Why ‘context’ is critical for (ultra) low-cost carriers to remain competitive

By Alex Mans, founder and CEO of FLYR Labs

Airlines need to sell the right product to the right customer at the right time and price. And for low-cost carriers (LCCs), the need is even greater. For these carriers, with their tighter margins outpaced by more intense competition, understanding the context behind their environment is even more important to help make smart, optimised pricing decisions.

LCCs rely heavily on optimising total revenue, with a particular focus on ancillary services. They need insight into the breakdown of total revenue to help them optimise pricing decisions across all of their products.

The processes that previously drove commercial decisions for airlines have not kept up with today’s volatile environment where great revenue outcomes are only achieved by considering everything from demand to capacity, from departure time to competitor price, and from search traffic to the events, holidays and promotions that are the driving force behind consumer interest.

Even before the pandemic, near-term adaptability was key for long-term airline strategies to succeed. Anything from extreme weather conditions to a marketing initiative from a competitor can impact demand and result in sub-optimal forecasting. Being able to understand and apply context to pricing puts airlines in the best possible position to achieve revenue uplift.

Adding context to data to better support pricing decisions

By algorithmically mapping and understanding the context within an airline’s network based on its data, analysts can easily leverage hyper-accurate forecasts of future performance and let such forecasts inform appropriate pricing, even for markets that have not been flown before or those that have seen dramatic disruption in their environment.

Data that can inform such context includes:

  • Route and itinerary – Advanced segmentation of an airline’s route network throughout time helps optimise each traveller’s willingness to pay based on their relationship to the original and destination market segment of travellers’ similar itineraries.
  • Competitor capacity and activity – Competitive strategy highly informs how consumers’ response to pricing strategies might have changed. The type and number of competitors for a certain route, their pricing relative to yours, their departure time similarity, and their product are all major influences on revenue outcomes.
  • Search demand – Consumer interest for particular routes will often become visible well in advance of observed bookings. Monitoring search queries across the airline website and third-party websites is key to informing likely outcomes early.
  • Holidays, events and promotions – Especially in the leisure segment highly represented amongst LCCs, the purpose of travel is often correlated to specific events, holiday periods, or the result of a promotional campaign by the airline or destination. The active consideration of such information will lead to better forecasts of demand and better revenue protection through intelligent pricing.
  • Total revenue – An understanding of how fare, fare families and ancillary transactions contextually relate to each other will enable LCCs to dramatically grow their ancillary contribution as a component of total revenue performance. Critical to total revenue optimisation is recognising how an increase or decrease of fares, for each individual itinerary, impacts ancillary attach values and revenues in either direction.

Using artificial intelligence, analysts can discover similarities between markets, competitors, leading demand signals and events. Identifying such signals before it is clearly visible in data-sparse subsets of the airline network helps focus attention where it is needed before action comes too late. With the right insights readily available and continuously updated, airline teams can, in real-time, start to resolve complex questions that used to be answered with guesswork.

How can LCCs achieve this level of pricing complexity?

LCCs should not be at a disadvantage when it comes to accessing technology just because they are cost-focused, especially as better forecasting and more confident pricing is every airline’s ticket to success. With airlines exploring digital solutions, we’re here to provide access to advanced, science-forward technologies that support growth.

With LCCs’ heavy reliance on total revenue optimisation – including fare families and ancillaries – they need an integrated solution that gives them insight across all revenue streams.

The ‘Revenue Operating System’ from FLYR is built to serve airlines of all sizes and operating models. With more efficient analyst workflows and incredibly accurate pricing automation, FLYR offers an easily implemented solution to help LCCs achieve better revenue outcomes. As a true partner to airlines around the world, FLYR’s platform is applied to support and automate decisions across commercial functions, driving value and growth across pricing, planning, offer, order and ancillary functions.

FLYR provides a no-risk implementation and does not collect fees until superior revenue results are proven. Through an objective A/B test led in conjunction with the airline’s RM team, FLYR’s cloud-native, AI-powered solution typically yields an incremental revenue lift of 5-7 per cent for its airline partners.

The use of FLYR’s advanced and intuitive technologies enables all commercial carriers to understand the context behind their network and inform better pricing or planning decisions with the goal of ultimate revenue potential within reach.

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