Airlines are “flying blind” on pricing policies as the pandemic has scrambled passenger behavior models and air traffic data, which is normally relied upon to estimate future demand.
From David Fickling at Bloomberg:
Making things worse is that two years of Covid has scrambled every tool the airline industry uses to guide its pricing policies. Typically, carriers choose which fares to offer at which prices depending on an analysis of air traffic the previous year, updated with more current data based on the strength of ticket demand.
That trove of information is almost meaningless at present. The last comparable period is now three years ago. Thanks to the way the pandemic has upended all our lives, there’s no guarantee that 2019’s passenger behavior will bear any resemblance to what we’ll see in 2022, or any year in the future.
“They’re flying blind if they rely on the old data,” according to Oliver Ranson, a former Qatar Airways QCSC executive who consults for airlines on pricing policy. For instance, whereas traditionally prices are higher close to the date of travel because only urgent flights would be booked so late, that might be reversed nowadays when only the most committed travelers would risk the border and cancellation turmoil that might result from reserving seats months in advance.
Low-cost carriers have some advantages here. With simple point-to-point flights and a long-standing need to fill every seat at all costs, they’re already using systems that depend more on real-time bookings than historical forecasts, according to John Harrison of Cumberland Consulting, who formerly headed up Iberia’s revenue management. That means they’re able to be nimbler than full-service carriers, with their complex global networks, could ever hope to be.