How LATAM unlocked incremental revenue with AI-powered dynamic pricing

As airlines make the necessary investments to transform towards offer-and-order based modern retailing, the importance of realizing incremental revenue is paramount. Airlines must continue to perform, delivering what travelers need today, even as they transform towards a more customer-centric long-term vision.

This is where Sabre’s next-gen solutions – including SabreMosaic™ which extends the offer optimization capabilities of our IQ products – can help.

What motivated LATAM to adopt dynamic pricing and Air Price IQ?

Rosario Phillips: LATAM has really diverse route types and home markets. We knew we needed to complement our revenue management capabilities with dynamic pricing in all direct sales channels. After launching our NDC solution, the timing was right to scale this more personalized approach.

How did LATAM Airlines implement the Air Price IQ system?

Bhaskara Guntreddy: We began collaboratively with a proof of concept, then a minimum viable product, and finally a full launch. At each stage, we measured results, learned and continuously improved the system.

Rosario Phillips: Generally, when you implement something like this, you have to do due diligence and understand the downstream impact of the changes you are making. We asked ourselves: how do we evolve all the processes that come after? How is the order managed? Something we discovered is that we didn’t require additional development because of Sabre’s development provision. Air Price IQ also integrates seamlessly with other Sabre solutions we use, like SabreSonic Inventory: Origin and Destination (SSI:O&D). This saved significant development time and accelerated scaling.

What makes Air Price IQ unique compared to other airline dynamic pricing solutions?

Bhaskara Guntreddy: We don’t use any personal data, only trip characteristics, to determine price consistency. The explainable AI framework also gives LATAM full visibility into why recommendations are generated, unlike black box systems

Rosario Phillips: The flexibility to test different algorithms and rules for each market was also game-changing. We can leverage Sabre’s expertise while also plugging in LATAM’s own models.

How has the partnership enhanced LATAM’s approach to pricing optimization?

Rosario Phillips: We took an approach that plugged in different models, different algorithms, different business rules, to see which one was the most appropriate for a specific group of markets like we have in LATAM. This allowed us to experiment and iterate. Having these tailored solutions for our diverse markets was critical. We evolved to plugging in specific models, data and rules for different segments rather than one blanket approach.

Bhaskara Guntreddy: We built an experimentation framework so LATAM can continually evaluate offers and fine-tune models. This “test and learn” capability ensures maximum value.

How do you see this partnership evolving?

Rosario Phillips: In 2024, we aim to centralize offers across all channels and expand into more markets, cabins and use cases. We also want to incorporate event more data signals into the models. Implementing disciplined data practices is essential to feed accurate models. And change management is critical as roles evolve with AI adoption.

Bhaskara Guntreddy: On the product side, we are developing Bundle IQ to optimize both pricing and product offerings by integrating third-party ancillaries. Listening to customer needs and collaborating closely drove our success. We will keep enhancing dynamic pricing as airlines progress in their retailing journey.