Where are your fares?

In a fast-evolving and hugely competitive market, manual methods don’t make for a commercially savvy approach. Airlines must strive for a centralized process for all fare agreements. They need a single version of 'the truth' ...

Many airlines still use e-mails and spreadsheets to manage their fares. But the rapidly evolving and increasingly complex fares market will demand nothing less than intelligent fares management and automation.

It’s reckoned that a medium to large carrier can have as many as 500,000 fares in the market place. They may need to monitor as many as three million competitor fares at any time. And in a single day, a tenth of all fares can change.

Yet airlines often still rely on people, email history and spreadsheets to gather fare data. They’ll frequently look up fare information in systems that were not designed for the purpose, or they’ll resort to studying advertising or looking up fares online.

Inefficiency costs

The cost of inefficiency goes beyond just paying for more labor to tackle the tasks involved. Charge too much, you lose customers; charge too little and you lose money. Without visibility of all your fares in the marketplace you can unintentionally undercut sales channels.

More than that, the lack of an efficient process for getting fares to the market can delay the impact of corporate and agency agreements. If you accidentally introduce a $1 fare, can you audit it to determine what went wrong and put safeguards in place to prevent this happening again?

Perishable

The reasons for so many changing airline fares in the market are multifarious. Airlines deploy strategic pricing to address any number of unique market criteria using policies relating to different channels and corporate accounts.

Yet competitor activity and distressed inventory conditions will drive tactical fare changes. An airline seat on a flight is a perishable commodity that can’t be recycled if it goes unsold. So airlines adjust pricing constantly to achieve optimal results.

Changing one fare can impact as many as 20 related fares. The airline’s challenge is to manage the relationship and inter-dependence among those fares in a way that’s logical and coherent with their overall strategy.

‘One truth’

In a fast-evolving and hugely competitive market, manual methods don’t make for a commercially savvy approach. Airlines must strive for a centralized process for all fare agreements. They need a single version of 'the truth' along with standard, auditable processes for agreeing, executing and cataloging fares – both global and regional.

Automated processes should enable fares management ‘by exception' rather than deliberating over fast moving individual competitive actions in the marketplace. And now that fares include taxes and surcharges, airlines need to be able to compare like-for-like before making decisions.

What's needed?

That demands instant access to intelligence for monitoring competitor pricing activity, with the ability to act on recommended responses that fit commercial strategies. It means enabling workflows across multiple departments – including revenue management, sales, and in-house or outsourced pricing distribution.

Such is the approach offered by SITA’s Airfare Insight – part of the next generation Horizon Fares Management suite. The end-to-end processes of requesting, decision making, approving and execution of any fare are managed by work queues. A new tax processing and calculation engine enables an airline to see and compare actual selling price that the customer pays, inclusive of tax.

The ‘garbage in-garbage out’ axiom is as true in the world of fares management as it is elsewhere in computing. It extends to revenue management too, because optimizing availability and pricing at any given time requires accurate fare value information to bring full benefits.

Revenue management systems typically rely on historic data but Airfare Insight feeds true fare values into these systems, ensuring flight optimization and price availability processing.

Think ahead

As we head towards a world enabled by IATA’s New Distribution Capability (NDC), will fares management get any easier? The answer is ‘probably not’. NDC will usher in new models, such as continuous pricing, bucketless distribution and dynamic pricing that are cascaded among carriers rather than published in the traditional way.

This has the potential to contribute exponentially greater complexity to the fares process. Only intelligent fares technology will be able to handle this more complex fares management future. Thinking ahead, the reality is that airlines will need to embrace the automation of fares management and achievement of efficient workflow processing. Such is the philosophy of Airfare Insight.

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