The airline industry is experiencing a significant shift in the way airfares and ancillaries are being priced. According to ATPCO estimates, approximately 25% of airfares, ancillaries, and airfare bundles currently sold are dynamically created. This represents a notable increase from the 15% reported in October 2022. ATPCO CEO Alex Zoghlin predicts that this trend will continue to grow, with the number of dynamically generated flight offers expected to reach 80% in the next two years.
Dynamic offers, as defined by ATPCO, involve modifying or creating prices or ancillary options in response to a flight query at the time of the query. This dynamic pricing model differs from the traditional airline pricing system, where carriers respond to flight searches from a predefined set of fares already filed with ATPCO. Companies that adopt dynamic pricing strategies can introduce up to 100 times more fares and fare products into the market compared to those using the legacy pricing systems.
In line with the increase in dynamic offer generation, ATPCO reports a rise in the number of airlines embracing this practice. Currently, 258 carriers engage in at least some form of dynamic pricing, up from 220 in the previous year. Additionally, 16 airlines, including industry leaders like United and Air France-KLM, have implemented a more advanced form of dynamic pricing known as adjusted pricing. This approach involves making real-time adjustments to filed ATPCO fares to create dynamic offers.
ATPCO is committed to accelerating the growth of dynamic pricing through technological enhancements. The company plans to launch an electronic solution called Product Catalog later this year. This tool aims to simplify the implementation of dynamic pricing for airlines by separating fare attributes, such as cabin class and ancillaries, from the price itself. By streamlining the process of creating offers, airlines can more efficiently develop dynamic pricing capabilities and enhance their competitiveness in the market.
Zoghlin emphasizes that ATPCO’s goal is not to mandate dynamic pricing but rather to make the adoption of this pricing model easier for airlines. The company seeks to reduce friction and barriers, enabling more technology providers to access the necessary data to implement dynamic pricing solutions. By facilitating a smoother transition to dynamic pricing, ATPCO aims to drive innovation and competitiveness in the airline industry.
The rise of dynamic pricing is reshaping the airline industry, offering carriers new opportunities to optimize revenue and enhance customer satisfaction. With an increasing number of airlines embracing this trend and technological advancements facilitating the implementation of dynamic pricing, the industry is poised for continued evolution and innovation in the years to come.