A Novel Bottom-Up Sales Channel Between Travelers and Airlines

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It is of paramount importance for airlines to fill their seats. This leads to a more efficient use of resources, with positive financial, operational and ecological impacts. It is also crucial for an airline’s success: on average, planes need to be filled at 70% of their capacity, just to break even. This is why airlines have spent significant efforts in revenue management, the practice of carefully optimizing the different fares proposed to customers. Nonetheless, the average load factor in the industry still lies below 85%. The current paradigm is top-down: revenue managers estimate the future demand for a flight, use it to the determine the optimal fares and then publish those fares through the different sales channels. Until the date of departure, they continuously monitor the flight’s occupancy. Whenever the actual market behavior differs from their prediction, they adjust the fares and wait to assess the market’s response. We propose to improve this model by introducing a novel bottom-up channel from travelers to airlines. When an agent knows there is a passenger interested in a flight, they will be able to place a bid on a seat. Airlines will have access to an interface listing such interested passengers and their offered prices. They may accept a bid and thus immediately increase the occupancy of a flight, without the need for continuous fare readjustment. This would deeply change the dynamics of the market, providing airlines with real-time information about the demand. At Option Way, we are experts in air travel. We have developed a comprehensive toolset to communicate with flight reservation systems and have conducted insightful research on airfare volatility. With airlines being a 10-billion Euro industry in Europe, and the number of passengers expected to nearly double in the next ten years, we strongly believe in the broad impact of our product, contributing to the financial health of air carriers and the more efficient use of resources.