Airline booking curves are a complicated business and generally require a micro focus, but United is bucking that trend, writes Tom Bacon

United recently reported that its booking curve had changed and that they needed to set aside more seats for passengers who book at a later date. Delta, on the other hand, advised that they were happy to continue to sell the existing percentage of seats early on in the booking process.

As the term suggests, the booking curve maps the timeline for when bookings come in for a flight or group of flights. In most markets, few bookings are expected three months or more in advance of the day of the flight. Business demand is often very close to the departure date, usually at around two weeks. Airlines monitor the booking curve as higher fare passengers are expected to book close in but the airline can only completely fill the plane by offering lower fares further out. If demand is stronger than expected, potentially too many seats are offered at the low fares and the flight is booked earlier than expected. If demand is weaker than projected, the airline may hold too many seats for close-in demand and find itself with empty seats. Understanding – and correctly predicting - the booking curve is critical to achieving the highest revenue.

Understanding – and correctly predicting - the booking curve is critical to achieving the highest revenue

Of course, each flight may be quite different. A system-wide booking curve, obviously, depends on the mix of flights included - international versus domestic, leisure markets versus business markets, high frequency markets versus a select day-of-the-week service. The booking curve tends to be further out for long-haul international routes; it tends to be close-in for high frequency business markets; and it is closer in for low-cost carriers which rely more heavily on spill from the legacy carriers.  Booking curves are thus a micro rather than macro phenomenon:  flight-specific, competition-specific, day-of-week and seasonal-specific. Revenue management systems capture the profile of each flight by day and automatically adjust if there is a change – more business demand, more competition, too many empty seats and so on.

Bucking trends

Given all of the factors that drive booking curves on such a micro basis, it is unusual for airlines to hear of a system-wide, macro change that United Airlines has observed.

However, Frontier Airlines experienced such a change across its system during the great recession. Frontier served leisure passengers disproportionately but in late 2008, financial uncertainty drove customers to postpone booking for travel over the end-of-year holidays and into 2009. In the end, however, the passengers showed up; despite the financial challenges, they took family vacations as they normally would. At the time, we were surprised that the relatively weak bookings more than a month out did not result in weaker overall revenue performance.

Despite considerable economic uncertainty today, we are not currently facing such a macro change in the booking curve. United may be detecting a change in their curve but Delta and others are not necessarily seeing the same effect.

Potentially, United’s booking curve change is related to an overall increase in demand due to its overall improvement in customer experience 

Potentially, United’s booking curve change is related to an overall increase in demand due to its overall improvement in customer experience.  By stepping up its game - in on-time performance, in schedule, in overall customer satisfaction - United may have driven increased demand relative to the competition – especially with higher, close-in demand faries. Most RM models would need some intervention to capture such a change, as the models are based on history; by design, models are careful not to react too quickly to demand blips that may not be sustainable. But at the same time, it could be very costly for United to underestimate close-in demand and to sell seats at low fares that they could sell at higher fares. Although the model will catch up, an airline cannot un-sell low fare tickets! If close-in demand is strong, the cost of dilution – selling too many seats at low fares – will be much higher than the projected cost of empty seats.

This is, of course, a very positive trend for United. Improved operating performance can result in increased demand; increased demand drives faster growing unit revenue; increased revenue across all sectors drives a larger benefit from holding more seats for higher fare passengers. This is a virtuous cycle that is likely propelling United into 2019. 

Having said that, booking curves are impacted by many flight-specific factors. To continue to maximise its overall revenue performance, United, like other carriers, needs to focus on the micro factors that impact the individual booking curve of each flight each day.

Tom Bacon has been in the business for 25 years. When he isn’t penning his regular column for EyeforTravel, he is an industry consultant in revenue optimisation, and leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. Want to find out more? Email Tom or visit his website