Flying with your eyes closed

There are cases when a global crisis is needed to make markets realize that immediate change is required. This is precisely what happened in the Covid-19 crisis. Most airlines in the world had finally realized that the old infrastructure with its outdated models for forecasting demand and pricing is flawed. The technological systems they had been using since the middle of the last century cannot function in the new world.

Most, if not all, of the world’s leading revenue management companies, have stood helpless in the past year. Airlines have returned one after another to manually model pricing using Excel and closed their redundant systems that still show expectations from past data-based demand.

Companies like Amadeus admit, their existing systems, based on historical information, are no longer relevant. Amadeus think we need to move to sophisticated models that can provide data in real-time.

Instead of developing innovative systems, such as those used in the sophisticated markets, Amadeus created patchwork solutions that mostly benefit themselves and leave the rest of the industry blind.

For example, Amadeus, a leader in aviation management systems, recently announced with great fanfare that following the realization that the old models are not working correctly, it is launching a new add-on to the existing return system. A system that will solve their problem of real-time modeling demand. This plugin tracks real-time competitor behavior and compares it with the company’s competitor behavior analysis. From there, they get more accurate recommendations on how to price.

However, we fail to see the point of relying on competitors who also have up-to-date information on demand. Don’t they use the same return management systems? It seems like the power of the blind leading the blind.

The real solution should come from innovative technologies that are based on a similar idea. After all, there are markets whose whole decision-making process consists of algorithms that replaced humans and can read countless information points from a wide range. These algorithms can cross-reference their data and know precisely the right demand and pricing needed at any given moment. Sophisticated markets like Algo-trading or E-commerce are flourish and thrive and are at their best in times of instability. They have the ability to read so many different information points in real-time, connect them, and get a clear picture at any given moment. They are giving companies the power to make daily decisions on how to price their product without flinching.

The coming year is a rare opportunity for airlines. The smart airline should upgrade their technology systems. Those who will base their model on patchwork solutions and look for innovative solutions will come out of the crisis with a more considerable market share, customer understanding, and a higher profit margin than before.

Roi Cohen is CEO of Fetcherr, a company that specializes in AI-based pricing systems for traditional markets.