In May.22nd, IATA carries out the chart for this week. The chart analyzes the booking pattern of Chinese domestic market in 2019 and 2020 March to May. This article aims to describe the trend and how the three reasons IATA points out affects. Moreover, the second part will answer a question in Martinview’s first paid class, Aviation 101, with in the similar field.
Analysis on the trends：
The chart is a proportional bar chart, to show booking pattern. In 2019 Mar-May, 46% of the passengers’ book 0-3 days prior to flight, 17% book between 4-6 days, same number for 7-12 days, and another 20% of passengers’ book 12 more days prior to flights. In this year, the number is 61%, 18%, 18%, 4%, 8%.
As a whole, most customer segments are affected since the booking time delay for all types. This may account to the difference between business traveler and leisure traveler.
In the third session of Aviation 101, the author has talked about these two distinct types of demand: in a word, business traveler travels for certain mission, with a closer to flight booking time and a higher WTP. As for leisure traveler, they are traveling for “enjoying life”, with a flexible choice between destination and a deliberate long-term plan. Though a 12-type frame is set by IATA, all of them have a lower WTP than leisure traveler, and they will affect by substitution effect, which means they may alter their destination due to price change.
Different from leisure traveler, business traveler “have to” fly at a certain time. With a 0-3 day prior to flight booking pattern, their habit is studied by airline’s revenue management system: leisure traveler won’t wait! Use time as a separator is viable in the conventional market. Due to those patterns, when Pandemic comes, leisure travel decreases more than business one.
Currently, domestic RPK falls and due to less leisure travel needs, the “delay booking” pattern occurs. In short, the structural change let few people book earlier, but what factor in market causes the delay?
Customer’s anxious about cancellation
According to IATA, a 17% cancellation rate is observed in Chinese domestic market. To cancel a flight is a market act: when the booking number is so small that it can’t even cover the variable cost, airlines will choose to cancel the flight and settle the travelers up. When there’s multiple flights per day per route, airlines will change the ticket automatically, or make is to “open status”, which is basically a ticket with unassigned date.
Decrease in air fare & Loading Factor’s long-term change affects booking pattern
From March to May, airlines conceded on air fare, gives leisure traveler more time to watch and flexibility, due to the systematically low price. For business travelers, the lower in price won’t change their booking pattern that significantly, since they have booked really late (1-3 days). But for leisure travelers, this can lead to a later booking with more time checking the changes of policies.
According to a previous report, (http://www.martinview.cn/?p=344)domestic fare is low for two months, which can be a type of “long run”. As the restrictions cancelled, leisure travelers will take the low price for granted, which forces airlines to keep it for a time and rise air fare gradually.
The change in booking pattern will challenge the current booking pattern. After the last class of Aviation 101, the writer has done some more research on that. Speaking of algorithm, revenue management system studied the previous booking pattern to forecast that for the upcoming flights. After weighted on different factors, change the price level accordingly.
Chinese market imports the arithmetic from foreign countries, which studied the foreign pattern. Thus, this may lead to some inaccuracy. Now, as the booking pattern as a whole changes, the previous model won’t sort business and leisure traveler effectively, on the scope of time.
IATA Economics Team. (2020. May. 22nd). Change in passenger booking behavior creates additional uncertainty. IATA Economics.