Airlines are the pioneers of dynamic pricing to maximize their revenues for perishable inventories, an unsold seat has no value after the take-off. Since most of the costs of an airline are fixed, maximization of revenue translates to maximum profits. Research shows that application of sophisticated pricing strategies can increase revenue by 2-5%.
Distinguishing between Traditional Airlines and Low-cost Airlines is key, as both the operating model and the customer segments served are structurally different. Therefore, most of the pricing models built in theory and in practice for traditional airlines will not work for low-cost airline business models. The customers of low-cost airlines are more price-sensitive and majority of them buy their tickets online in comparison with all competing flight choices and prices.
- Customized pricing models for low-cost airlines which considers competitive offers, substitute alternatives and consumers’ willingness to pay under different scenarios
- Dynamic, real-time, adaptation and determination of the right price point relative to each competitive offer
- Ability to combine qualitative intuition with statistical analysis to exploit the synergy of human and artificial intelligence
- Pricing of in-flight services to realize an additional level of price differentiation
- Incorporating the impact of time of day, day of the week, and season on consumer behavior
- Modeling at variable granularities considering the fact that the booking curve behavior closer to departure time is critical to capture customers with higher willingness to pay
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