Beautiful Virgin Islands

Friday, Aug 08, 2025

Coronavirus Has Upended Everything Airlines Know About Pricing

Coronavirus Has Upended Everything Airlines Know About Pricing

The pandemic has completely confounded the computers that spit out airfares based on passenger behavior. After an unprecedented drop in air travel due to the coronavirus, passenger airlines are being forced to make long-term, make-or-break decisions at a time of great uncertainty and minimal cash flow. So how are they planning to survive?
Airlines have lost the ability to extract as much money as possible from travelers. And their pricing computers may stay confused for some time to come.

The airline industry has been notorious for being the most difficult ones to profit from or indeed survive in, given almost every crisis seems to lead to a round of bankruptcies. The current crisis with the travel bans might just be the most severe of them all. This article talks about a completely new challenge the current crisis is posing for the industry – revenue management or seat pricing in plain English.

Whilst the emergence of ‘Big data’ based analytics has spawned off several new business models, airlines have been using statistical tools and algorithms based on huge swathes of historical demand data to price seats so as to optimise utilisation and pricing for decades now. Given significant changes in travel behaviour thanks to the pandemic, some of these could likely be permanent changes, historical data may not come in that handy in predicting demand patterns and therefore affect the industry’s ability to price seats optimally.

“Revenue management—the science of getting the highest price for an airline seat, hotel room or other perishable good or service—is based largely on historical data. With big-data computing, airlines know with surprising precision what the demand will be for the 2 p.m. flight to Chicago on the third Thursday of October. Except now they don’t, since so much of revenue management is based on past buying with no relation to a pandemic.

…Spot checks on busy routes show surprisingly little variation between pandemic fares this fall and summertime prices next year, when airlines hope there will be strong demand. In other words, pricing systems look confounded.

..It’s worth explaining how airlines actually price tickets. It’s a system that often frustrates consumers with rapid changes. The cheap prices never seem available when you want to go.

Airlines typically have a pricing department that sets a range of fares for each flight and includes rules that govern each fare, like a 14-day advance-purchase requirement. The lowest price might be a match of a cheap fare a discount carrier has in a particular market. The highest coach price will be the unrestricted, refundable walk-up fare. In between, there may be a dozen different prices.

Airlines also have a revenue-management department, separate from pricing. Revenue management decides how many seats to sell at each price and how many to hold back for higher prices, based on forecasts of demand and how flights are actually selling. Human analysts fine-tune computer results and mix in their own hunches and experience.

Every price gets loaded into reservation systems along with the availability of seats. If seven seats sell at one price and that’s all the airline allocated, the price a shopper sees jumps to the next available price.

Tom Bacon, a longtime airline-industry pricing executive and consultant who taught revenue management at the International Air Transport Association, thinks airlines need to move away from their reliance on historical data. He suggests they become more like online retailers that use factors like how many searches have there been for a particular product.

“Expedia or Amazon don’t think of it as: What did you sell three years ago and what’s the average sale for that over the past three years? They are now: What is hot now?” Mr. Bacon says.

Today, airlines say they are doing a lot of manual pricing and essentially pricing every flight as if it were a brand new route with no historical data.”
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Trump Administration Increases Reward for Arrest of Venezuelan President Maduro to Fifty Million Dollars
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Embarrassment in Britain: Homelessness Minister Evicted Tenants and Forced to Resign
President Trump nominated Stephen Miran, his top economic adviser and a critic of the Federal Reserve, to temporarily fill an open Fed seat
The AI-Powered Education Revolution: Market Potential and Transformative Impact
Chikungunya Virus Outbreak in Southern China: Over 7,000 Hospitalized
French wine makers have seen catastrophic damage to vines that were almost ready to be harvested after the worst fires in more than 70 years burned through the south of the country
US Lawmaker Probes Intel CEO’s China Ties Amid National Security Concerns
Brazilian President Lula says he’ll contact the leaders of BRICS states to propose a unified response to U.S. tariffs
Trump Open to Meeting Putin as Soon as Next Week, with Possible Trilateral Summit Including Zelenskiy
Katy Perry and Justin Trudeau spark dating rumors, joining high stakes world of celeb-politician romances
US envoy Steve Witkoff arrived in Moscow to seek a breakthrough in the Ukraine war ahead of President Trump’s peace deadline
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Karol Nawrocki Inaugurated as Poland’s President, Setting Stage for Clash with Tusk Government
Trump Signals JD Vance as ‘Most Likely’ MAGA Successor for 2028
US Charges Two Chinese Nationals for Illegal Nvidia AI Chip Exports
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
U.S. Tariff Policy Triggers Market Volatility Amid Growing Global Trade Tensions
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
Representative Greene Urges H-1B Visa Cuts Amid U.S.-India Trade Tensions
U.S. House Committee Subpoenas Clintons and Senior Officials in Epstein Investigation
Sydney Sweeney Registered as Republican as Controversial American Eagle Ad Sparks Debate
Trump Accuses Major Banks of Politically Motivated Account Denials and Prepares Executive Order
TikTok Removes Huda Kattan Video Over Anti-Israel Conspiracy Claims
Trump Threatens Tariffs on India Over Russian Oil Imports
German Finance Minister Criticizes Trump’s Attacks on Institutions
U.S. Proposes Visa Bond of Up to $15,000 for Some Applicants
U.S. Farmers Increase Lobbying Amid Immigration Crackdown
Elon Musk Receives $23.7 Billion Tesla Stock Award
Texas House Paralyzed After Democrats Walk Out Over Redistricting
Mexican Cartels Complicate Sheinbaum’s U.S. Security Talks
Mark Zuckerberg Declares War on the iPhone
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
Tesla Seeks Shareholder Approval for $29 Billion Compensation Package for Elon Musk
Nvidia is cutting prices on its RTX 50-series graphics cards after sales slowed and inventories piled up
Ghislaine Maxwell Transferred to Minimum-Security Prison Amid Ongoing DOJ Discussions
U.S. Tariffs Surge to Highest Levels in Nearly a Century Under Second Trump Term
Matt Taibbi Slams Media for Role in Russiagate Narrative
Pilots Call for Mental Health Support Without Stigma
All Five Trapped Miners Found Dead After El Teniente Mine Collapse
Ong Beng Seng Pleads Guilty in Corruption Case Linked to Former Singapore Transport Minister
BP’s Largest Oil and Gas Find in 25 Years Uncovered Offshore Brazil
Italy Fines Shein One Million Euros for Misleading Sustainability Claims
×