Moving Away from Fixed Price Points – Unlocking the Power of Airline Dynamic Pricing

The airline industry is at a turning point. Traditional fare structures and the 26 rigid booking classes that have defined airline pricing for decades are no longer sufficient to present attractive offers and capture the full revenue potential of modern air travel. Airlines that cling to these legacy systems risk leaving revenue on the table, while agile competitors embrace the dynamic pricing revolution.

The shift is more than upgrading the tech stack. It’s fundamentally reimagining how airlines price their inventory to match price elasticity and respond to market dynamics.

In this blog, we explore why static pricing was never the optimal choice, how airlines can successfully transition to dynamic pricing, and what it takes to capture the significant revenue opportunities that await.

Static Pricing: Born from Constraint, Not Strategy

As Ramesh Anantharaman, Divisional SVP of Revenue Management & Business Effectiveness at flydubai, puts it: “We did not want to start with static fares, we had to start with static fares because of the infrastructure limitations. Now, why has it been difficult for us to move from a static on to a dynamic kind of fare – it’s because of the monster we have built.”

Airlines didn’t choose static pricing because it was the best revenue strategy. They adopted it because early technology infrastructure couldn’t handle anything more sophisticated.

The roots of today’s pricing challenges trace back to the dawn of computerized reservations. When airlines first connected through wide area networks, data transmission speeds crawled at 1,200 bits per second, making real-time price calculations impossible. These technological constraints led to the creation of fixed price points and booking class codes as a workaround that worked, not a strategic choice.

The challenge is compounded by the airline industry’s interconnected nature. Unlike other industries that can modernize pricing systems independently, airlines must coordinate changes across a complex network of stakeholders – from global distribution systems, online travel agencies, corporate booking tools and their own direct channels.

Dynamic Pricing is a Maturity Journey

Successfully implementing dynamic pricing isn’t a binary switch from static to dynamic. Airlines that achieve the best results treat it as a progressive maturity journey with three distinct stages for commercial offer precision, each building upon the previous level’s capabilities.

Stage 1: Dynamic Availability

The first stage involves deploying availability strategies based on booking class fare levels and capacity constraints. Rather than opening and closing booking classes based on simple inventory controls, airlines implement more sophisticated availability logic that considers market dynamics, competitive positioning, and changing demand patterns.

TAP Air Portugal and ITA Airways have successfully implemented this approach through PROS RTDP (Real-Time Dynamic Pricing) for dynamic availability.

This shift is especially critical, as airlines simplify fare structures to enhance customer experience. Traditional segmentation tools — like advance purchase restrictions or minimum stay requirements — are becoming less common. Dynamic availability fills this gap by using pricing logic, rather than fare rules, to distinguish between customer segments and manage demand effectively. This is the first step to introducing economic concepts like margin in airline RM and pricing, moving away from the traditional thinking that associates demand to booking classes.

Stage 2: Continuous Pricing

The second maturity stage involves applying adjustment factors to propose optimal dynamic prices between static fare levels. Instead of forcing passengers to choose between discrete price points, continuous pricing allows airlines to offer prices that more precisely match price elasticity, ultimately presenting travelers with more attractive offers and eliminating steep price jumps.

This stage captures revenue that falls through the gaps between traditional booking classes. When passengers face a choice between a $200 fare and a $400 fare, those willing to pay $300 often defect to competitors or choose not to travel. Continuous pricing closes these gaps, allowing airlines to offer a spectrum of lower prices that otherwise wouldn’t be available to customers and successfully compete on the market.

The foundation for continuous pricing success requires three key elements: well-priced fare ladders, quality transformed fares, and accurate bid prices.

Stage 3: Contextualized Pricing

The most advanced stage incorporates shopping request data to determine optimal prices in real-time. This approach considers not just aggregated historical demand patterns, but the actual shopping context. PROS Request-Specific Pricing (RSP) enables airlines to respond dynamically to demand by estimating price elasticity on a more granular level.

RSP represents the convergence of historical intelligence with real-time market signals. As Anantharaman describes: “When you’re talking about request-specific pricing, it’s much more real time. So that’s where history connects with the future. And this gets us to what should be an optimal revenue value.”

Each stage delivers incremental revenue improvements. While individual improvements may seem marginal, the cumulative impact is substantial.

Cross-Functional Alignment: The Make-or-Break Factor

No matter how advanced technology is, dynamic pricing initiatives stall without strong cross-functional alignment. Airlines that lead in this space invest early in bringing together revenue management, IT, commercial teams, and executive leadership into one cohesive transformation effort.

Siloed implementation approaches consistently run into a wall. Revenue management teams might understand the pricing science, but lack insight into distribution channel requirements. IT departments can build technical integrations, but may not grasp the commercial implications of pricing decisions. Commercial teams understand customer needs, but might not appreciate the complexity of real-time pricing optimization.

Antonia Valente, RM Systems Planning & Support at TAP Air Portugal, emphasizes this challenge: “The main challenge is to involve the analysts, to involve the managers at all levels, the top management, because they need to be aware of the entire process… And we need to prepare and to guarantee that… the way they work is the correct way.”

The human element often presents greater challenges than technical integration. Anantharaman reflects: “The biggest challenge for you is going to be changing people, changing the mindset and the upskilling of the people.”

Successful airlines proactively address change management. They invest in training programs that help revenue analysts understand new tools and capabilities. They create cross-functional working groups that align on pricing authority, data governance, and performance metrics. They establish clear communication channels that keep all stakeholders informed as the implementation progresses.

The payoff for this organizational investment extends beyond technical success. Teams that understand and trust dynamic pricing systems make better business decisions. They’re more likely to leverage advanced capabilities, rather than revert to familiar manual overrides based on analysts’ gut feeling and legacy experience.

Technology Partnership: Meeting Airlines Where They Are

Dynamic pricing implementation doesn’t require airlines to replace their entire technology stack overnight; rather, a modular approach that integrates with existing systems, while gradually expanding capabilities can be undertaken.

PROS exemplifies this approach by providing solutions that coexist with legacy reservation and distribution systems during transformation periods. Airlines can begin with the foundation of dynamic availability, then progressively add continuous pricing and request-specific pricing capabilities as their organizations mature.

This modular strategy offers several advantages:

Risk Mitigation: Airlines can test and validate dynamic pricing logic on limited routes or markets before full deployment.

Resource Management: Implementation costs and team resources are spread over time, rather than requiring massive upfront investments.

Learning Integration: Teams develop expertise gradually, reducing the risk of operational disruption.

System Compatibility: Existing systems continue to operate, while layering in advanced capabilities that are not designed as a workaround but translated to the legacy setup.

The partnership approach also addresses the reality that dynamic pricing success depends on more than software deployment. Airlines need access to pricing science expertise, analytical support, and ongoing optimization guidance in order to create the synergy between dynamic pricing adoption and the carrier’s business strategy.

The Future of Airline Pricing

The ultimate vision for airline pricing extends beyond current dynamic pricing implementations. The industry is moving toward fully adaptive, contextualized and class-free pricing that adjusts in real-time based on demand, market dynamics, and contextual factors.

This future state will deliver benefits to both airlines and passengers. Airlines capture optimal revenue, while passengers receive pricing that is more attractive and better matches price elasticity.

However, achieving this vision demands a fundamental cultural shift in how airlines think about pricing decisions. Success depends on trusting automated systems, embracing continuous optimization, and maintaining focus on customer value alongside revenue maximization.

As the industry evolves, airlines that master dynamic pricing principles will be best positioned to capitalize on emerging opportunities. Those who continue to depend on static pricing approaches will find themselves increasingly disadvantaged in a marketplace that rewards agility, personalization, and revenue optimization sophistication.

The question isn’t whether to implement dynamic pricing, but how quickly your airline can begin capturing the revenue waiting to be unlocked.