Before, air travel had certain rhythms. Business travelers flew on Monday morning and Thursday evening, filling more expensive seats. In summer, price-conscious vacationers have taken off. Crowds flew for Thanksgiving, Labor Day and Christmas, and to specific destinations for events – athletic championships, music festivals, fashion weeks. Decades of historical data fed into complex mathematical models have helped airlines determine times and prices.
Then came the pandemic. “All the history, all the old practices that Airlines companies used to decide what to fly and what prices to charge, had to be thrown out the window, ”says Jim Barlow, vice president of strategic advice at Amadeus, which develops software for airlines.
Now, as more passengers are vaccinated and ready to travel, the airline industry is seeing green shoots. More than 2.1 million people passed through security checkpoints at US airports on July 5, nearly twice as many as last year; but it was still 20% less than in 2019.
This does not mean that the images created by the algorithms of the airlines have become clearer. Airlines operate with less data and more uncertainty than usual, which creates a complicated math problem. It’s not just about where people want to go and how much they’ll pay. It’s also about making sure that the right size aircraft and the full, rested crew are in the right place for take off. The digitizers that run their systems have found other ways to cope.
For about six months at the start of the pandemic, many airlines relied less on their algorithms and more on their human planning and pricing teams who used hunches about where people wanted to go, says Barlow. They froze hiring and laid off thousands of workers. Some have stored planes and photos of Delta and Southwest planes parked in the california desert has become a frightening and pandemic sign of the times.
Part of the problem was that their customers had changed and continue to change. The process of setting airfares is one of the most complicated in the business world. Passengers on the same flight, and even in very similar seats, often pay different prices, depending on where and when they bought their tickets. Internal teams create fare structures and schedules based on when passengers are likely to purchase tickets. Vacationers, looking for deals, tend to buy early, which is why airlines tend to offer the lowest prices on tickets purchased well in advance. Business travelers, on the other hand, buy closer to flight time and are willing to pay more.
Since the pandemic hit in early 2020, most people traveling tend to be for leisure. And they were booking closer than usual to their travel times, probably because they didn’t know how the coronavirus would affect their plans.
The influx of holiday flyers has altered airlines’ schedules and made them more willing to experiment with less traveled routes. Over the past year, JetBlue has added routes to the Caribbean. United for the first time launched non-stop flights to Florida and its popular national vacation destinations. As business travel continued to subside, airlines have subtly moved away from traditional large hubs to more scenic routes: Milwaukee to Las Vegas; Boise, Idaho, New York; Des Moines in Portland, Oregon.
As the routing experiments continue, airlines and the people who build their pricing systems are testing other sources of data to make better operational decisions. They use customer web searches and online notification requests to determine what is requested. Have a bunch of people signed up to receive notifications of cheap flights to Vegas in November? Maybe the airlines should schedule a few more flights this month. In the future, says Barlow, airlines hope to incorporate other sources of information into their operations, such as cellphone data that tells them how full competitor flights are, in real time.
‘Dynamic pricing’ – targeting specific fares to specific people, based on their flight history and real-time market conditions – has also increased during the pandemic, with airlines mimicking e-commerce companies by changing price according to live demand. Since the 1980s, airlines have varied seat prices in well-defined patterns, selling blocks of tickets at predetermined prices. But dynamically priced tickets can be changed at any time. For airlines, this is a holy grail because it promises to almost perfectly predict the prices that customers are willing to pay. Research suggests that more precise pricing, not only for seats, but also for freebies like meals and extra legroom, could increase revenue by 5-15%.