Airlines must employ a lot of guesswork to arrive at a final selling price for a ticket. That can be a costly business.
At a time when consumers can forensically compare one airfare with another, carriers need to be very precise about the pricing delivered to the market. Get it wrong and you could be losing sales or discounting too much.
Comparing like with like is an elusive task. Look at how the price you pay for an airline ticket is made up. First off, there’s the base airfare. But to that must be added extra service fees, fuel surcharges, sales taxes, airport facility charges and so on.
These additional fees often mount up to being more than the base fare, and this can skew effective marketing of fares by the airline – such as a US$599 promotional fare.
And in some countries, such as Australia and UK, consumer protection legislation forces airlines to advertise the full fare with all the mandatory extras, not just the base fare.
Problems can arise because up to now airlines typically compare fares with competing carriers using the base or ‘filed’ fare. That ends up bearing little resemblance to the price paid by the customer.
To get to that US$599 ‘all in’ promotional fare, they have to work backwards, extracting the additional fees, to determine the fare they file in the distribution systems.
In many cases the number must be worked out manually, fudged, or generalized. It gets even more complicated when you take into account multiple origins and destinations and via points.
And that’s not to mention the industry’s creativity with new fees, which constantly drives up the volume of these extra charges at an exponential rate.
Airlines really need to get control back. A new solution due late 2014 will allow just that, through a new option available in Airfare Insight.
This is SITA’s solution for managing an airline’s fares, enabling strategic pricing, competitive monitoring and pricing responses to competitor activity.
Using an automated tax processing and calculation engine, the Insight option will process all taxes, fees and charges. It will enable an airline to see and compare actual selling price that the customer pays, inclusive of tax.
That means no more guesswork, and a lot less time required to execute fares decisions. The product is ideal for international carriers with more complex itineraries and taxes.
Airfare Insight helps airline analyze fares and manage workflows across multiple departments – including revenue management, sales, and in-house or outsourced pricing distribution.
Bringing improved accuracy, the new Insight option, means the right fares are distributed at the right time, to the right customer.
Asia Pacific insights
The recent successful implementation of Airfare Insight at Philippine Airlines marks the seventh major international airline in Asia to introduce SITA’s innovative fares management software.
Within Asia, it means that almost 40% of all passengers are carried by airlines using fares managed by Airfare Insight*.
Other airlines in the region include Cathay Pacific, Singapore Airlines, Garuda and Emirates. Outside of Asia, Airfare Insight customers include British Airways and Virgin Atlantic.
*Calculated by passenger numbers in 2013 for all airlines that carried over one million passengers in the regions of Middle East, Central Asia, South Asia, East Asia and Oceania.