Airlines are struggling to pluck as much revenue as they can from travelers today, and the computers they use to set airfares and plan how many seats to offer may stay stupefied for a while longer. Alaska Airlines, though, is attempting to become nimbler during a crisis that has overturned many assumptions about pricing tickets.
Revenue management — the art of grabbing a top price from a shopper — relies heavily on studying past transactions. But the pandemic devastated travel, rendering useless historical data on booking patterns.
“We decided to limit the historical data that we actually loaded into the new system,” said Kevin Ger, vice president, revenue management, Alaska Airlines. “The old data didn’t really represent the post-Covid reality. We also made sure all the data on the flights we loaded in excluded the spring cancellations. We wanted future predictions to represent normal operations.”
Later this year, Alaska will adopt a new forecast model from Amadeus that will put a heavier weight on the most up-to-date demand patterns. This so-called active forecast adjustment will pull live sales data, said Benjamin Cany, director of offer optimization, airlines, Amadeus.
An Eye on Corporate Travel
“We especially want to understand how, when, and where business travel demand will recover,” Ger said. “One of the core challenges is to make sure you protect enough seats so you can satisfy demand from business travelers who book very close to departure.”
In the meantime, Alaska hopes that its new software, which uses parametric equations and a broader set of demand-influencing variables, will help it grasp what the demand will be for any given flight. The new system ingests current fares filed by Alaska and other airlines through the central clearinghouse ATPCO (formerly Airline Tariff Publishing Company), something its previous one, an older generation of a Sabre system, didn’t for inventory management.
Alaska Airlines decided to use Amadeus’s revenue management system even though it uses Sabre for its passenger service system, a core airline operating platform.
“After Covid-19, revenue management systems need to be more flexible and agile, especially in responding to changing customer behavior in a very volatile environment,” said Elena Avila, executive vice president, airlines, Americas, Amadeus.