Airlines cannot price in a vacuum, and instead must constantly make pricing decisions based on competitive prices and customer demands. To inform decision making and maximize revenues, airlines must strive to better understand customer price elasticities and compare against multiple scenarios of potential competitor pricing on an ongoing basis. Without a tightly integrated system of real-time internal and external data sets, airlines face an extreme challenge to synthesize the needed information to make optimal market-informed pricing decisions.
Oliver Wyman has developed a market response pricing optimization tool that allows users to evaluate the strategic impact of pricing decisions under various customer demand and competitive scenarios. By integrating internal forecasting and pricing systems with bookings and fare data feeds (internal and competitive), our tool leverages regression-based analytics to identify opportunities to optimize price. The platform can leverage powerful analytics to provide key action recommendations on competitive pricing topics to support revenue management decision making.
Elasticity-based pricing can drive an additional 2%-3% in revenue benefit.