The upheaval caused by the Covid-19 pandemic has rocked the foundation of airline industry revenue management forecasting and opened the door for upstarts to win the business of a growing number of carriers.
The upshot for consumers could ultimately be pricier fares during times of high demand and even steeper discounts during off-season and low-travel periods.
"Right now there's the lowest disruption cost that there will ever be," said Judson Rollins, head of the New Zealand-based consultancy Propel Solutions and a former revenue manager at Air New Zealand. "I've talked to people at 10 airlines globally who said their carriers are pursuing other revenue management systems." He called the market shift "a tidal wave."
A driver of the dynamic is the pandemic, which has sharply diminished the value of historical flight demand data -- previously the starting point for revenue management forecasts. Airlines these days can learn little from looking at previous years. And matters are complicated further by the ebb and flow of Covid-19 outbreaks as well as the ever-changing rules on travel within and between countries around the world.
Advance bookings, another key input for revenue management forecasting, has also proven an unreliable indicator during the pandemic as booking curves have tightened.
Rollins says that in efforts to adjust, dominant revenue management providers, notably PROS, Sabre, Amadeus and Accelya subsidiary AirRM, are slowed by their existing legacy systems.
"When you are taking a 20-year-old system and adapting it, you're turning a battleship," he said.
On the other hand, startup revenue management players, notably Connecticut-based Kambr and San Francisco-based Flyr, are nimbler, he said, and their new systems can more readily adapt to real-time changes in market conditions.
Evidence that at least some airlines are noticing such a difference can be found in the success Kambr and Flyr have had in signing up clients over the course of the pandemic.
Flyr has signed five of its seven airline clients in just the past six months, its founder Alex Mans said. All of them, he added, independently sought out Flyr and its Cirrus revenue management platform, which he views as an indicator of the carriers' hunger for change.
Though he isn't revealing specific carriers until later this month, Mans said Flyr customers include two airlines located in the Americas that were among the world's 10 largest pre-pandemic carriers.
The first airline customer for Kambr's Eddy revenue management solution went live 10 months ago, the company's managing director, Chris Anthony, said. Now four airlines are using the system, while two more have signed on and are going through system training. Kambr's largest client so far is discount carrier AirAsia.
In an article published on the Kambr website in January, AirAsia chief commercial officer Amanda Woo touted the ease of integrating the Eddy system.
"One of the unique features of Kambr's platform is its flexibility. You can achieve incremental improvement without having to rip out your entire tech stack and endure a painful implementation phase," she said.
Anthony said that Kambr also offers the advantage of being less expensive than legacy competitors. But beyond cost, he said, the pandemic exposed problems with traditional revenue management forecasting that had already existed.
For example, in the years before the pandemic, new-entry airlines were often piling capacity into specific markets, thereby rendering historical data for those markets less valuable. One way Eddy looks beyond historical data is by capturing search volumes, not just on the website of a particular subscribing airline but also on OTAs, in the GDSs and elsewhere.
"The picture of demand can be forward looking, as opposed to just historical looking," Anthony said.
Mans said one key element of Flyr's Cirrus system is that it uses artificial intelligence to map booking and demand metrics, not just on one route but on groupings of routes that cater to similar market segments, in order to anticipate pricing conditions.
Justin Jander, director of product management at airline revenue management leader PROS, said that the progress being made by startup competitors has not gone unnoticed.
"We know about the competitors that are in the market. They are doing some interesting things. There is an opportunity that they are taking advantage of during Covid to get their brand out there," he said.
But Jander said PROS hasn't been standing still during the pandemic, either. For example, the company has added modeling for Covid-19 closures as well as incorporated more flight search data into its forecasts.
He noted that late last year PROS won the contract for Breeze, the U.S. carrier started by JetBlue founder David Neeleman that plans to launch soon.
"What we have been doing in the past and will continue to be doing in the future is assessing our technology based upon what our customers are telling us. And then we take that information and build it into our products so that we continue to remain competitive in the marketplace," Jander said.
Sabre, meanwhile, has been touting its Revenue Optimizer solution during the pandemic. When JetBlue recently migrated to Revenue Optimizer from Sabre's older Revenue Manager platform, Sabre noted the diminished value of historical data due to the pandemic and added that, "Revenue Optimizer helps airlines adapt to changing market conditions based on the latest real-time market activity."
Rollins and Mans both said that as revenue management forecasting evolves, consumers won't necessarily pay more in airfare overall. Rather, pricing will be more closely aligned with demand conditions, both strong and weak.
That, in turn, will drive more variations in ticket prices.
"Our system is trying to charge more when it can to increase total revenue, and it is trying to charge less when it can to sell more seats," Mans said.
Anthony said there will indeed be a tidal wave away from legacy revenue management technology. But Kambr and Flyr aren't guaranteed to win out over the standing market leaders.
"A tidal wave could also embody those vendors moving away from some of their traditional ways to a new product or new platform," he said.