Before, air travel had certain rhythms. Business travelers flew out Monday morning and back Thursday night, filling more expensive seats. Come summer, travelers who are aware of the price have climbed into the sky. The crowd flew for Thanksgiving, Labor Day and Christmas, as well as to certain destinations for events – sports championships, music festivals, fashion weeks. Decades of historical data included in complex mathematical models have helped airlines determine timetables and prices.
Then a pandemic ensued. “All history, all old practices airlines which followed in order to decide what to fly and what prices to charge, had to be thrown out the window, ”says Jim Barlow, vice president of strategic consulting at Amadeus, which makes software for airlines.
Now, as more and more passengers get vaccinated and want to travel, the aviation industry is recording green shoots. More than 2.1 million people traveled through security checkpoints at U.S. airports on July 5, almost twice as many as last year; but it was still 20 percent less than in 2019.
This is not to say that the images created by airline algorithms have become somewhat clearer. Airlines operate with less data and with more uncertainty than usual, creating a complex mathematical problem. It’s not just about figuring out where people want to go and how much they’re going to pay. It also ensures that the planes are the right size and the full rested crew is in the right place to take off. Drug counters that run their systems have found other ways to handle it.
About six months at the start of the pandemic, many airlines relied less on their algorithms and more on their human scheduling and pricing teams that guessed where people wanted to go, Barlow says. They froze employment and laid off thousands of workers. Some are preparing planes and photos of Delta and Southwest planes parked in the California desert became a gruesome sign of a pandemic time.
Part of the problem was that their customers have changed – and continue to change. The process of determining air fares is one of the most complex in the business world. Passengers on the same flight, and even in very similar seats, often pay different prices, depending on where they bought tickets and when. Internal teams create price structures and schedules based on when passengers are likely to purchase tickets. Vacationers, who are looking for offers, tend to buy earlier, which is why airlines usually offer the lowest ticket prices purchased in advance. Meanwhile, business travelers are buying closer to flight time and are willing to pay more.
Since the pandemic that hit in early 2020, most people who fly are mostly recreational. And they were Book closer than usual to travel, probably because they weren’t sure how the coronavirus would affect their plans.
The influx of holiday flyers has changed airlines ’schedules – and made them more willing to experiment on routes that have traveled less. Over the past year, JetBlue has added routes to the Caribbean. United premiered direct flights to Florida and its popular domestic vacation spots. As business travel continued to decline, airlines turned subtly from large, traditional hubs to unusual routes: Milwaukee to Las Vegas; Boise, Idaho, to New York; Des Moines to Portland, Oregon.
As routing experiments continue, airlines and people building their pricing systems are testing other data sources to make better operational decisions. They use customer web searches and online notification requests to evaluate what is being sought. Did a bunch of people sign up for notifications of cheap flights to Vegas in November? Maybe airlines should schedule a few extra flights for that month. In the future, Barlow says, airlines hope to integrate other sources of information into their operations, such as mobile phone data that tells them how full competitors’ flights are in real time.
“Dynamic pricing” – targeting specific tickets for specific people, based on their flight history and real-time market conditions – also intensified during the pandemic, and airlines mimicked e-commerce companies in changing prices based on live demand. Since the 1980s, airlines have been varying seat prices according to strictly prescribed schemes, selling blocks of tickets at pre-determined prices. But tickets with a dynamic price can change all the time. For airlines, this is the holy grail because it promises an almost perfect prediction of the prices customers are willing to pay. Research suggests that more accurate pricing, not just of seats, but also of supplements like meals and extra legroom, could increase revenue by 5 to 15 percent.