How Airlines Plan To Squeeze You For 10% More, Using Big Data To Customize The Fare They Offer You

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.


Credit: ATPCO

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.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Gary, can you speculate what this would mean for meta-search engines like Google Flights? Or for OTA’s like Expedia?

  2. An interesting exercise to keep track of this will be to simultaneously shop airlines in one browser logged in under your FF account and in another browser in incognito mode. This will allow you to gain from any price benefit that comes either from loyalty or anonymity.

  3. My prediction: this will spawn a whole community of “airfare gamers” (Doug above has already started!), and those that pay attention will benefit, much like credit card gamers.

  4. Thank you, Doug. I would suggest a 3rd option: to use a VPN in another country, such as an emerging nation.

  5. Very smart! Use analytics to continually measure supply/demand and adjust prices accordingly. Many events have gone to this and some local golf courses even use it to price tee times.

    You can complain or bemoan the fact this is happening but it is inevitable given advances in technology and something every business with a product that can be dynamically priced should (and eventually will) do.

  6. So this may work with some folks but everyone reading these blogs and other boards is effectively staying ahead of the game, so we will likely end up benefiting in the long run. Just like I bet everyone has had their vaccine already right?

  7. @ Gary — I cant wait for the return of massive error fares with the inevitable programming errors…

  8. I do suspect this can be gamed, especially in the beginning. I’ll be watching for it.

  9. Ahhhhh, fresh IT and programming errors are waiting in the wings. I foresee 2-3 years of rare, but exceptionally good, airfares ahead. 🙂

  10. An under appreciated phenomenon is that the free market (now mistakenly called capitalism) reaches toward “from each according to his abilities to each according to his means.”

  11. It’s time to reregulate the airlines.
    Last week, I had to change the date of my UAL return flight from Savannah to Newark from Friday, the 26th to Monday the 29th. UAL wanted $900 and up for the one way return flight. This was the return leg of a RT ticket that had cost me a bit over $200 when I first purchased it. BTW, that was for coach.

  12. A highly subsidized industry running on highly subsidized infrastructure (very few private airports anywhere) is price discriminating citizens based on nontransparent factors?

    This can’t end well, just like it didn’t end well when the mortgage or insurance industry did the same.

  13. KimmieA has it right. Incognito doesn’t give you the privacy that you think it does. A VPN will be essential to see different prices.

  14. Every time you do a search, delete cookies. In Windows, Ctrl-Shift-Delete at the same time.

  15. Exactly – VPN and an anonymous browser like DuckDuckGo or Firefox with all the anonymity settings switched on. Cue the gaming (I am in!) and the breathless 11pm news casts about people finding out they had to pay more because they live where they live, have a profile X vs others with a profile Y, wanted to fly on a Friday instead of a Tuesday, didn’t know it pays to shop around, felt being discriminated or racially profiled, etc. etc.

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