Air France KLM just announced that they plan to move to ‘continuous pricing’ rather than filing fares and managing availability on specific flights. They think that, on average, they can charge consumers about 10% more for tickets than they do today.
Air France-KLM said on Tuesday that it had tapped airline tech vendor Accelya to help sell its tickets in new ways. Air France-KLM said it would roll out “continuous pricing,’ meaning that it plans to calculate and present its prices in close to real-time — similar to how Uber responds to changes in supply and demand when setting rates for its ride-hailing services.
In an effort that is years in the making, they’re following in Lufthansa’s footsteps. Airlines including British Airways, Qantas and Norse Airlines all say they want to create personalized prices for airfare.
Currently airlines change fares up to a few times per day during the week, and perhaps once a day over the weekend. Changes in fares presented to customers, therefore, are usually based on availability of a given fare on a specific flight (fare buckets).
The idea is that a search for an airfare check available prices and inventory buckets, it creates a request to the airline’s marketing database “to determine which fares, services, and brands apply to the person requesting the airline products.”
Prices become more granular, too. Instead of filing $79, $89, and $109 fare levels they might come back with $82 or $83 fares.
Airlines are already better at charging different prices to different customers for the same product (seat on the plane) as nearly any other industry, except perhaps casinos. But they think they can do more. Technology no longer will be limiting the number of fares on a specific flight at a given time, and they can make adjustments on the fly based on who is searching, and who else is searching, for a given trip. This raises concerns, of course, that the algorithms determining customized prices do not run afoul of forbidden category rules.
Sometimes an airline knows you’ll pay more, why offer you the cheap fare? But other times it makes sense to offer you a lower fare because you’re a valuable customer and they don’t want you to jump to a competitor – and possibly not come back. That means sometimes a consumer will come out ahead. Instead of presenting someone with a $99 fare when they’ll only pay $80, the airline may offer a lower price to that customer to keep them from walking away.
While Facebook, Google (and its YouTube subsidiary) executives get called on the carpet for how they use data, and as government abuses data with little protection or constraint, the development of further data-driven personalization proceeds apace in every facet of the economy.