to enhance their pricing models and offerings.
The airline industry’s shift towards dynamic pricing represents a significant evolution in pricing strategies. With the adoption of dynamic offers and adjusted pricing, airlines can cater to the diverse needs of travelers, optimize revenue, and stay competitive in the market. As technology continues to advance and tools like Product Catalog become more widely available, the implementation of dynamic pricing is expected to grow further, shaping the future of airline pricing and customer experience.
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