Why airlines must move beyond filed fares for modern retailing

Airlines are no exception to the digital transformation sweeping across various industries: for more than a decade, a significant proportion of travel bookings have been made online.

As more companies ramp up their data capabilities to create dynamic, targeted experiences for consumers from advertising to post-purchase, airlines are more challenged than other industries by legacy systems and processes holding back innovations like dynamic product creation.

As airlines seek to become even more customer-centric and offer more dynamic personalized experiences, the legacy fare filing process is becoming increasingly more of a hurdle. Filed fares are a limited number of predefined prices and related business rules that airlines file with ATPCO who in turn forward these fares to all other distribution channels, systems and airlines. They have been a mainstay of the airline industry for decades and have provided a valuable way for airlines to manage their pricing.

While this has been the industry standard for filing fares for decades and served the industry well, it is time to evolve.

One of the biggest challenges posed by filed fares is their inflexibility in the new world of pricing that is emerging, “dynamic offers.” The current system of creating offers involves an entangled combination of business rules, pre-defined attributes and prices.

Although a majority of dynamically adjusted fares rely on filed content, the pre-filing process limits the flexibility of an airline to create personalized dynamic offers for its customers. To achieve efficiency in dynamic offer creation, an airline needs to define and manage product attributes independently of filed prices.

Opportunities beyond filed fare

Dynamic offer creation allows an airline to assemble a product and determine the optimum price “on the fly” based on real-time data, providing more flexibility to offer relevant deals to targeted segments using contextual customer data and science-based pricing.

The industry is transforming from pre-defined prices underpinned by filed fares and associated rules to more dynamic offer creation, allowing product or price adjustments without pre-constructing every permutation to deliver a real-time, customized offer at the time of shopping request.

However, several data and technology upgrades are necessary for airlines to reach the "promised land" of dynamic offer creation.

First, airlines need the ability to consistently decouple price from product attributes to simplify and provide enhanced flexibility. They also need a robust foundation of competitive data, integrating filed and non-filed competitor offers that are adaptable to be incorporated with new and evolving data sources such as events data to drive comprehensive market and competitive insights.

Leveraging artificial intelligence, machine learning and large language models to handle and process exponential volumes of data efficiently can allow the industry to seamlessly automate the ability to update offer components in near real-time.

In order to manage this, an airline needs a future-looking DSS (decision support system) tool that can help them not only meet the demands of today's market needs but also position them to capitalize on the opportunities of the future.

While some of these new capabilities will be achieved through technology partners, an airline may have to make internal changes. It may need to adopt a more data-driven approach to its commercial operations by collecting customer insights and making them consistently available for offer creation.

Accomplishing this may require significant changes to the way data flows across systems, how different systems are integrated and how different teams work together with a common focus on the customer. Many airlines will rely on pre-defined fares for quite some time, but many sophisticated airlines, both large and small, are transforming to build different capabilities such as AI-driven predictive analysis to create accurate dynamic offers.

Lufthansa, United Airlines and American Airlines are already experimenting with dynamic offers on their owned direct channels, where they have immediate access to this contextual data. However, publishing the same offers to interline or indirect channel partners (such as GDSs, OTAs or TMCs) presents a new set of challenges and complexity, in part addressed by establishing proprietary direct connections or adoption of NDC-based distribution.

During this massive transition, the industry needs tools, standards, and collaboration to ensure that every customer receives the best possible offer based on the data available and the capabilities of each airline at whatever their stage of maturity on every sales channel. As an industry we know that airlines must move beyond filed fares, and that transformation is already underway.