Passengers Learn To Adapt As Airlines Adopt Dynamic Pricing

With airlines keener than ever to maximize revenues, dynamic pricing is making inroads into the industry. Not everyone…

Passengers Learn To Adapt As Airlines Adopt Dynamic Pricing

With airlines keener than ever to maximize revenues, dynamic pricing is making inroads into the industry. Not everyone is welcoming the trend, but industry insiders say dynamic pricing can benefit both passengers and airlines.

Like it or not, dynamic pricing is here to stay in the airline industry. Photo: Don Wilson / Sea-Tac Airport

Airlines know a lot about their passengers, dynamic pricing harnesses that knowledge

Dynamic pricing is a process whereby an airline will pitch a fare at you based on what they know about you or think they know about you. Airlines are masters at gathering data. They harvest your frequent flyer data and track your searches and interests online via cookies. Hand over your Amex details to buy a drink inflight or a case of wine from the airline’s wine store and that airline gets an insight into your drinking preferences. Hundreds or thousands of these tracked behaviors all add up.

Log on to the British Airways website (or any airline’s website) after cleaning up your browser, and a message like this pop up.

“By continuing to use, you will be agreeing to the website terms and conditions and the use of cookies while using the website and our services. Please also read our privacy policy under which, to the extent stated, you consent to the processing of your personal data.”

Airlines already know a lot about their passengers – we’ve largely lost or surrendered that privacy battle. Now, many airlines are harnessing that data and learning to use it to boost revenues. On an individual passenger level, dynamic pricing tries to determine what a passenger is willing to pay to fly from Madrid to Heathrow next Sunday.

Your favorite airline already knows a lot about you. Photo: Don Wilson / Sea-Tac Airport

Just how much will a passenger pay to fly at a certain time on a certain day?

Justin Jander, Director of Product Management at digital commerce platform PROS  says airlines are trying harder than ever to create a sticky end-to-end passenger journey. One way they can do that is to use artificial intelligence (AI) to learn from the past behavior of a passenger. The airline can then attempt to predict what they will do next – including what they are willing to pay for an airline ticket.

“Dynamic pricing is extremely relevant to the airline industry as it allows airlines to break away from the barriers of fare classes with fixed price points,” says Jander. “Imagine a scenario where there are two filled fares, one at $100 and the other at $200. If a passenger is willing to pay $150, the airline either offers that passenger the $100 fare and loses $50 in incremental income. Or the airline can offer the $200 fare and lose the entire $150. Having this flexibility to identify an optimal price point allows airlines to be more effective in capturing revenue.”

We know airlines adjust fares according to broad seasonal factors. We also know an airline will adjust fares to a particular destination at a certain time if a big event is on in that city, say a football final. Equally, airlines will drop fares at off-peak times to stimulate travel demand. Dynamic pricing is about taking this to a more granular, individual passenger level.

Passengers can stand to benefit from dynamic pricing if they learn how it works. Photo: Ontario International Airport

Dynamic pricing can work for passengers

Justin Jander says dynamic pricing can work for passengers as well as airlines. At a basic level, interested passengers can learn how dynamic pricing works and is applied. It’s like learning how frequent flyer, hotel loyalty, or shopping programs work. Once you understand the nuts and bolts of dynamic pricing, passengers can potentially work dynamic pricing to their advantage.

“It is more expensive to acquire a new customer than to retain one,” says the PROS Director. “It makes sense for airlines to prioritize getting to know their existing customers.

“For passengers that are brand loyal customers of a particular airline, they will benefit from receiving personalized flight packages based on the AI that the airline has been able to leverage to understand them and their preferences.”

Most airline insiders agree dynamic pricing is here to stay. As the AI behind it gets smarter, so to will dynamic pricing. It will become more subtle and less driven by sometimes clunky algorithms. There always has been and always will be some tension between buyer and seller. Dynamic pricing in the airline industry won’t take that away> But over time, dynamic pricing may become better at fixing the median price that satisfies both airline and passengers.

Do you agree with dynamic pricing in the airline industry? Is it here to stay? Post a comment and let us know.

Source : Simple Flying More   

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Wow: Over 15,000 Passengers Fly On South Korean Flights To Nowhere

Flights to nowhere have taken South Korea by storm, with thousands of passengers taking scores of flights since…

Wow: Over 15,000 Passengers Fly On South Korean Flights To Nowhere

Flights to nowhere have taken South Korea by storm, with thousands of passengers taking scores of flights since travel restrictions and border closures thwarted more conventional travel plans. With flights to nowhere to continue in South Korea throughout 2021, the already impressive statistics will keep rising.

Korean Air is one of seven South Korean airlines offering flights to nowhere. Photo: Vincenzo Pace/Simple Flying

Over 150 flights to nowhere have flown in South Korea

According to data recently released by the Korea Customs Service, 15,983 passengers have taken a ride on 152 flights to nowhere. Seven South Korean airlines have offered the flights. Whether passengers were keen for the ride or just needed to spend some money, Simple Flying isn’t sure. But between them, those 15,983 passengers spent US$20 million on duty-free shopping. Nearly half, or 7,266 passengers, spent more than $600 on duty-free booze. 

Of the seven airlines operating flights to nowhere, Asiana Airlines low-cost subsidiary Air Busan operated the most, with 35 flights. Jeju Air has run 34 flights to nowhere, followed by Jin Air with 33 flights. Trailing but still active in the flights to nowhere space are T’way Air, Air Seoul, Asiana, and Korean Air.

Low-cost carrier Jeju Air has offer flights to nowhere. Photo: Getty Images

Retail therapy drives the demand for flights to nowhere

These South Korean flights to nowhere are particularly interesting because of their strong focus on duty-free shopping. The South Korean Government allows the flights to happen to help prop up both local airlines and the local duty-free industry. That’s fair enough – airport retailers are frequently among the forgotten amid the travel downturn.

But what was a tightly controlled sideline for airlines and the other players in the industry has exploded in South Korea. The South Korean Government has allowed  over the last year. Over that time, the rationale for the flights has also shifted.

While flights to nowhere or scenic flights in many other countries are about recapturing the flying experience, that doesn’t seem to be the case in South Korea. A recent  provides an interesting insight into these flights. Bloomberg detailed a two-hour flight to nowhere on Air Busan.

Global duty-free retailer Lotte organized the flight for 130 of its best customers. Those customers paid nothing for the flight. But they were expected to spend up big on Lotte duty-free. This flight was one of six flights to nowhere organized by Lotte in May alone.

The flights briefly enter Japanese airspace, thus legitimizing duty-free purchases. South Korea’s second-biggest duty-free operator, Hotel Shilla, offered two similar flights in May to its customers. Each of those flights could accommodate 114 passengers.

Flights to nowhere are proving popular with keen duty-free shoppers. Photo: Getty Images

Flights to nowhere passengers spend up big on duty-free

The Korean Customs Service says that in addition to alcohol, these passengers were spending up big on cosmetics, perfumes, and pricey bags.

“I saw a lot of people with bags full of duty-free items,” one Air Busan duty-free shopper told Bloomberg. This particular shopper left her flight on the low-cost airline armed with a new Chanel handbag – not the type of arm candy you see on your typical low-cost airline passenger. These flights don’t cover the losses incurred by duty-free operators since the travel downturn began, but they do help.

“The contribution from the flights to nowhere is small, but it’s better than having nothing,” an analyst told Bloomberg.

The full-service airlines aren’t above getting their hands dirty mixing flying with retail. Flag carrier Korean Air is among the seven airlines offering flights to nowhere. But unlike the low-cost carriers, Korean Air provides a more refined duty-free flight. Passengers pay from US$142 to $490 (depending on where you prefer to sit) and pick up their pre-ordered duty-free on the way through the airport before boarding one of the short flights out of Seoul’s Incheon International Airport. Still, it’s all about retail therapy. Says one Korean Air passenger;

“A flight to nowhere is a refreshing concept, but honestly, I don’t think I would have booked if there were no duty-free shopping benefits.”

Source : Simple Flying More   

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