Unlocking Revenue Growth with Dynamic Pricing

How are airlines using cutting-edge dynamic pricing science to compute seat availability in the moment and dynamically apply strategies to drive revenue growth? In this session, PROS Director of Product Management, Justin Jander talks with panel guests from the airline industry to take a deep dive into the impact of dynamic pricing in enabling airlines to limit buy-down and ensure optimal revenue.

About the Speakers

Cory Garner is a leading travel technology innovator and 20-year veteran of American Airlines (AA), where he led AA's strategies for distribution, travel agency incentives, and programs for corporate customers of all sizes. He has been instrumental in driving global adoption of technologies that open up new possibilities and economic streams for travel companies. Garner was a pioneer in the airline distribution technology which was later codified by the International Air Transport Association (IATA) as its New Distribution Capability (NDC) standard. In part because of his strategic work, consumers can more easily compare airline products and airlines have access to a new, significant competitor to global distribution systems.

Justin Jander, Director of Product Management at PROS, focuses on the Revenue Management, Availability, and Dynamic Pricing products in airline passenger, airline cargo, and other transportation and logistics industries. He has been with PROS for 11 years, all within the product management group. In product management, Jander is focused on continuous improvement of the products, through new features and functionality that improve the industry-leading Science as well as enhancements to the way analysts use the system. In order to understand the needs of the always-changing industry, he has worked with customers across the world, which allows him to understand the business problem and translate that into features that can improve the products. Jander earned a B.S. in Mathematics from Stephen F. Austin State University and a M.S. degree in Statistical Science from Southern Methodist University.

Marcial Lapp is Managing Director of the Revenue Engineering group at American Airlines. His group is responsible for the systems, data, and business processes that power Revenue Management, Network Planning and Customer Insights. Lapp began his career in 2010 as an intern where he developed the optimizer for the overbooking system, still in use today (it’s been significantly enhanced since then). Following his internship, Lapp joined as Chief Scientist RM where he led the development of an improved network controls model and managed several domestic markets. Following a period managing the Mexico, Caribbean & Latin America region, most recently Lapp has been leading the Operations Research and Data Science group, responsible for the technical implementations of systems that drive revenue outcomes. Lapp earned a Ph.D. in Industrial Engineering and MBA from the University of Michigan.

Richard Cléaz-Savoyen, Senior Director, Revenue Optimization at Air Canada, has overall responsibilities for Air Canada’s Revenue Management systems science, innovation and calibration. His work supports the airline’s business objectives and continued drive towards accelerated revenue growth and sustained profitability through demand forecasting, network revenue optimization, fare availability optimization, revenue integrity, training and best practices. Cléaz-Savoyen started his career at Air Canada in 2005 when he joined the Domestic Revenue Management team as Flight Revenue Analyst. In 2012, after occupying several positions, he built the Revenue Management Science team, and led the business implementation of the current “Origin & Destination” Revenue Management system. Richard holds an Engineering degree from Ecole Centrale de Paris and a M.S. in Aeronautics and Astronautics from MIT, where he completed a thesis on Revenue Management. Since 2017, Richard is also Vice-President of AGIFORS, the Airline Group of the International Federation of Operational Research Societies. 

Full Transcript

Justin Jander: Hi, everyone, and welcome to our panel on dynamic pricing here at Outperform 2021. My name is Justin Jander and I'll be the moderator for this panel. There's been a lot of talk around dynamic pricing in the industry, and PROS has done some work in the area. But today we wanted to have the opportunity to talk to some experts about their work in dynamic pricing and what they see as the direction the industry is headed. So with that, we're going to start out things by having our panelists introduce themselves. So we'll start with Richard from Air Canada. Richard, can you tell us a little bit about yourself, your background, your time in the industry and how you got to where you are in the Revenue Management space today?...

Richard Cleaz-Savoyen: Thank you, Justin. Hi, everyone. So I’ve been with Air Canada for more than 15 years now. Time flies. I have a background in aeronautical engineering and then Revenue Management. I started at AC right out of school and started with managing flights and pricing for a bit. And then I had the opportunity to work on the project that delivered the transition of our RM systems from Lake to Wendy and PROS RME back in 2015. It was a game changer in our practice of Revenue Management. And ever since we continue to innovate. And so today my team is responsible for the RM systems, their calibration, innovation, looking at the future and as well as embedding all of these systems in the daily practice of our Revenue Management users and practitioners. So I'm very excited to be here today. Thank you for the invitation.

Justin Jander: Yeah, and thank you for joining us. And yeah, Marcial, if you want to continue on, tell us. Sure, yeah.

Marcial Lapp: So Marcial Lapp with American Airlines have been with the company for probably about 10 years at this point, started in Revenue Management have been in Revenue Management. Now am responsible for the revenue engineering team, which encompasses both pricing yield management, but also encompasses functions like revenue integrity. What else do we have, customer insights. We just added and and so the idea really of the team is to think about how do we solve sort of Revenue Management problems today? So business process, how do we make sure that everybody is kind of trying to maximize revenue across the company, but also thinking about what is the future? To Richard's point in terms of integrating new data sources, how do we think about our customer, not just flights, right? And so that's kind of the idea behind creating this revenue engineering organization have a lot of technical folks that try to solve those kind of problems. And that's why I think we're here talking about things like the next generation of pricing.

Justin Jander: Great, yeah, and thanks for joining us today. And Cory, how about you?

Cory Garner: I'm Cory Garner. I'm the co-CEO of T2RL, also known as travel technology research. Just recently joined the company in the last six months or so, but for the prior 20 years I was with American Airlines and at American Airlines I was the head of sales strategy and distribution and most notably involved in some of the early going of the NDC trend. So involved in rolling out NDC for American Airlines, both that at a company and industry level. And now what I do with T2RL is I help airlines all over the globe procure their airline technology and marry that together with their distribution strategy. So all told, we help about 60 airlines, about 30% of the world's pbs'

Justin Jander: Awesome well, again, thank you to all of our panelists. I think, as our audience can tell, we've got a really great background across all of our different people, and we're excited to hear from you today, and I'm going to ask you some questions. So we'll bounce through throughout. You'll hear kind of opportunities to talk to one another as well, so definitely jump right in. So I think we're at the start. We want to start broad. So I think we want each of you to tell us what dynamic pricing means to you. And so, Cory, I think we'll start with you. What do you think dynamic pricing means?

Cory Garner: It's a great question. I'm very particular about this one, actually, because I think a lot of people conflate the issues of dynamic pricing and personalized pricing together. To me, they are two very different concepts. Dynamic pricing to me is the calculation of a market clearing price of an O and D or an ancillary product. In that moment, just the generic market clearing price. Personalized pricing goes one step beyond that, which takes into account who is the customer, what might they be looking for and things like that affect the suite of products that are offered and also the price points that are offered.

Justin Jander: That's great. Yeah, I think that's a good perspective and Richard, how about you? What what would you define dynamic pricing as?

Richard Cleaz-Savoyen: So in our case, we're trying to we've tried to ban the term dynamic pricing. It refers to both the past and the future, and it's been associated with so many different things. So it's more for clarity purposes. But I believe in the past 20, 30 years, we've done a lot of things that are very dynamic from a pricing standpoint, just by the nature of our inventory evolves as time passes and we get closer to departure, prices dynamically, dynamically change already we can say that, but we're looking at the next stage of evolution on that matter. And so we're kind of distinguishing between continuous pricing, which is the ability to present some prices to the customers that are different from those that we traditionally file and publish ahead of time. And that can range from 1 dollar to the next all the way across the certain range. We distinguish that from, let's say, a contextualized continuous pricing, which means that this price may vary based on the context of the request and to the next stage, which would be contextualized offers that include the dimension of packaging and bundling, potentially not just the flight, but also selected ancillaries, which may be relevant in the context of the request and that may include all, not some degree of personalization. So that's the king of the three, the three components that I would include under dynamic pricing at this point.

Marcial Lapp: And by the way, Justin, thank you for actually, I think, starting this panel by asking the question of, hey, how do you define this? Because a lot of I'll copy a little bit of what Richard was saying. The idea that we as an industry have always been dynamic in the sense of right. We don't charge a single price for a flight all the time, right? And we have all kinds of constructs. My I guess, my definition again follows kind of the rails of basically what Cory and Richard have been saying in the sense of what we're trying to figure out what does this industry look like as we move forward from a technology perspective. So this idea that we have filed price points today in a lot of our and, basically whenever we distribute our product, we have this thing called inventory, which manipulates sort of the availability that is that's been a great construct that's worked for many, many years, right? In my mind, that is very dynamic because it is a function of how many customers are asking how much inventory you have available per bucket and so on and so forth. So I think kind of migrated again. Also away from this term called dynamic pricing, it is more sort of continuous pricing world where I think the idea of what we're trying to capture is the thought that I no longer have to pre-file price points, right? And that's why I think what Cory was also mentioning is the idea that I can on the spot have a calculation. I still have a calculation engine that I need to build and make sure that thing can answer relatively quickly. And so and so forth. But the idea is that I can have these price points essentially be calculated on the fly, but depending on who's asking and really, that is all about in my mind customer segmentation. That's what we try to do, right, the way we make money in Revenue Management is understanding who the customer is, what is their willingness to pay and then try to figure out how to charge them accordingly. We have had systems in place for many years. Now we're trying to figure out what does that future look like. And I would also say that, by the way, this feature isn't completely defined yet. I think that's why we have these panels. That's why we have conferences to get together and say, hey, what do you think? Hey, what do you think? And we're still trying to kind of evolve that concept. And so probably over the next 5 to 10 years, we'll get somewhere that is going to be a lot more dynamic, a lot more continuous. And then we'll have to figure out how to distribute it because that's kind of the thing that is not so easy in this new world so.

Justin Jander: Another story that comes to mind is we have the product RTDP, it stands for Real Time Dynamic Pricing. It's been around since the early mid 2000s. It was called dynamic pricing at the time. And it's exactly to your point, Marcial. We've been doing dynamic pricing in the sense of a lot of things are dynamic about our pricing. It's just now we're talking about the continuous aspect. We're talking about the individual personalization of it. And I think that's really where why we're here today, right? That's what the next step is along that journey. So, all right, so let's get a little more specific. So there's we're looking for some of the key components to get to dynamic pricing. So, you know, is it science? Is it the workflow? How do we consider what the user's interaction is with dynamic pricing? I think those are a lot of the key things that it's easy to talk about the concepts of dynamic pricing. We defined it and came up with close to similar answers. But now when you talk about what's the most important part of dynamic pricing, we want to kind of understand what your thoughts are. So, Marcial, you ended us last time. How about you kick us off on this one?

Marcial Lapp: And by the way, I think the answer is all of the above, right? As as much as that is, I'm trying not to make it a cop out answer, but I think you're right first. So, so at American we've been working on, I'm going to call it continuous pricing from now on, and we have I'm going to call them proof of concepts underway to figure out, well, how do we actually do this starting off with your point about science. Traditional systems, I would say from an inventory perspective and a pricing perspective work well together to take those systems and turn them into a give me a continuous pricing answer is not easy. The current fair filing infrastructure provides certain guardrails, I would say, right. We probably have all thought about what happens when I have a $10 bid price. Well, what's the price I'm going to ask for, right? And that concerns us, right? So, so we've been experimenting with this particular for our redemption product. So it's a very contained ecosystem, right? This is not something I have to worry about distributing to the world, but the idea is today that those are all dynamically priced or continuously priced, actually. And so we learned a lot about the science and we keep making that better. The other point that you mentioned was around sort of the infrastructure that you need. So again, solve the science part, then you have to figure out how to get it across all the different parts of the world. I'm probably going to defer that to Cory because of all his experience, but that is not an easy problem to solve, partly because you probably need something like NDC to actually get the distribution infrastructure in place, and we are making progress on that. But again, you know, COVID probably set the industry a little bit back because we all had not as much money to invest. We're still working on getting more money to invest, right? And so everybody kind of hunkered down in the traditional space a little bit. And so we're trying to figure out how to get beyond that, meaning that we will go and try to figure out how to create the right NDC direct connects, if you will, to be able to then distribute those price points into the marketplace. And then, by the way, the thing that really nobody ever wants to talk about is what I call servicing. So we love to sell stuff to customers, right? And then when we say, hey, you want to make a change? Sorry no, that's really hard, right? And so those are all things that we need as an industry. By the way, this is not an American Airlines problem in my mind. This is an industry problem, is how do we actually build all the right infrastructure sort of with the right technology vendors, with IATA to help create some standardization to some degree, so we can solve this problem like I said, not just for one carrier at a time, but actually have some leading carriers that are interested in solving this problem for an industry working with the right technology partners to get it done.

Justin Jander: Perfect. Yeah and I think, Cory, that's a perfect segue into to your area. So when you think about dynamic pricing, you've got science, the users, the workflows, the data and distribution. So what do you think kind of are the key components there? And how do we get to the points that Marcial is making?

Cory Garner: Distribution, if everything else is a science, then distribution is the art of getting it to market because that is less of a technical question in my mind and more of a commercial question. The technology is, Marcial said, we've got it today. It's called NDC and the airline can use it. The problem is you have to get all of your third party distribution channels working with you willingly to do that, and some may throw up objections about the difficulty of implementing NDC just logistically. But the bigger problems are. Entities like the GDSs, who, yeah, sure, you want to do NDC’s., that's great, but you have to give me everything. Yeah and it doesn't matter that I charge a really high price for the privilege of taking everything from. And so what we find is we find this uneven rollout of NDC carrier by carrier, region by region depends upon who your provider is, depends upon whether you want to use the NDC API from your provider. And it really plays very interestingly into the game theory. And maybe we'll talk about that at some point on this panel, but it's like, think of it like the 5G network rollouts, you know, the first carriers that are able to roll out their 5G networks to third party distribution channels. You know, every carrier might have a dynamic pricing engine, but only some may have the network to actually put it out there. And then that unleashes some really weird and dangerous dynamics competitively. And so that would be interesting to see play out.

Justin Jander: Yeah, I think it's a really good point. I think we can hit on that in a later question because I think it's AI know Marshall has mentioned it before as well the potential race to the bottom in some cases, if you start, no longer have the protections in place. So, Richard, from your side, you know, same question thinking about the different components, particularly, I know you're really in touch with the user side of your business. I'd like to get your thoughts on generally the different components, but also the user's perspective on what dynamic pricing means or continuous pricing if we're using the new term here today.

Richard Cleaz-Savoyen: Sure so we're working as well. Like, like Marcial mentioned on proof of concepts for some of these, some of these new functionalities. And as we get into it, I think there's one big difference versus when we implemented and when the system a few years back is that it's the scope is much bigger and it requires an alignment across all of commercial right because you're touching like it was mentioned to distribution, you're pitching to the core of the models as well. You need like a commercial alignment and policy framework around it. You need alignment on the fact that you're going to be proposing different fares to different people, different packages, different bundles. The data component is also very important because yes, we used to do a lot of dynamic stuff already, but now we're introducing even more models that have to be updated and refreshed in real time and more dynamically, let's say and from different data sources. So there's a big data component into that. Of course, the models, I think we've mentioned distribution as well. All the technical enablement it was mentioned already, but that includes shopping. Servicing was also down the line, so it's definitely not contained just within Revenue Management. And then as much as we want to develop something ourselves, there's always the opportunity and probably some benefits associated with also being able to do that, not just on our own online network, but including our partners. And every time we go down that road, we all know it's getting more complicated, but it's an important component as the airlines are more and more integrated today across joint ventures and alliances. And finally, like you mentioned, roles and organizations, so continuous pricing is bringing together the aspect of managing the demand and managing the price very close to one another. So we're expecting or we're thinking that new roles are going to emerge out of this implementation. If you think about offer optimization, you're bringing the notion of ancillary in the mix. So that's one additional aspect to this new role. And then beyond that, now you have this, let's say, super TDP now that can deliver these kind of functionalities that triggered some function functions that used to be in the digital team distribution, et cetera so how do we get reorganized around it so that we have the proper controls and proper decision process to continue to optimize everything? So there's definitely some questions to be answered when it comes to changes to roles and potentially some organizational changes as well.

Justin Jander: Great yeah, that's really good. And this is great insight from all of you. I think I want to dive a little bit deeper because I think into the distribution question. I think as you know, good Revenue Management practitioners, scientists, you just think we'll just calculate the price. I mean, it's that easy, right? Just come up with the price and just get it out to the market. But I think we've already started kind of hearing how there's some complexities in doing that. So I think if we can kind of dive in a little bit deeper. Richard let's start with you on this, since we heard a little bit more from these guys already on it. What are you thinking about in terms of what areas are you focused on in terms of fulfillment? The GDS’s, full content agreements, all those kinds of components that you have to deal with. And then also your own internal systems. What are you looking at in terms of the distribution side of continuous price?

Richard Cleaz-Savoyen: Well, you know, we've been constrained with the 26 classes for quite a while, and we've done a lot of stretching right of our current models and in science so that we can maximize revenues within this context. But I think we kind of reaching the limit now and the next steps in the evolution of Revenue Management and the next opportunities for additional revenue generation are coming from such concepts and ideas that require more flexibility around the classes framework that we currently have today. So to the points that were made earlier. It it seems relatively clear that the channels that offer the more flexibility on that matter are definitely the dot.coms and NDC and all related channels. So naturally that is going to be a preferred areas where we can test and see how the customers respond to these new technologies. But at the same time, it would be unreal to completely forget about all the other channels. So our strategy needs to encompass solutions that will allow us to enable such functionalities across a maximum number of our customer touchpoints. And there's definitely a lot to be discussed about that internally, and I have to say we're just getting started on that matter.

Justin Jander: Great so, Marcial, what would you add from a distribution perspective and all of those downstream systems, what would you say?

Marcial Lapp: A lot. So Richard made a bunch of good points. The I think the first thing to think about is this thing called data. So we talk a lot about what are our competitors selling, right? We certainly do that. I guarantee you every airline does this right. In this continuous pricing world, what does that data look like and how do I get that data? And if I'm kind of trading off sort of current sort of atypical affairs for something else, how much am I going to pay for that? Because, by the way, getting a massive volumes of data, as you guys all know, is not cheap. So data is one. I think the second thing is, and this becomes a little bit more of a practical, probably a little bit more of a I'm going to call it a computer sciencey question in the sense of in the continuous pricing space. Let me back up, today we have I'm going to call it shopping engines kind of all over the world. And what I mean by shopping engines I have I have my dot com, which might be powered by some provider. I have GDS’s that are effectively shopping engines. I have OTAs that have built their own shopping engines, right? And so they all work off of a current framework today, which we all know in inventory and pricing, right? So now if I switch to this continuous pricing world, presumably that means that unless I replicate my calculation logic in many different places, I'm going to have one single engine and I'm obviously not talking about one computer, but I'm thinking of some sort of cloud construct. But the point is, I have one place where all of my shopping requests go, how is that going to work? Right and and I think again, that's one of those things that we haven't quite answered yet. One, because that tends to be very expensive. If if I have to pay for all the computation, maybe it's cheaper than what I do today across all my distribution channels, so I have to have that one sort of shopping engine. Some carriers out there have created, I think, constructs trying to sort of append a little bit the distribution model in the sense of, I'm going to call it like a materialization construct, meaning that, hey, by the way, if you keep looking but not booking right, look, look, look to book ratios that if you look that cost me money as the airline, right? So if you look a lot but you never book, maybe you get worse content going forward. Again, I'm not advocating for it, but those are the kind of ideas that are being thrown around to sort of say, hey, look, I can't I can't pay this entire Azure or Google Cloud or whoever your favorite cloud provider is. I can't pay those giant bills, right? So I have to be smart with my compute, and that's very expensive going forward. So so again, going back to this construct that I'm kind of a single shopping engine, I have to figure out how to orchestrate all that. That's just like I said, just from a the beginning part of the distribution, if you will like, that's the start. And then there's some practical questions. So things that, for example, IATA’s trying to solve. Give you an idea is if a customer is searching for is part of O&D, they want to go from, let's say, from Austin all the way to Frankfurt, who's the airline that's going to answer those requests, right? Who governs that? So does American Airlines get to play? I hope so, because we have a pretty good service in that O&D right. Does does Air Canada get to play? I don't know. Right so the point is, right now the GDS serves that purpose, right? They build a schedule that they have some rules around that in the future. The question is again, which which airlines get to sort of again answer the request from a certain customer out there. So like I said, a lot of questions that we still need to answer as this, and this is why I think this is an evolutionary process in a way, as we, you know, think about paving the road here for the next probably 5 to 10 years in a way.

Justin Jander: It makes a lot of sense. So I think, Corey, from your perspective, obviously, we've got panelists from American and Air Canada here, big airlines doing a lot in the space think, you know, looking for the next step. You have the ability to talk to a lot of airlines around the world, some that are as large as American and Air Canada, some that aren't. And so I think your perspective would be good to get here just to kind of see what are the challenges that all the airline? Well, not all. But, you know, a lot of the airlines are facing in this space. So what are you kind of hearing along the same question, but just a broader picture on that.

Cory Garner: Well, the first challenge is just doing what we're doing here on this panel. It's getting your hands around the topic. And generally speaking, the types of airlines that we see globally are your mid-sized carriers are the ones that we typically talk to so that the big guys have people like Marcial and Richard and they go, figure it out. But the mid-sized guys need people to talk to. And so what I find in that case is we've got airlines shaking out in three different camps at this point. You've got airlines that are in markets with ULCCs that have been doing dynamic pricing from the beginning. They don't know anything else. That's what they've been doing on their websites. And so that's been a competitive reality for them for some time. And so they are the early adopters of continuous pricing and they are deploying that on O&Ds where they are head to head with OTCs. You have other airlines that kind of had their head in the sand, really. What the talking point sound like from airlines like that is, you know, nobody is really doing dynamic pricing. They're doing dynamic discounting. They're not really pricing along a demand curve. And until somebody has a really amazing tool, you know, I'm not going to do it, I'm not going to consider it. And then you've got a third group of airlines, which I think is really interesting that are quietly preparing. And so perhaps not, they're not in a market where they are head to head with an immediate need to use the platform, but rather they're equipping for a future world where they know that they'll need it. And those are the types of airlines that are also working on their distribution strategies at the same time and rolling out there NDC connections. And so you have sleeping giants out there that will have some technology ready for the moment when it's needed. So there's a bit of a Cold War happening, actually.

Justin Jander: Interesting I mean, that's a great perspective, and I think it really does show the breadth of the different carriers that are out there that are considering all the different possibilities. So I think I want to go back to something that was brought up before Cory, you mentioned about game theory, and there's some interesting things around dynamic or continuous pricing and game theory. I think we should go back to that. Maybe you could give us a little bit of a what you mean by that, what you're hearing. And that way we can see what's sort of the answers are or comments are about that.

Cory Garner: Yeah, sure. I've worked with some RM folks in the past, present company excluded that, you know, think that their decisions happen in a vacuum and that if you got the best technology, the best algorithm, the best team, the best everything else, then you're going to have the revenue optimal result. But the reality is you don't control what your competitors are doing in a lot of cases, you're only as smart as your dumbest competitor. And so that is what I meant when I said game theory. It's considering the moving parts and the knock on effects of any decision that you take as it relates to continuous pricing. Whether that decision be you're not going to do it or you are going to do it and how you're going to do it, but I leave it to the practitioners to kind of explain how they think through the game theory.

Justin Jander: All right, well, Marcial, lets get your thoughts on it.

Marcial Lapp: Great OK. I guess I'll get us started and then, Richard, you can tell me if you agree or not. So let me put some context around this. The question here really becomes just in terms of when, when we, RM practitioners in terms of how do we think about our representation of our product in the marketplace, what I mean by that is you think about how customers make decisions, what drives somebody to fly with American Airlines versus somebody flying, perhaps with Air Canada or wherever the competitor is. If you believe and you know, we've always held this as a truism in this industry is that the price and schedule is what matters. I believe that to be true, there are and I'm going to go back and play on the discussion we had earlier about data. They're data providers out to these days that are very interested in giving you the airline insight in terms of customer choice. What I mean by that is if you imagine that you're sitting in front of your computer or your favorite device and you're shopping for air travel actually following kind of your eyeballs, right? And saying what is actually happening kind of like in your mind, we always believe that our customers are rational. That may be true or may not be true. But the more that we can gain information and insight in terms of why is somebody choosing my particular product, the more I can understand the value of my product. So what I mean by that is when I think about competing in like I said this, this airline travel space again, we've always thought that price is the ultimate decision maker. And to Richard's point, we only have 26 buckets today that I have to make a decision in terms of what those prices are when they go continuous, there may be an opportunity to create upsell opportunity for my particular airline to say, hey, look, I have what I call schedule depth. In other words, we have many more flights than anybody else. I should be able to monetize that. You may have seen some recent announcements for American Airlines. What we are actively doing is we're trying to build. We are the world's largest carrier. We are trying to build the world's largest network. That is, we are signing up partners that are flying with us. And so what we're trying to do there is monetize the fact that we are able to get you from A to B on an American Airlines or American Airlines partner product, we should be able to monetize that. And so this is where I see the role of continuous pricing coming in to say what, how am I able to extract that additional value because I am offering the customer a better product than perhaps my competitor? So what we are actively working on as a proof of concept is much less about what is the entry fare in the market, but actually what is the upsell amount that I can monetize today when it comes to, for example, my premium economy product, my life flat business product that is, I believe, certainly a product that is much superior to some of our competitors, right? And so when I think about the application of this or at least the first application of this, that is where our focus is because again, it is trying to figure out how to price our products appropriately, given the fact that we are limited by these buckets today. So that's kind of my two cents.

Justin Jander: Interesting. All right, Richard anything to add to that?

Richard Cleaz-Savoyen: Super interesting first, I think continuous pricing introduces pure continuous pricing introduces some risk in terms of how airline will respond to what the competitor is offering in order to continue to generate revenue. However, I see continuous pricing more as a transition in the evolution of revenue management, and I think our eyes are more on offer optimization and where the customer experience and the importance and importance of the care, for the customer, for the product that we present will introduce a bias in the game theory if you want. There's more and more airlines that are putting customer experience at the forefront in there in the evolution of how they want to interact with the customer in the product that they offer, offering in the care, in packaging, the proper ancillaries that will respond to the expectation of such and such customer segment. So I'm not, I'm not too concerned. Like in the end state, I think there's definitely a way forward that would make sure that we continue to extract more revenue like Marcial mentioned, but at the same time, allow us to leverage the fact that we can price whatever we want, whatever we think is relevant for the product that we want to present to the customers.

Marcial Lapp: By the way, one quick follow up point, I think, you know, something that I think we as airlines do a terrible job of is actually communicating what our products are. So what I mean by that is, you know, when you think about, for example, the American Airlines product suite, everything from basic economy to what we call a flagship first, which is our kind of very high end premium product. To be able to, we do, I think, an OK job on our own website, our own in terms of illustrating with some pictures, with some descriptions of what these different products are. But just like every other airline, we're probably 50% indirect, meaning that we have customers right that don't book directly with us. In those cases I don't control the display, nor do I really have a very good idea of how does that third party then display my products right and communicate that to the customer. So, so part of, I think, what we also as an industry need to figure out how to solve is that communication. I'm going to call it a communication gap, really in the sense of if I'm trying to monetize my product, the first thing I need to do is be able to explain what you're getting right? Because if you just say, oh, I'm buying a business class fare, well, OK, you probably travel a lot. You probably travel a lot. So you have an idea of what that means, right? But if I'm trying to monetize this to a customer and say, hey, look, there's really value in this product I'm offering and all it says is business, that probably doesn't mean a whole lot for the novice traveler, right? So to Richard's point, is really trying to figure out how do we get better as an industry at communicating our products such that we can actually monetize them? And again, because this industry is built on not just direct distribution, but also indirect distribution, we have to figure out how to get better at that.

Justin Jander: It's a really good perspective, and I think that's especially with the post-covid kind of things that are happening in the industry where your typical business traveler isn't the one traveling as much anymore, and there is opportunity in your premium cabins and different products, new travelers altogether. There is an opportunity to sell to them. And if they don't know what business class means on each individual airline or don't do the research, it can be it's an opportunity missed at that point. Well, I think there's been a great amount of conversation today, and I think the way that we should wrap this up is to get the perspective on what the next 10 years looks like. And I picked 10 years because about 10 years ago, we at PROS kind of set ourselves up to start the journey towards dynamic and continuous pricing. We've had some success in the area and now we're having this conversation. It's been really productive and good. And want to get each of your perspective on where you see the next 10 years, what's going to happen next? And so, Cory, I think it'd be great if we can start with you on what you think that looks like.

Cory Garner: I want to say about 10 years ago, IATA introduced the NDC standard, and we are now at about 5% adoption globally.

Marcial Lapp: Exponential.

Cory Garner: That's right. So if I were to give a realistic answer, I would be willing to bet that we are still laying out the infrastructure for continuous pricing systems. And if it follows the pattern of history, history shows that these commercial strategy type systems, they get pulled out of the legacy infrastructure and the science behind these systems go screaming out ahead of what the industry infrastructure can deliver. And so I think we're going to go through a long period of time where the industry infrastructure, both the PSS fulfilling all these offers and also the distribution channels will be catching up for many years. But hopefully at the end of those 10 years, we're getting to some really interesting personalization and segmentation. There are customers out there. The customers are not defined by elite status. They're defined by their reason for travel and what their preferences are. And I think that if we can unleash all the capabilities that these core commercial strategy systems have, customers will have a materially better experience at the end of these 10 years.

Justin Jander: That's awesome. I think that's a really great perspective. And yeah, I'm certain you're right that there's going to be that build up time that takes some time, but hopefully the end game is really what gets us to the spot where we want to be. Richard, how about you? What would you say the next 10 years looks like for us?

Richard Cleaz-Savoyen: OK, so I'm not sure for English term, but I'm assuming that the deportation won't be yet. Let's hope not. We can monetize. So I think we've discussed many great opportunities and concepts. I think we're at the beginning of the deployment of these concepts. So I agree with what was said that if we can manage to deploy some of these concepts around what I referred to at the beginning as contextualized offers that leverage continuous pricing that leverage customer segmentation, more transparency to our customers, more relevant offers and something that we can sell across the network of our partners as well. That would be fantastic if we can achieve that before 10 years. So I'm hopeful that it's going to be a step by step approach, but we're getting started and that's very exciting.

Justin Jander: Great. Yeah and thank you very much for that answer. It's really, again, very insightful on that. Well, Marcial, I guess wrap us up here on what you think the next 10 years looks like.

Marcial Lapp: Yeah, and it's look, I agree with both of, you know, both Cory and Richard on this. In my mind, I think the first question we need to ask ourselves is really around sort of technology. What I mean by that is. You know, this industry has a history of taking legacy technology and just kind of making it electronic, so I'm thinking like we used to have tickets now we have etickets. It's the same thing. It's just an electronic version. And that was because, I think partly because of convenience. And so as we think about this sort of I'm not maybe it's not an evolution. Maybe it is a revolution as we really think about taking these old constructs that we have and really putting them by the wayside and saying, here's where we're going to build towards the future. So this includes both sort of the shopping side of things, but it also includes the PSS. What does that look like going in the future? We will have both of these running, I think in parallel in a while, to Richard's point, we all have partners that we need to work with. All our partners have different there. There are different lines on the Gantt chart, if you will, in terms of their readiness. But the nice part is that everybody is very excited about these topics. So to Cory's point earlier, if you're a very large airline, there is somebody that I can talk to and say, hey, have you have we talked about these concepts and we can have a good conversation about how to move this industry forward. The thing that has me a little concern, I think, is. In a way, we would like to move into the same direction, what I mean by that is we're not trying to design the same pricing engine, but we need some standards that allow us to communicate, right? I think Cory you made the point earlier that we have folks that have done continuous pricing forever. Yes, they have. They don't have partners, right? And that makes their life fairly easy. We all because we are building these massive networks and we're trying to create these great customer experiences where you can travel across the world. And you should really never experience sort of a gap in your experience because we've done a really good job of getting you there. All of that takes a lot of orchestration. It takes a lot of technology to go make happen. And like I said in my mind, it takes our current technology stack that isn't capable of doing these things and really reinventing that as we go forward. So there's a real opportunity here for all of us to really rethink of all the investment that we've done so far to kind of build on top of our stack and really build a parallel stack right next to it and say, here's how we're going to do it right. And by the way, I need to convince my finance folks and say, hey, by the way, our cost are going to go up for a time, right, because I need to build both of these things in parallel and that will generate additional costs. That tends to be a hard conversation in the airline business. But in my mind, that's really the only way that we can move this entire business forward. So there are my two cents.

Justin Jander: Well, that's great. And I think overall, just there's just so much opportunity in the next 10 years. I think that's been kind of what I took away from the conversation today. There's just a whole lot of chances for us to work together as an industry to solve the problems that have been talked about today and really get to a point that's there. And I think we've got that. You know, one of the things that I think just listening to the conversation today, having experts in the room that want to solve the problem and sitting down in Cory as you said it, you know, getting together as a group and talking about these problems and panels like this can help people start thinking about it, start solving these, bringing more people to the table to start solving the problem. And that's going to lead us to the next direction, the next place where we can get to the goals that each of you kind of identified for the next 10 years. So I just want to say thank you to all three of you for joining us today. Again, been really insightful and really appreciate the time. Each of our panelists were kind enough to agree if you have any questions for them, feel free to reach out to them on LinkedIn. There'll be more than happy to answer your questions that from in that way and again, we really appreciate it and Thanks for joining us today.

Marcial Lapp: Great thank you, Justin.

Previous Article
The Shifting Distribution Landscape
The Shifting Distribution Landscape

The airline industry is forever changed after the COVID-19 pandemic. Join industry leaders across airline a...

Next Article
Partnering to Accelerate Time to Value and Maximize Your Potential
Partnering to Accelerate Time to Value and Maximize Your Potential

René Aguiluz explains how Horn Solutions partners with PROS to accelerate the time to value and maximize th...