Using Data Science And Engineering To Build A Price Elasticity Estimator At Lufthansa Group

Dec. 10, 2019
Lufthansa has been aiming to compute the optimal seat pricing that would ensure higher bookings and conversion rates.

Air transportation is a capital-intensive industry that often results in net profit margins between 3 to 5 percent. Even during periods of low fuel prices, the industry has not been able to stretch its margins beyond these levels for several years. Airlines face constant competitive and operational challenges such as keeping fares low to match competitors’ pricing, and optimizing passenger load factors for maximizing route profitability. At the same time, carriers have relatively little control over fixed costs such as airport rentals, taxes, aviation fees and others.