Key Insights for Driving AI Innovation in Airline Retailing

It’s an exciting time for retailing in the airline industry. In 2024, passenger numbers are expected to grow beyond pre-pandemic levels, promising an all-time high demand for travel. And airlines have never been more strategic about investing in critical AI innovation to drive automation, efficiencies, and most of all – revenue optimization across retailing, and capitalize on this positive trend.

Reflecting on 2023: pioneering AI innovations to advance airline retailing

To help our airline customers and the broader airline community in this direction, PROS is very mindful and deliberate in focusing our AI innovation. As we look back on 2023, we're proud of the collective achievements of PROS AI, Product, and Travel teams. This past year was marked by innovative breakthroughs and collaborative efforts that showcased our commitment to advancing retailing through AI. We've pushed industry boundaries, highlighted PROS AI capabilities, and continued to add value for our customers—showing that #InnovatorsThinkDifferently.

Hop on board with your science team, fasten your seatbelts, and explore key AI research and insights to help you define your retail strategy across revenue management and offer optimization.

Beyond ChatGPT and generative AI

ChatGPT has brought the potential of generative AI to the forefront of public attention. But what is generative AI, how does it work, and how can airline businesses leverage this technology to drive innovation and growth?

If there is one person who can provide valuable insights into one of the most exciting developments in the world of AI today, it is Dr. Michael Wu, PROS Chief AI Strategist. Dr. Wu led an influential (and standing room only!) workshop session at the World Aviation Festival in Lisbon on the transformative role of AI in airline revenue management and customer-centric retail strategies. Read more about AI in the airline industry in this blog post and watch Dr. Wu present on generative AI here.

AI and advanced approaches to RM, forecasting and price sensitivity

There is shared acknowledgement among business leaders in the airline industry on the benefits of dynamic offer creation and dynamic pricing. At the core of such evolutions lie the advancements in revenue management and pricing and removing legacy class-based practices with the adoption of dynamic customer-centric product and price determination.

The PROS AI team is actively researching and sharing their findings to support broader awareness and adoption by the airline industry of these advanced AI approaches to RM, forecasting, and price sensitivity. Explore their research below:

• PROS hosted the Air Transportation Lab at Georgia Tech (ATL@GT) in our Houston headquarters. This hallmark event showcases our continued commitment to driving forward the field of revenue management within the airline industry. Supporting the research efforts of the community is a big part of how PROS contributes to innovation. Recently, ATL@GT has been actively focusing on exploration of methodologies to drive value beyond the seat in competitive environments. PROS AI efforts are also dedicated to helping airlines dynamically price ancillaries (learn more about using AI for ancillary optimization here.
  
  This May, at Outperform with PROS Dr. Laurie Garrow, who leads the ATL@GT, will be joining the stage to share with the airline community more details on the advancements the Air Transportation Lab and their impact on practice.
  
  Take a look at the Outperform agenda here.
  Explore more about ATL@GT, visit https://sites.gatech.edu/ce-atlatgt/our-history/

  

• PROS participated and contributed at the ACM SIGKDD & KDD Conference in California on the critical for airline pricing strategies topic of price elasticity. PROS Senior Scientist, Shahin Boluki, presented on behalf of the PROS AI team (including Ravi Kumar, Jonas Rauch, and Darius Walczak) at the Causal Inference and Machine Learning in Practice Workshop, the paper "Machine Learning based Framework for Robust Price-Sensitivity Estimation with Application to Airline Pricing”. Understanding the fundamentals of price elasticity will be critical as airlines transition from forecasting and optimization based on class availability to forecasting and optimization based on customers’ willingness-to-pay.
   
  Read the published paper on price elasticity here.
  Read more about willingness-to-pay here.
  
  
   
• PROS presented at the 5th EURO Workshop on Pricing & RM at the University of Zurich. In a pivotal gathering of industry minds, PROS Lead Scientist Ravi Kumar presented revolutionary approaches to price elasticity, vital for enhancing dynamic pricing strategies in aviation.
  Learn how airlines can transition to applying dynamic pricing here.
   
• PROS joined AGIFORS in Helsinski, sharing a thought-provoking presentation from Jonas Rauch on how to measure forecast accuracy. Ross Winegar and Tom Gorin also presented on forecast accuracy and shared thoughts on how to run a revenue management team without focusing only on accuracy measures. Last but not least, Darius Walczak gave an insightful talk on various business metrics that can be generated of out the dynamic program.
   
• PROS published a paper on new, innovative science that helps solve revenue management without demand forecasting. We call this capacity-aware optimization and are starting to use it across the air cargo industry to generate bid prices.
  Read more about this unique methodology in this research paper.

AI and the path forward to Offers and Orders

Front-runners in the airline retailing are making serious progress on airline-led AI-powered offer optimization strategies. Lufthansa Group have been vocal about their move to continuous pricing on a broader scale across their sales and NDC distribution channels, and the revenue benefits this has triggered. For more airlines to follow in their footsteps and grow industry adoption, there is a knowledge gap that must be filled.

Delve into key insights on how to make AI a key part of the transformation roadmap to offer optimization and Offers and Orders:

• PROS, Lufthansa Group and Emirates on leading the airline retail revolution
  At Outperform with PROS in Denver Surain Adyanthaya, President of PROS Travel, Amit Khandelwal, Divisional VP at Emirates and Benedikt Zimmerman, former Head of Business Development, Methods and Solution, Commercial Offer at Lufthansa Group emphasized the importance of modular and open technology that is powered by AI to fuel the retail revolution of the airline industry. It is the foundation for next-generation offer and order management to help airlines progress further toward commercial autonomy in 2024 and beyond.
  Watch the keynote here.
  
  
  
• The roadmap to AI-fueled Offers and Orders
  AI and ML driven technologies will have an accelerating impact on airline strategies for Offer and Order management adoption. To realize incremental value every step of the retail transformation airline leaders should be exploring how AI can be successfully implemented across revenue management and pricing, eCommerce, distribution, sales, marketing and more. This is the leading theme of the WAF-PROS webinar with industry experts Justin Jander, Christopher Allison, Catarina Silva, Jason Glenn, and Bipin Majevadia.
  Check out the on-demand webinar here.
   
• The starting point for AI and retailing
  Here at PROS, we continue to focus on how AI can help airlines drive incremental revenue through Offer Optimization and Offer Management. Srikanth Ranganathan, Sr. VP of PROS - Travel, emphasized at World Aviation Festival the importance of AI for offer optimization so that airlines can retail how, when and where they and their customers want. Catarina Silva's workshop at T2RL Engage focused on the integration of AI in how airlines determine the offer (product and pricing), can transform business processes and workflows, leading to significant optimizations and shorter time to value. Additional innovation around the use of generative AI and other use cases are underway and we can’t wait to share more as we continue to research, develop, and launch new products.

Whatever the AI approach to retailing, the biggest threat is for airlines that do NOT consider the introduction of AI to drive commercial outcomes. PROS is excited to continue leading innovation in AI for the industry in 2024, together with the broader airline and partner community. For more insights into AI trends and innovations follow PROS Travel on LinkedIn and meet us at the industry events throughout the year. See our calendar here.