Airline Retailing Has Entered an Execution Phase
The airline industry is entering a new era of retailing. Capabilities such as continuous pricing, dynamic offers, NDC, and Offers & Orders are reshaping how airlines create, price, and deliver value to travelers.
But as these capabilities become more widely adopted, the conversation is shifting from innovation to execution. Success no longer depends on implementing new technologies alone. Airlines must ensure that revenue management, pricing, merchandising, and offer delivery work together as part of a connected commercial ecosystem.
This requires a fundamental shift in how commercial decisions are made and executed. Rather than operating as separate functions, revenue management, pricing, and offer systems must work in concert to optimize every offer and every customer interaction.
In a recent webinar, experts from PROS and Avianca shared how this transformation is unfolding in practice. Their perspective makes one thing clear: the future of revenue management depends not only on making better decisions, but on ensuring those decisions can be executed effectively across the entire offer lifecycle.
The Industry Problem: Disconnected Decisions
Despite significant progress in airline retailing, many airlines still operate with a fragmented commercial model. Revenue management forecasts demand. Pricing defines structures. Offer systems determine what the customer ultimately sees.
These processes often operate in sequence rather than in coordination. As a result, even strong decisions made upstream can lose impact before they reach the customer.
Esteban Rubio, RM Innovation Manager at Avianca, highlighted in the discussion: “One of the biggest challenges in the industry is the disconnect between optimization and execution.”
This gap between decision and execution leads to revenue leakage, inconsistent pricing, and missed opportunities to respond to real-time demand.
Moving Beyond Fare Classes to Customer Value
Traditional revenue management has been built on fare classes for decades. This model has delivered strong results historically, but it introduces structural limitations in today’s environment.
Esteban Rubio explained: “It assumes that demand behaves in steps and that passengers only have a limited set of price points, but the reality is that the way customers perceive pricing is continuous and dynamic.”
This shift in thinking changes the core question revenue management teams ask. Instead of focusing on which classes should be open or closed, airlines are beginning to focus on identifying the right price for each customer at a specific moment in time.
This represents a fundamental shift from managing inventory to managing customer value.
The Role of Elasticity in Modern Revenue Management
To support this new approach, airlines are adopting elasticity-based forecasting. This allows teams to understand how demand responds to price changes rather than simply predicting booking volume by class.
Avianca shared several benefits from this transition:
- Forecasts become more accurate because they reflect real demand
- Pricing decisions can adapt more quickly to market conditions
- Many manual processes can be automated
- Pricing becomes more precise and less constrained by predefined structures
Santiago Duque Caicedo, Sr. Specialist RM Innovation at Avianca, described the impact of this shift: “Previously, we forecasted demand volume by class. Now we forecast price elasticity to ensure we offer the correct price to customers.”
This evolution enables airlines to align pricing decisions more closely with actual demand, which improves both revenue performance and competitiveness.
Transformation Requires More Than Technology
One of the most important insights from the discussion is that this transformation is not purely technical. It also requires significant changes to modernize how teams operate.
Historically, revenue management analysts spent much of their time on manual tasks. These tasks included monitoring bookings, adjusting class availability, and reacting to short-term changes.
With modern revenue management systems, many of these tasks become automated. The role of the analyst shifts toward oversight, analysis, and strategic decision-making.
Esteban Rubio described this transition clearly: “We are not removing analysts. We are elevating their role.”
In this new model, analysts focus on understanding system behavior, validating performance, and intervening when necessary. This approach is often described as management by exception.
However, this shift requires trust. Teams must believe in the system and understand how decisions are made. Avianca emphasized that training and change management are critical to achieving adoption.
“Without trust in the system, we will not achieve the expected results” Santiago Duque Caicedo explained.
Execution Is the Critical Link
Even with advanced forecasting and pricing models, value is only realized when decisions are executed in sync across revenue management, pricing, and offer optimization, ensuring a seamless and unified commercial strategy. A consistent theme throughout the discussion was the importance of connecting revenue management outputs to real-time pricing and offer delivery. Without this connection, airlines risk losing the value generated by their optimization systems.
Santiago Duque Caicedo described the challenge clearly: “Even if you have a great RM strategy, if execution is constrained by legacy systems, you won’t fully realize the value.”
To address this, airlines need an execution layer that translates revenue management decisions into prices that customers actually see. This layer must operate in real time and maintain consistency across all channels.
When execution is aligned, airlines can respond faster to demand changes, maintain pricing consistency, and reduce revenue leakage.
Continuous Pricing as a Foundation
Continuous pricing plays a central role in enabling this transformation. However, it is often misunderstood.
Continuous pricing is not simply about removing fare classes. It requires strong data, accurate forecasting and elasticity estimation, and systems that can update prices dynamically.
When implemented effectively, continuous pricing allows airlines to better match price to demand, improve conversion rates, and deliver a more relevant customer experience.
Esteban Rubio highlighted in the discussion: “Customers do not shop in fare classes. They shop by value.”
This reinforces the need for pricing systems that can adapt to changing demand patterns and market conditions.
Expanding Beyond the Seat to the Full Offer
While much of the conversation around pricing focuses on the ticket, the opportunity extends much further.
Ancillary products now represent a significant and growing share of airline revenue. Despite this, many airlines still price these products statically. This creates a clear opportunity for improvement.
Avianca pointed out that dynamic pricing should extend to the full offer, including ancillaries and bundled products. This requires the ability to adjust prices based on trip context, use data to continuously learn and optimize, and integrate pricing with merchandising systems.
Optimizing the full offer allows airlines to capture more value while delivering more relevant offers that better align with traveler needs and trip context.
A Practical Path Forward
The transition to modern revenue management and pricing does not happen all at once. Avianca emphasized the importance of taking a structured and incremental approach.
They outlined three key steps:
- First, build a strong revenue management foundation with accurate forecasts and high-quality data.
- Second, ensure that pricing execution is aligned with revenue management decisions.
- Third, expand toward full offer optimization, including ancillaries and merchandising.
Equally important is the mindset behind the transformation, as stated by Santiago Duque Caicedo “do not wait for perfection. Progress is what matters.”
Final Takeaway
Modern airline retailing is defined by connection. Forecasting, pricing, and offer construction must operate as a single, coordinated system.
Airlines that succeed will not simply adopt new technologies. They will ensure that every offer decision made within their commercial systems is executed with precision in the market.
As Esteban Rubio put it: “It’s not a one-click solution, it’s a journey.”
The shift from managing inventory to managing customer value is already underway. The next step is ensuring that value reaches the customer in real time.
1. Statistics for average revenue uplift and forecast accuracy are based on PROS customer data and industry studies using real-market simulation.
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