In the first post in this series, How airline prices get made, I used London to Koh Samui, connecting once in Bangkok, to show how an add-on extends a base fare. A $300 London to Bangkok fare plus a $100 Bangkok to Koh Samui add-on produces a $400 through fare.
In the second, The same market, three different prices, I showed the weakness in that construction. Three airlines can all sell London to Koh Samui and arrive at three different prices because each starts from a different base fare.
The alternative is to start with the market: the fares customers can buy, the routing the airline can support and the amount owed to each partner. That produces a market-priced specified fare, while the airline still owns its strategy, partner economics and revenue management controls.
That leaves two practical objections.
The first is time. No pricing team has enough analysts to manage thousands of small markets by hand.
The second is dilution. Will a lower offline fare displace a higher-fare booking the airline would have captured anyway?
The time constraint is real, but automation changes it. The dilution concern is real too, but network carriers already have a way to control it.
The headcount objection
An airline’s ability to review markets manually grows one analyst at a time. The benefit of reviewing any single low-volume market falls quickly.
It does not make sense to pull an analyst away from a core revenue market to hand-price a small offline city pair. That math has always been right.
What it misses is the aggregate. Pool demand across thousands of small markets and it becomes something that would have a dedicated analyst if it existed in one city pair.
The long tail was never unimportant. It was unaddressable at human scale.
That is exactly the kind of problem automation is built for. Systems can identify partner connections, file routings and generate market-appropriate specified fares across large volumes of markets.
Human time moves up a level: setting offline strategy, reviewing performance and tuning the parameters within which the system operates. The analyst stops being the coverage mechanism and becomes the strategist.
The economics can be material. In one anonymized airline implementation, market-priced offline fares have delivered about $1 million in incremental EBIT using the network and market demand already in place.
The airline did not add aircraft, open routes or increase pricing headcount. It captured more of the value available in a fragmented pool of markets it was already able to serve.
That makes the business case easy to evaluate. The airline can measure both value and payback in its own performance: incremental bookings, retained revenue after partner payouts and EBIT contribution set against the cost of the system.
Someone still needs to own that work. Where an airline already has a team managing add-ons, the role fits naturally there. A smaller group with clear performance measures is easier to train and govern than asking every analyst to manage a piece of the long tail differently.
Why dilution feels different in an offline market
Return to the example from the first post. Airline 1 has a $300 fare from London to Bangkok and a $100 partner add-on from Bangkok to Koh Samui. The constructed London to Koh Samui fare is $400.
Now assume a competitor sells London to Koh Samui for $350. At $400, Airline 1 is overpriced and wins few, if any, bookings. A specified fare of $350 makes it competitive.
After the $100 partner payout, Airline 1 retains $250. Put that next to the $300 London to Bangkok fare and it looks as though the airline has diluted its own revenue by $50.
That comparison ignores how a connecting network is managed.
The London to Koh Samui customer is not using a separate pool of seats. The itinerary uses the same Airline 1 flights to Bangkok that are also being sold to passengers ending their trip in Bangkok or connecting elsewhere. Airline 1 offers all of those journeys, then uses O&D revenue management to decide which demand is worth accepting.
The offline market should be treated the same way.
What a bid price does
A bid price is the minimum value the revenue management system wants from the next seat on a flight leg. It represents the opportunity cost of using that seat now instead of preserving it for demand that may arrive later.
For an itinerary using more than one controlled flight, the system evaluates the itinerary against the bid prices on the legs it uses. As bookings build and seats become more valuable, those bid prices rise. Lower-value booking options close when they no longer clear the value required for the itinerary.
In the example above, revenue management can stop offering London to Koh Samui when its $250 retained value no longer justifies the space on Airline 1’s flights to Bangkok. That is the same protection already used across a connecting network.
An offline itinerary does not need an automatic pass. It also does not need an automatic veto.
Put the right controls around it
The first control is the partner payout. A specified fare should only be filed when it exceeds the amount owed to the partner, preventing negative retention.
The second control is inventory. The retained revenue still has to clear the airline’s O&D revenue management controls on the flights it operates. When stronger demand develops, the lower-value flow can be restricted.
The comparison, then, is not a $350 offline fare against a guaranteed $400 sale. In many markets, the $400 fare is not selling. The useful comparison is the revenue captured under inherited pricing against the revenue available when the market is competitive and still subject to the network’s existing controls.
The right test is not whether the offline fare is lower. It is whether market-priced fares capture more retained revenue without displacing higher-value demand the network would otherwise accept.
What changes across the network
At the individual market level, a specified fare gives the airline a chance to compete for demand that an inherited price may have missed. It also gives the airline a chance to raise a fare where the add-on landed too low.
Across the network, that demand is pooled. More demand competes for the same inventory, and revenue management continues to decide which flows are worth accepting as flights fill.
For the pricing team, the work changes from maintaining coverage to managing performance. The team owns the strategy and the exceptions; the system handles the volume.
Add-ons were a reasonable answer when airlines could not analyze the long tail at scale. That constraint is no longer the same.
The choice now is whether offline markets remain a coverage exercise or become part of the airline’s pricing discipline.
If that is a useful conversation for your network, we are easy to find at longtail.ai.
Previous: The same market, three different prices.
