Scott,
I share your memories and agree with your insights, subject to clarification of your last sentence. There are lots of ways to describe how airlines generate value and to quantify such. Most experts I have spoken with agree that there is more leverage in capacity management (fleet, network, schedules) than in RM. I like to describe this as: the difference between average and superior capacity management (including alignment with demand) will create more profits than the difference between average and superior RM. On the other hand, credible analyses show that best-practice RM creates 6-10% revenue gains with low marginal costs compared to the pre-RM world. By that measure, RM is typically responsible for all of an airline’s profits. I directionally agree with your last sentence, but am cautious of attaching too much significance to the particular numbers since they can be made to dance in many different ways. Numbers are valuable to know, but they must be in proper context to be meaningful. Going back to Prof Zhang and Kathryn’s question, there is a good case to be made that PRM (and associated dynamic pricing) played a major role in democratizing air travel by allowing airlines to profitably offer lower fares to price-sensitive customers (and helping build load factors). Similarly, many other factors (e.g., aircraft technology, aircraft gauge, seat density, airline scale, improved distribution, cabin mix, improved capacity management, etc.) helped drive lower unit costs and, in turn, lower fares. Don Garvett From: Scott Gibson via Mifnet <[email protected]> Sent: Wednesday, June 10, 2026 5:31 AM To: [email protected] Cc: Scott Gibson <[email protected]> Subject: [Mifnet 🛰 76369] Re: Dynamic pricing democratized air travel? I agree that it depends on the definition of dynamic pricing. The big consumer value came from deregulation and the ability to compete based on price (which also derivers more total industry revenue). Telling was the first “biG’ pricing g move which was the “Super Saver” launched by American Aiurlines in 1976. That $231 (midweek) roundtrip coast to coast fare was a 45% reduction from the CAB set price. BTW, that is $1352 today. Not surprisingly, demand exploded and airline profitability (by filling seats that would otherwise go unsold driving incremental re3venue) improved. In essence, this was already dynamic pricing (defining it was adjusting the fare by demand) as it was the Tuesday and Wednesday (the slower travel days) price with a higher weekend level. Over the 50 days since then, the industry has managed to fill more seats (qa c0ombination of pricing, better seat management tools allowing higher load factor realization plus aligning capacity offered with demand but based on a cost-revenue trade-off). Creating price points and rules to segment consumers by ability to pay/value of the seat from a consumer perspective along with revenue management (predicting demand by fare category, overbooking levels and O&D pricing being just some of the tools) that have developed all of which to a degree are designed to apply dynamic pricing (adjusting price in real time based on demand). The development of RM tools upped the game and as technology further advances, fryer gains (from an airline revenue generation) appear. But, this has been incremental over decades and as a concept, dynamic pricing is not new at all. In my early days at New York Air under the pricing freedom provided by deregulation, our price levels varied greatly to try to fill every seat at the highest price possible too make money. In the Washington National-Boston market, I recall that our one way fares ranged from $29 (most available on. Saturdays) to $189 (most seats on Friday, Sunday afternoon-evening and Monday morning sold at this price). No RM system existed. So, this was humans setting the number of seats by price point as the schedule loaded and then managing the seats in real time based on what we saw from a bookings perspective. The introduction of RM systems. (Especially PROS) upped the game in perms of predicting demand and thus either releasing low fare seats or removing them based on an expectation that the seat could be later sold at a higher price fare). This is tough to do with just humans but systems allowed both prediction b y flight (ie day of week, time of days, time of year, etc) and then adjusting in real time based on actual demand versus the prediction. In my mind, this is dynamic pricing but this in the last element in the overall revenue generation )and profitability) equation. The first is creating a schedule that offers a flight that aligns capacity with demand (revenue not volume) and then pricing it correctly try and lastly managing the inventory (how many seats offered on each flight at the various price points with rules that try to separate consumer demand segments to best capture the consumer value for the airline). While I haven’t seen any analysis in decades as to the airline earnings value equation, my memory is that the schedule (and that capacity-demand alignment) created over 80% of the value, pricing another 10% and the “RM” process (which is what allows dynamic pricing() was less than 5% (other factors being brand, loyalty, product). Scott Gibson On Jun 9, 2026, at 10:23 AM, Rudolf Zivcic via Mifnet <[email protected] <mailto:[email protected]> > wrote: It kinda depends what is understood by "dynamic pricing" - currently it is almost assumed to be real-time adjustable and also continuous - all the fancy stuff of the day (and yes, ideally with AI in the background :)) But actually, anything else than flat price can be seen as dynamic price - and certain changes (dynamics) can happen based on time to departure/occupancy of the aircraft (load factor), day of week, season etc etc... To confirm what George posted - Deregulation and new entrant price competition lowered fares - that is actually a start of dynamic pricing (eg offering tickets at multiple price points, with their availability/price levels depending on departure dates/DOW/competitor landscape etc...) On the JumboJet - yes - with more capacity offered, there was a need to introduce discounted fare products, as filling the whole plane with only full-fares was (is) not possible under normal market conditions (and demand). So all in all, everyone is right :) My 2 cents, Rudo Zivcic On Tue, Jun 9, 2026 at 4:18 PM George Hamlin via Mifnet <[email protected] <mailto:[email protected]> > wrote: Deregulation and new entrant price competition lowered fares decades before dynamic pricing came into play. On Jun 9, 2026 7:14 AM, Kathryn Creedy via Mifnet <[email protected] <mailto:[email protected]> > wrote: I'm reading a WaPo article on dynamic pricing at the grocery store and stumbled over this: John Zhang, a professor of marketing at the University of Pennsylvania’s Wharton School, said dynamic pricing helped democratize air travel by making it more affordable, Gee I thought it was the jumbo jet. What's your take? 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