Performing while transforming: Three ways to unlock revenue along the path to modern airline retailing

In recent months, there has been a noticeable shift in the industry conversation around airlines’ transition to offer- and order-enabled retailing, with questions like ‘if’, ‘why’ and ‘when’ being replaced by ‘how’.

Many have already started along the transition path but there’s a long journey ahead. Airlines must be bold and make the necessary investments in retailing technology, skills, and fulfillment. At the same time, they must continue to deliver against the needs of their travelers today, in order to generate the much-needed incremental revenue to fund their future. In short, airlines must continue to perform even as they transform.

We’ve created a flexible, phased and financially durable transition path that is sustainable for all. One that enables airlines to realize additional revenue from day 1 as they set out on their transformation journey. Here are three ways airlines can unlock revenue along this path…

1. Science, not assumptions

Key to unlocking incremental revenue early in the transition process is dynamic and data-driven offer optimization: creating rich and personalized offers that better meet traveler needs, drive higher conversion and enhance loyalty.

At Sabre, our offer optimization solutions employ advanced artificial intelligence and machine learning (AI/ML). Many of the most important departments in modern airlines use AI/ML technology at scale, including network planning, flight scheduling, pricing and revenue management, operations and crew planning, amongst others.

But AI/ML has come a long way in recent years, and the newest applications – including SabreMosaic™ IQ products – use a modern, cloud-based, microservices architecture with improved scalability and automation. Powered by Sabre Travel AI™, the SabreMosaic IQ products leverage Google’s class-leading technology to create compelling customer offers that deliver significant revenue opportunities for our airline partners looking to meet the needs of modern, retail-savvy travelers while maximizing conversions and developing a competitive edge.

Learn more about Sabre’s partnership with Google

2. Dynamic pricing and availability of airfares

Airline dynamic pricing is a term that has been used in many different contexts. At Sabre, we refer to dynamic pricing of airfares to describe an engine that can help airlines provide tailored offers to different customer segments, considering a carrier’s revenue management controls and data signals on the current competitive marketplace.

A close cousin to dynamic pricing is dynamic availability. With dynamic availability, rather than directly modifying the price amounts, an airline’s availability controls are updated (either by closing or opening booking classes). The airline’s ability to modify prices in real-time with dynamic pricing provides the maximum revenue performance, but today it is limited only to airline direct channels and NDC offers. On the other hand, dynamic availability changes can be applied across all GDS selling channels, so while the revenue performance of each change is slightly less, the total applicable sales base is larger. Thus, both approaches are used by airlines today.

Dynamic pricing involves moving away from traditional, static filed fares and instead provides the flexibility to charge any price at any point in time. The use of current competitive shopping data (amongst other things) allows airlines to fine-tune the actual prices to realize revenue performance that is above and beyond what is possible using only their revenue management system controls. In practice, this has been shown to provide up to 3% revenue gains.

These gains are incremental to what an airline realizes from its revenue management system, and they arise from more customized offer decisions, continuous price points instead of fare classes and the ability to manage prices with finer granularity. This finer-grained, continuous pricing also benefits travelers because they gain access to new price points that were previously unsupported. But don’t just take our word it, here’s what our customers are saying:

Learn more about SabreMosaic Air Price IQ™

3. Dynamic pricing of air ancillaries

One of the biggest trends in airline marketing over the past 10 years has been the strong and steady growth of ancillary sales for air travel. According to a report from IdeaWorks, airline ancillary revenue trends since 2013 show an average estimated annual growth rate of more than 15%. Ancillary sales growth in this period arises from both individual ancillary sales (a la carte) and the proliferation of airline branded fare bundles.

As sales (and revenues) have increasingly shifted to ancillaries, the opportunities for more dynamic pricing with AI/ML technology have grown. Traditionally, airlines have relied on pre-defined, static pricing rules that limit the incremental revenue that can be generated through ancillaries. It no longer has to be that way. Dynamic pricing continually analyzes and optimizes pricing to seamlessly deliver targeted airline ancillary offers at scale.

SabreMosaic Ancillary IQ™ uses embedded machine learning models which consider passenger, trip and marketplace insights to present intelligent and personalized airline ancillary products and bundles that travelers are most likely to purchase – including seats, bags, Wi-Fi, lounge passes or any other airline ancillary you sell.

In practice, our customers have seen incremental ancillary revenue gains of up to 10% from the use of AI/ML models for both dynamic price decreases and increases of ancillaries.

Learn more about SabreMosaic Ancillary IQ™

The clock is ticking

The future of airline retailing is enabled by offers and orders and early movers stand to gain the most. Sabre offers a range of next-gen products that enable airlines to take meaningful steps towards modern retailing by creating dynamic and personalized offers for every customer – from NDC to the SabreMosaic IQ products infused with the latest Sabre Travel AI™ technology.

We’ve been busy laying the technology foundations of an industry-leading modern retailing solution. We’re ready for what’s next. We invite you to join us on the transition journey as we redefine the airline technology landscape.