Ticket pricing is becoming a thing of the past, says company that offers AI revenue management tools. Pictured… (+) Passengers check in at LAX in 2008. (Photo: David McNew)
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An Israeli company says airline revenue management systems, first developed in the 1950s, need an artificial intelligence update.
“In a legacy world like airlines, the infrastructure is old,” Fetcher CEO Roy Cooper said in an interview. The problem with legacy revenue management systems is that ultimately “humans still need to make the pricing decisions,” he said. But “AI looks at millions of data points and simulates what the best next action is to meet the airline's goals,” he said.
In typical revenue management, fare levels are set in buckets; when one bucket sells out, you move on to the next. “AI gives us a lot more power in our decision-making around pricing, not just by making fares higher when one bucket sells out,” Cooper says.
He said the current revenue management systems are “pretty confusing” and “inconsistent.” Large airlines like Delta have their own revenue management systems that they are updating, but smaller airlines are either trying to catch up or buying them from vendors like Amadeus.
At an investor conference in December, Delta President Glenn Hohenstein said the airline had recently begun experimenting with AI in pricing. He said the technology will help determine “what people are willing to pay for premium products relative to the base fare,” noting that Delta's pricing analysts can check whether the technology is recommending what the airline should charge. “It takes a lot of time and effort out of the feedback loop and really automates it, makes it more efficient and accelerates our ability to act quickly,” he said.
While Delta Air Lines appears to be leading the way in using AI in revenue management, it’s clear that many aspects of the airline industry can be enhanced with newer, faster technology.
United Airlines announced Tuesday that it's using AI to provide passengers with detailed information via text message about flight delays and schedule changes. “Earlier this year, we started using gen AI to help craft these messages,” the company said in a statement. “Now, gen AI supports customer messaging by reviewing flight data and generating suggested text updates.”
“The addition of Generation AI has enabled our Storytellers to increase the number of custom flight updates sent, ensuring more flights receive more relevant and helpful information,” United said. American Airlines did not respond to an email asking about its use of AI.
Additionally, UK-based travel booking company Travelport said on Wednesday it recently launched a tool that uses AI to search billions of travel options across hundreds of airlines. Travelport, which supports travel agents and online booking sites, said the tool returns search results faster than the average search response time on airlines' direct channels.
Fetcher's Cooper said revenue management “collects data points as humans make decisions,” and there are lots of data points — not just fares and schedules but “weather and fuel hedges and politics and seasonality.” Traditional revenue management looks primarily at “consumer buying velocity.” For example, if a ticket sells for $200 and demand drives the price to $275, “everyone stops buying,” he said.
He says the Fetcherr models are better suited to a price range between $200 and $275. How does Fetcherr choose its price range? “That's our secret sauce,” he says. “We've been training the engine with all the data we can get our hands on. We're very secretive about how we work. We know we're developing something new.”
Fetcher says its airline clients include Azur Airlines, Royal Air Maroc, Virgin Atlantic, Viva Aerobus and WestJet. Fetcher's system is “extremely versatile,” Cooper says. “It can connect to almost anything, anywhere. It can automate all of the manual processes. It puts all the information in front of the analysts, reducing their day-to-day work. The AI will recommend changes that need to be made to every fare.”
Fetcher was founded in 2019 and has offices in Netanya, Israel; Miami; and Warsaw. Cooper said the company is profitable, with revenue in the tens of millions of dollars, but declined to provide details. The company announced it had raised $90 million in June, bringing its total funding to $111 million. ted
