Insights / Pricing
Dynamic Pricing and Airline Revenue Management Explained
To travellers, airline pricing looks arbitrary: the same seat, a different price minute to minute. In fact it's the product of decades of revenue-management science, now undergoing its biggest change in a generation.
From fare buckets to continuous pricing
Revenue management is the discipline of selling a perishable product (an empty seat, once flown, is worth nothing) at the right price to the right customer. For decades airlines did this through fare classes: a fixed set of price points. The legacy EDIFACT system could only handle around two dozen of them, so prices moved in discrete jumps. An airline that wanted a price between two buckets simply couldn't file it.
NDC broke that constraint. Continuous pricing lets carriers such as Lufthansa Group and Air France-KLM adjust prices in fine increments, calculated in real time from demand, capturing revenue the old buckets left on the table. The next frontier is AI-driven dynamic offers, where the whole package is assembled for the specific customer and moment.
Why it decides OTA competitiveness
Your connectivity determines your price competitiveness.
Handle dynamic content well and you show the airline's best, most competitive prices. Stay on legacy content and you increasingly display stale, higher, bucketed fares. In the market taking shape, the moving price is becoming the only kind there is. The question for every OTA and agency is whether its platform can handle it.
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