Just as travel buyers are closing in on the airline industry’s New Distribution Capability, another disruptive twist is taking flight: Continuous pricing.
Borrowing a page from the hotel industry’s dynamic rate models, continuous pricing replaces fixed fare buckets with fluid prices that adjust in real time based on demand, booking patterns and market conditions. In theory, it allows airlines to offer more competitive, personalized fares, but it also raises new challenges for corporate travel programs built on predictability and transparency.
To begin with, it would help to put a framework around this concept. What is continuous pricing, and how does it differ from the historic model airlines have used to distribute their inventory?
Nicola Ping, global manager of travel distribution for Flight Centre Travel Group, explains traditional fare filing involves airlines creating fares and assigning them to each of the 26 letters of the alphabet. Each fare is then associated with a set of rules, such as minimum stay requirements, refundability conditions, or advance purchases. ATPCO manages these fares and then distributes them to the correct entities (websites, travel agents, GDS, etc.). These fares remain static until they are filed again.
“Continuous pricing allows for more prices to be created so there is no longer a restriction based on the 26 letters of the alphabet,” she says. “And typically, the difference between booking classes is smaller. Airlines can create continuous pricing in many ways, either internally themselves based on rules, or by using additional ATPCO features.”
Therefore, dynamic pricing is a model that allows airlines to create fares based on internal criteria at the time the customer is shopping. This is the long-term goal for many airlines; however, it does require considerable changes to back-end technology.
Peter Vlitas, executive vice president, partner relations for Internova Travel Group, notes that NDC is a distribution standard that allows airlines to share content more dynamically, but an airline can adopt NDC without implementing continuous pricing, as traditionally filed fares may still sit behind the system.
“With continuous pricing, which clearly benefit the airlines, airlines can move the price up, depending on demand,” he explains. “Continuous pricing follows a curve rather than fixed fare buckets. The first seat might sell for $300, but if demand rises, the price can quickly increase. Airlines can also offer unique pricing based on passenger loyalty and what they know about the traveler.”
According to John Balloch, chief partnership officer global air and GDS at CTM, most airlines are likely to adopt continuous pricing at some stage of their NDC journey, due to the positive yield results it delivers.
“Continuous pricing allows airlines to generate more dynamic offers, potentially millions of price points based on demand, competition and customer context,” he says. “There is the ability for an airline to offer reduced pricing via continuous pricing. However, very few airlines so far have chosen to adopt reduced yield options. Still, it is the most effective yielding tool available to airline revenue management teams.”
NDC and Airline Strategy
As airlines seek greater control over distribution through their own APIs, some in the industry are questioning whether continuous pricing will enhance value for buyers or simply make it harder to know if they’re getting the best deal.
Julian Russell, executive director of IT and supplier relations at GlobalStar Travel Management, cautions that continuous pricing could potentially have a significant impact on corporate budgeting, though the introduction is likely to be phased in over a period of time across the industry, giving buyers a chance to test the water and adjust accordingly.
Additionally, he says, while continuous pricing provides airlines with flexibility to dynamically manage pricing, it doesn’t necessarily equate to price increases as airlines will also have the opportunity to provide private fares directly to corporates which will diminish the risk.
“It is worth considering that a supplier’s pricing menu is typically set for the year ahead with a defined percentage increase shared at the start of the following year, allowing buyers to forecast and manage budgets,” Russell says. “In theory continuous pricing removes this control over budgeting.”
A Natural Evolution of NDC?
For the airlines, continuous pricing was one of the defined goals for investing in NDC, Russell notes. “Airlines have believed for some time that the EDIFACT standard was not flexible enough and real-time offers were required to provide that flexibility,” he says. “I believe one is a natural evolution of the other but like NDC, continuous pricing will require a staggered introduction, as no two airlines have the same strategy or are the same point on their journey.”
Ping views continuous pricing as a steppingstone to dynamic pricing, but NDC shouldn’t really be seen as the goal for airlines. “Airlines want to become retailers, and the fundamental transition to offers and orders is key for this, which requires a lot of internal rebuilding,” she says. “NDC is a way to enable offers, including more price points, but moving away from neutral ticketing to a concept of true orders is really the end goal.”
The Visibility Gap
For travel buyers and TMCs, one of the biggest questions surrounding continuous pricing is visibility. With fares shifting in real time and no longer tied to traditional fare buckets, the familiar benchmarks that once defined concepts like “best available fare” or “lowest logical fare” are becoming harder to pin down. Additionally, as pricing becomes more fluid and more dependent on airline-controlled data feeds, the challenge isn’t just finding the lowest fare, but proving it.
Balloch notes instead of tracking against filed fares, travel managers will need to rely more on historical averages, real-time data feeds or analytics provided by their TMC to understand likely ranges.
“Forecasting will become less about point-in-time fare snapshots and more about modelling patterns over time,” Balloch says. “In practice, instead of chasing a single lowest fare, the focus will shift to demonstrating that the fare booked represents good value, meaning it aligns with policy, honors any negotiated airline discounts and delivers the best overall outcome when considering the full cost of the trip.”
Vlitas warns that unless one uses a third-party who can benchmark or a TMC such as ALTOUR which has benchmark data and can forecast, it will be a challenge due to demand and loyalty pricing, especially if fare filings and inventories are not public. “TMCs will have to develop analytics using their database of fares, NDC data, airline portals and airline earnings data,” he says.
That leaves buyers wondering how they can validate pricing in a world where fares are subject to constant fluctuation. “The services built around airline booking processes will continue to evolve to help track cost,” Russell says. “There are a number of ‘re-shopper’ solutions in the marketplace that have invested in incorporating NDC fares into their workflow and will without doubt incorporate continuous pricing over time.”
In reality, he adds, the fragmented distribution model has meant the buyers have been challenged to source the “best available fare” for some time, depending on booking platforms and smart TMCs to source content from a number of different endpoints.
“If fare structures become too opaque or volatile, airlines risk a loss of confidence from buyers, especially if they believe that there is no consistency in the way fares are offered across multiple platforms,” Russell says. “This could ultimately lead to more leakage where the end user decides to source content away
from their managed travel program.” Still, continuous and dynamic pricing models are changing how corporate travel programs evaluate and manage airfare spend.
Ping notes the concept of traditional corporate deals, for example, “10 percent off J class” may evolve to ensure that the value of the corporate bookings is still reflected in the discount offered even if it remains 10 percent.
“It may become more complicated for a corporate travel manager to verify that the correct discount has been applied, potentially requiring an anonymous shopping request at the time of the booking to provide an effective benchmark,” she says. “As corporate travel programs continue to embrace NDC, it’s important that they engage with airline partners to understand how the value will be reflected and measured.”
Additionally, many corporate programs are based on the “lowest logical fare” (LFF). As airlines start to include items such as priority boarding, preferred seating or other ancillaries as part of their bundles, it becomes essential that LLF calculations reflect the total value of the offer. “The conversations between airlines and the corporates must evolve to include these items, as well as the TMC and OBT calculations,” Ping says.
Intermediaries in Flux
As airlines push more content through their own APIs and experiment with continuous pricing, traditional intermediaries like GDSs, aggregators and booking tools face an uncertain future.
Russell notes their role as the central source of fare data could be challenged by direct distribution models that give airlines greater control and potentially leave buyers juggling multiple channels to access complete fare content.
“Intermediaries have all invested significantly in integrating direct content and specifically NDC content, paving the way to being able to manage continuous pricing,” he notes. However, while airlines may prefer direct sales and the potential upselling opportunities that these offer, Russell says, “realistically they will need to support all endpoints.”
Intermediaries remain critical for scale, comparison and servicing, so while some airlines may push continuous pricing primarily through direct channels, travel buyers will still need one place to compare options, manage bookings and get support, according to Balloch.
“TMCs and booking tools will rely on aggregators and GDSs to normalize and display those dynamic offers,” Balloch says. “The intermediaries’ role will increasingly be about ensuring completeness of content, fare transparency, and post-booking servicing rather than just fare distribution,” he predicts.
Looking Ahead
Russell is confident that continuous pricing will no doubt play a significant role in airline distribution in the years ahead. However, he says it’s impossible to define timelines for its implementation right now, pointing out that very few would have foreseen NDC integration taking as long as it has to take hold.
Vlitas foresees an immediate future where content will be delivered by NDC, and most – if not all – airlines will implement continuous pricing. “This may create fare anomalies and the risk of airlines removing some content if it isn’t supported,” he says. “We should also expect a spike in customer complaints and disrupted travel due to the new technology’s shortfalls.”
Continuous pricing will likely expand significantly, Balloch shares, but adoption will be uneven across regions and carriers. “For the medium term,” he says, “travel buyers should expect a hybrid environment where continuous pricing co-exists with legacy fare filing.”
