Optimizing airline fare structures

Abstract

Optimizing an airline’s fare structure has always been reliant on the expertise and market awareness of its Pricing professionals. Whether in the traditional airline world—with restrictions aiming to “fence” high-yield customer segments from the leisure ones, in the low-cost carrier competitive world with more simplified fare structures, or in the new world of dynamic offer generation and continuous pricing, how to establish the entry level price and all other prices, as well as the appropriate conditions associated to a price remains a challenge for any airline Pricing department. In this article we explore some of the common airline practices for determining fare levels and fare rules, as well as what the future holds for this field in the context of IATA New Distribution Capability, where offers will be generated dynamically, pricing could be continuous and traditional booking classes might not exist.