2024-10-13 15:30:00
Commercial aviation began to generalize the adjustment of prices to demand in the late 1970s. An entire highly regulated market, resulting from states’ sovereignty over their airspace, will then explode in flight. The coup began in the United States under the presidency of Jimmy Carter (1977-1981), urged by ultraliberals to put an end to a system that consisted of fixing the amount of tickets based on the distance traveled and protecting national companies. In exchange for maintaining the loss-making lines, they could command high prices.
Deregulation will open the door to freedom of prices, choice of lines, timetables and airports. First consequence, the explosion in the number of new companies: more than one hundred and twenty between 1978 and 1984. Among these, the first low cost ones, the famous low cost ones, which will launch the price war, thanks to new tailor-made IT tools.
Several historic carriers will not survive these new rules of the game, such as Pan Am or TWA, with cost structures too high to keep up with the pace imposed by young companies. Mergers will multiply until, in less than a decade, just eight will control 95% of American traffic. Among these, Delta Air Lines and American Airlines are perfecting a pricing model aimed at reducing prices on destinations subject to strong competition, to increase them on less popular destinations. The number of passengers is increasing sharply. Their data processing systems for filling their planes with the best possible income remain world standards today.
“Like the engine of a Formula 1”
In Europe, although the British Freddie Laker had been the first to cut the prices of transatlantic flights in 1977, the liberalization process was truly launched in 1987. Companies began to be allowed, under certain conditions, to establish their own price lists prices. It was only from 1 January 1993 that more than a hundred European companies were able to set their own prices without government intervention. Two years later, three out of four Europeans fly at a reduced fare. Today the Irish low-cost airline Ryanair is the leader in Europe by number of passengers carried and many national airlines have disappeared.
In the aviation sector, young companies rarely choose to internally develop the IT solutions offered by the three main global booking giants. They rely on the European Amadeus and the Americans Saber and Travelport, owners of Galileo, which have developed global distribution systems, GDS, also used in the railway and hotel sectors. Some companies that have developed tools sell them to other operators. Finally, others jealously guard the system developed internally. This is the case of Air France-KLM, one of the founders of Amadeus.
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