Using AI to Help Airlines Make the Most of Ancillary Income

7/28/2020

Using AI to Help Airlines Make the Most of Ancillary Income | by venkat vajradhar | Medium

Using AI to Help Airlines Make the Most of Ancillary Income venkat vajradhar Nov 20, 2019 · 3 min read

Airports are the places you want to spend the most time, but from the operator’s perspective, they see your time as an opportunity to cash in on you. Some estimates suggest that by 2025, shoppers in duty-free shopping are likely to increase by an astounding 5,000 to 125,000,000,000 USD.

However, with the rise of low-cost airlines, boutiques are not the only way you flee the airport, and new research highlights how airlines can use AI to help with price services, such as checked bags and seat reservations.

However, the researchers set out to counter the notion that such tools can be used to ring extra money from passengers and show how it can provide cheaper and more personalized service for every passenger.

Cost-saving Researchers explain how clever unbundling can lead to significant cost-saving opportunities, as passengers do not pay for items they don’t need while discounting customers who pass on some extra items can increase sales.

To Know About: Responsible and Ethical AI — Building Explainable Models

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7/28/2020

Using AI to Help Airlines Make the Most of Ancillary Income | by venkat vajradhar | Medium

“Most airlines offer the same price for a checked bag for each customer,” say the researchers. “However, not every customer has the same travel and budget requirements. With AI, the information they collect when the shop can be used to estimate the price point they are comfortable with.

To Know About: Why does artificial intelligence not replace humans?

Researchers hope to reach the sweet spot by using AI to track and allocate demand levels depending on the specific flight preferences of each passenger. These models take into account several factors including flight destination and origin, travel time, and the travel duration.

For example, if the trip is only a few days away, there may be less incentive to pay for a checked bag, but if the convenience can be discounted to outweigh the cost, it will encourage sales.

Put to the test The system was tested with a European airline over a six-month period that included both data collection and testing. Passengers must log into the pricing page before offering discounts on various support services.

To Know About: Artificial Intelligence Is Being Used To Diagnose Disease And Design New Drugs “We started by offering AI-model discounts to 5% of customers who logged in,” the researchers said. “To allow us to adjust this percentage, as well as experiment with different AI methods used in our models, the airline has allowed us to acquire a robust data set.”

With increased revenue for each customer and an increase in auxiliary sales conversions, the results began to materialize almost immediately.

“Because of the unique nature of personalized pricing, we have built a high level of equity and privacy in our models,” the authors continue. “There is a maximum price that does not exceed, and we do not track customer demographic information such as income, race, gender, or multiple visits to the sales site. Each repeat appointment is observed as a separate consumer.”

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7/28/2020

Using AI to Help Airlines Make the Most of Ancillary Income | by venkat vajradhar | Medium

The study was able to generate rate in sales conversion and revenue for 17% and 25% of offers, respectively, allowing the AI Company to move beyond the average customer and into the personalized world of individual travelers.

“In recent years, the airline industry has felt that it has lost contact with its customer base,” the authors conclude. “The industry is keen to find new ways to meet customer needs and retain customer loyalty.”

Airlines

Arti cial Intelligence

Machine Learning

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