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AIRLINE


Airline Revenue Management is on the verge of fundamental change

Although airlines have led the field of revenue management or RM, they are far from fully exploiting pricing opportunities. They employ predetermined fare products with rules, such as, ‘Saturday night stay’ to separate business and leisure customers so that different price points can be defined for them. These price points are relatively static. At the same time, RM systems are designed to protect a certain number of seats for high value business passengers while limiting the number of seats sold to low value leisure passengers. Revenue Management demand forecasts are the main drivers behind these decisions.

Airline RM systems, especially for the legacy and full-service carriers, have played a strategic role in their survival in their competition against the “low cost carriers.” These systems allocated a limited number of low-fare seats to match the competition, while the rest of the capacity was protected for high yield passengers.

While this approach served the industry relatively well, today’s data enriched environment that allows for extreme personalization has outdated these RM techniques. And yet, there still exists a huge potential to increase revenue through optimized pricing; for example, by incorporating passenger shopping behaviors, and other relevant information available during the shopping time; an aspect ignored by legacy RM systems. In addition, it is extremely cumbersome and expensive to redefine the fare rules as a surrogate to segment customers and re-file them to the centralized systems, such as ATPCO and SITA, to be redistributed to GDSs (Global Distribution Systems). The current approach and infrastructure lacks the ability to accommodate the changing needs of the airlines and their customers. Carriers recognize that there is an urgent need for a new approach to pricing and offer management, which would benefit both airlines and their customers.


Prorize Solution 


Dynamic pricing is the core of our award-winning Pricing AI Platform™ and can effectively bring the “static fares based on rules” approach into the 21st century. Each shopping and booking request can be targeted in real-time, based on multiple available data sources so that customers are satisfied with the airline offer. Our solution uses data intelligence from customer relationship management (CRM), scheduling, RM, ATPCO/SITA fares and other pricing systems to make decisions in real-time by understanding why customers buy and which factors are most relevant in their decision-making process.

Pricing airline seats involves many interwoven factors, including but not limited to origin-destination pair, ancillary revenues, destination attributes, cabin, customer loyalty data, departure date/time, days left to departure, flight duration, flight type, sales channel, competitive data and demographic data. With data technology evolving beyond recognition, airlines urgently need to go beyond “fare rules” and reach to new levels of revenue with AI-powered Dynamic Pricing.

However, some airlines are still largely limited by their technical infrastructure for what they can do for personalized offer creation and dynamic pricing. Those carriers with simpler operating models and limited dependency to existing legacy platforms have more options in implementing more sophisticated offer creation and optimized pricing solutions. Prorize recognizes the reality that many airlines will have to live with this legacy infrastructure for a number of years to come. This does not mean that those airlines cannot take advantage of the benefits of our AI-powered Dynamic Pricing. Our platform can be plugged in to the existing ATPCO/SITA-based fare filing systems to work with the fare rules structure or create optimal prices on a continuous price curve to maximize profit potential.

AIRLINE


Airline Revenue Management is on the verge of fundamental change

Although airlines have led the field of revenue management or RM, they are far from fully exploiting pricing opportunities. They employ predetermined fare products with rules, such as, ‘Saturday night stay’ to separate business and leisure customers so that different price points can be defined for them. These price points are relatively static. At the same time, RM systems are designed to protect a certain number of seats for high value business passengers while limiting the number of seats sold to low value leisure passengers. Revenue Management demand forecasts are the main drivers behind these decisions.

Airline RM systems, especially for the legacy and full-service carriers, have played a strategic role in their survival in their competition against the “low cost carriers.” These systems allocated a limited number of low-fare seats to match the competition, while the rest of the capacity was protected for high yield passengers.

While this approach served the industry relatively well, today’s data enriched environment that allows for extreme personalization has outdated these RM techniques. And yet, there still exists a huge potential to increase revenue through optimized pricing; for example, by incorporating passenger shopping behaviors, and other relevant information available during the shopping time; an aspect ignored by legacy RM systems. In addition, it is extremely cumbersome and expensive to redefine the fare rules as a surrogate to segment customers and re-file them to the centralized systems, such as ATPCO and SITA, to be redistributed to GDSs (Global Distribution Systems). The current approach and infrastructure lacks the ability to accommodate the changing needs of the airlines and their customers. Carriers recognize that there is an urgent need for a new approach to pricing and offer management, which would benefit both airlines and their customers.


Prorize Solution 


Dynamic pricing is the core of our award-winning Pricing AI Platform™ and can effectively bring the “static fares based on rules” approach into the 21st century. Each shopping and booking request can be targeted in real-time, based on multiple available data sources so that customers are satisfied with the airline offer. Our solution uses data intelligence from customer relationship management (CRM), scheduling, RM, ATPCO/SITA fares and other pricing systems to make decisions in real-time by understanding why customers buy and which factors are most relevant in their decision-making process.

Pricing airline seats involves many interwoven factors, including but not limited to origin-destination pair, ancillary revenues, destination attributes, cabin, customer loyalty data, departure date/time, days left to departure, flight duration, flight type, sales channel, competitive data and demographic data. With data technology evolving beyond recognition, airlines urgently need to go beyond “fare rules” and reach to new levels of revenue with AI-powered Dynamic Pricing.

However, some airlines are still largely limited by their technical infrastructure for what they can do for personalized offer creation and dynamic pricing. Those carriers with simpler operating models and limited dependency to existing legacy platforms have more options in implementing more sophisticated offer creation and optimized pricing solutions. Prorize recognizes the reality that many airlines will have to live with this legacy infrastructure for a number of years to come. This does not mean that those airlines cannot take advantage of the benefits of our AI-powered Dynamic Pricing. Our platform can be plugged in to the existing ATPCO/SITA-based fare filing systems to work with the fare rules structure or create optimal prices on a continuous price curve to maximize profit potential.

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