Shaking up the foundations of revenue management and pricing

Within a couple of weeks, historic data as the foundation to monitor trends and performance has become irrelevant, shaking up the foundations of revenue management and pricing. Real-time data will play a significant role for airlines to make decisions by considering market-specific factors. Based on these insights, revenue management and pricing have to be done differently. Lufthansa Consulting’s Revenue Management and Pricing experts have identified the importance of approaching data as the foundation of decision making in a different manner and the key measures to adapt the steering of revenue management and pricing to build the foundations for a sustainable future. 

Revenue Management and Pricing in the time of crisis recovery

Imagine starting over with a clean sheet of paper and changing the way of doing revenue management and pricing. What should be done differently? Within a couple of weeks, historic data as the foundation to monitor trends and performance has become irrelevant, shaking up the foundations of revenue management and pricing. Many variables have changed or are unknown within the equation forecasting future demand and predicting demand patterns. IATA estimates an industry drop in per passenger revenue of $314 billion and a full-year demand decline by 55% compared to 2019 based on a scenario with domestic travel restrictions up to three months and international restrictions beyond three months.  Airlines have to come up with a quick answer of how to make decisions and how to adapt the steering of revenue and pricing to recover from this crisis and to build the foundations for a sustainable future.

The impact of the Covid-19 pandemic forces airlines to change their revenue management and pricing approach. A hybrid approach, combining machine learning and human interaction, allows the automation of processes with the option of human intervention. 

This is also an opportunity to change fare structures by offering more flexible fare conditions to gain customers back. New models could allow customers increased flexibility without requiring the airline to sell tickets at a price too low to make a profit.   

Finding creative and tailored solutions will significantly impact the ability of airlines to recover revenues. 

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