The airline industry is undergoing a significant transformation with the adoption of dynamic pricing strategies. According to ATPCO estimates, approximately 25% of airfares, ancillaries, and airfare bundles currently sold are dynamically created, marking a notable increase from 15% in October 2022. This shift towards dynamic offers is set to accelerate over the next two years, with ATPCO CEO Alex Zoghlin anticipating that the number will reach 80% by 2026.
Dynamic offers, as defined by ATPCO, involve adjusting either the price or ancillary options in response to a flight query at the time of the query itself. This stands in contrast to the traditional airline pricing system, where carriers respond to flight searches from a pre-determined list of fares filed with ATPCO. By adopting dynamic pricing, airlines can introduce up to 100 times more fares and fare products into the market simultaneously, compared to those using legacy pricing systems with limited fare classes.
ATPCO reports a growing number of airlines embracing dynamic pricing, with 258 carriers currently incorporating some form of this strategy, up from 220 in late 2022. Notably, 16 airlines or airline groups, including major players like United and Air France-KLM, have progressed to adjusted pricing—a more advanced variation of dynamic pricing. United, for instance, dynamically adjusts its filed ATPCO fares in real-time to generate dynamic offers, enhancing revenue optimization and consumer choice.
To facilitate the industry’s shift towards dynamic pricing, ATPCO is introducing tech enhancements like the Product Catalog, set to launch later this year. This electronic solution aims to simplify the implementation of dynamic pricing for airlines by separating fare attributes from the price itself. By enabling airlines to easily integrate diverse fare attributes into their existing ATPCO fares, Product Catalog streamlines the process of creating a variety of products quickly and efficiently.
The implementation of dynamic pricing is not about imposing a one-size-fits-all approach on airlines but rather about facilitating an easier transition to this model. By reducing friction and lowering barriers, ATPCO seeks to empower more carriers to develop dynamic-pricing capabilities and enable advanced airlines to enhance their pricing strategies. The goal is to make dynamic pricing more accessible and user-friendly for technology providers, ultimately fostering innovation in airfare offerings.
The rise of dynamic pricing signifies a paradigm shift in the airline industry’s approach to fare structures. With technological advancements and increasing industry adoption, dynamic pricing is set to revolutionize how airfares are tailored and presented to consumers, offering a more flexible and optimized pricing model for both airlines and travelers alike.