Post-booking flexibility can offer a largely untapped solution to managing through the capacity shortfall, writes Volantio chief executive Azim Barodawala
Air travel demand is soaring, but aircraft supply is lagging, creating one of the most pressing mismatches the industry has faced in years.
A recent analysis by McKinsey estimated a potential global shortfall of 2,000 to 5,000 aircraft, citing pandemic-era manufacturing slowdowns, delayed aircraft retirements, supply chain fragmentation, and early engine performance hiccups.
What often gets lost in the conversation is what airlines can do right now, without waiting for original equipment manufacturers (OEMs) or geopolitical conditions to shift. The loudest voices often focus on production volume. But shouldn’t we also be asking how intelligently we’re using the capacity we already have?
Better utilisation of existing capacity means lower unit costs, higher unit revenues, and reduced carbon emissions per passenger flown – major benefits all around.
CAPACITY REALITY
Consider an airline with an average load factor of 85%. What this really means is that for every peak flight that departs 100% full, there is at least one off-peak flight that departs 70% full.
But what if, during the post-booking window, airlines could dynamically shift even 2% of the demand from the peak to the off-peak flights, thereby enabling additional bookings on the peak? The peak flight would still depart at 100% full, but the off-peak flight would depart at 72% (assume similar aircraft size to keep the math easy). System-wide load factors would increase by 100 basis points to 86%.
Many wonder whether passengers who have booked a peak flight would truly be flexible with their plans. The answer is surprisingly and emphatically yes. Volantio’s proprietary research indicates that up to 80% of passengers are open to proactively changing their flights in the post-booking window after they have already purchased a ticket, as long as they are presented with the right options, incentives, and communication. That’s a massive pool of profit potential that can be unlocked simply by harnessing this flexibility.
Accessing this profit pool requires that airlines incorporate passenger flexibility into their commercial planning, gaining a crucial lever to align available supply with demand. Existing systems are typically not sufficient; instead airlines must consider new post-booking revenue management systems to fully capture the value of passenger flexibility.
Consider a scenario where demand is surging on a 09:00 flight from London to Frankfurt, while an alternative flight on the same route is leaving at 11:30 with many empty seats. Today, most airlines would typically rely solely on their revenue management system to increase price on the 09:00 flight, extracting as much revenue as possible from the remaining capacity.
However, rather than only yielding up on the remaining capacity, a post-booking revenue management platform can leverage passenger flexibility to dynamically create more capacity on the 09:00 flight by incentivising passengers (via vouchers, points, upgrades, and so on) to shift to the 11:30 flight. This rebalancing improves load factor and yield, while reducing operational friction, driving outsized results when applied at scale.
From a strategic perspective, rebalancing demand is particularly valuable when airlines are flying wingtip to wingtip with competitors. Airlines with robust post-booking revenue management systems in place can leave lower fare classes open longer, forcing competitors to match fares, sell out, and ultimately spill lucrative revenue at the last minute. With the ability to rebalance, carriers with post-booking revenue management systems in place can ultimately absorb this lucrative revenue, increasing load factors and yield.
GREEN METRICS
Finally, higher loads ultimately also mean less carbon emitted per passenger flown, a key metric for carriers on their march towards net-zero. Our analysis with existing partners reveals an opportunity to reduce this metric by 1% while also increasing profits – a true win-win.
Passenger flexibility isn’t a backup plan. It’s a strategic asset hiding in plain sight. Tapping into it only requires a shift in mindset, and the use of the most modern tools available.
When American Airlines launched the first mainstream revenue management system in the mid-1980s, it was a game-changer. Within 10 years, nearly every major airline in the world had adopted similar capabilities.
Post-booking revenue management is on an even faster trajectory of adoption, as airlines realise the clear benefits of harnessing passenger flexibility: increased unit revenues, lower unit costs, happier passengers, strategic flexibility, and meaningful contributions to sustainability initiatives.
The carriers that lead in flexibility will set the pace for the next era of aviation.
Azim Barodawala is the chief executive and co-founder of post-booking revenue management firm Volantio