While air travel volatility is nothing new, it is becoming more extreme each month. The price of airfare has increased by as much as 152% in the past year. Traditionally, flight prices followed a predictable pattern, starting at a low point and then rising as flights filled and award seats became distressed inventory. The recent spike is not surprising given the uncertainty surrounding a potential pandemic. As a result, air travel volatility is likely to remain high for a while.
Air travel volatility has been increasing since the turn of the century. In the years prior to 2007, air traffic growth was almost linear, following established traffic flows. But in 2007, demand began to plummet and growth stalled. After that, demand grew again, but with peaks and troughs. This reversal may have caused the airline industry to take a hard look at its schedule planning process.
Airfare volatility is a real problem for travel managers. Flights can change without warning, and travelers can be tempted to book at high prices. To avoid this, travelers can use Faresaver to automatically rebook when a lower price is found. Faresaver can also help travel managers better weather volatile airfare prices.
The airline industry has suffered huge losses because of the COVID-19 pandemic. According to IATA, 2020 is expected to be the worst year since the 9/11 attacks, with a loss of $84 billion for the industry. IATA expects the industry to recover from this period, but not before 2024.
The increased volatility in the air travel sector may be a long-term trend. But for now, airlines can only be profitable if they deploy their full capacity. It’s not sustainable to fly ghost flights or fly in marginally profitable markets. And as fuel prices rise, they’ll face additional pressure as well. Aside from the high cost of oil, airlines will also face increasing security expenses.
Airlines will need to reorient their revenue management framework in order to cope with this volatile environment. As a result, airlines will need to access real-time data on the market and process it in real-time. They will also need to retrain their pricing and revenue management processes. By adopting an early data sharing strategy, airlines will be able to better align service levels with fluctuating volumes and avoid over and under-resourcing.
