The Future of Airfare Pricing – And Why It Scares the New York Times

The New York Times is scared about airlines maybe, possibly, potentially kind of customizing airfare pricing displays in the future.

Airlines could soon start offering customized fares to travelers based on how regularly they fly, where they live and the kind of trip they are taking.

… For instance, an airline might offer a package that includes free checked baggage, an aisle seat and a 10 percent discount to frequent fliers. And customers would be able to compare competing bundles from different airlines. They also say customers will still have the option of shopping anonymously for basic fares if they choose not to provide any information about themselves.

But this is scary because if the airlines know more about you they might think you’re willing to pay more, and present you with higher prices And the Times fears they might not offer the lowest prices when you shop anonymous.

I’m not so worried.

  • Airlines who refuse to offer the lowest fares to anonymous shoppers would lose out to other carriers that do display the lowest prices. So while it’s possible that airlines would only offer discount seats to customers who identify themselves as only willing to purchase those seats, it’s far from obvious that would be the case (and most likely tuned more finely to flights likely to sell out of those seats easily).

  • Folks really concerned that anonymous shopping won’t show them the lowest prices, and logged in pricing won’t either because the airline will think they’re willing to pay higher prices, could try identifying themselves without a frequent flyer number or with a partner frequent flyer number. Pretty quickly savvy shoppers will discover the algorithms and even if airlines try to do really scary things it won’t be easy for them to maintain those things.

  • Airline pricing is highly competitive. Airlines compete against each other for every advantage, and we know that the biggest driver of purchase decisions is price.

  • And it’s not just the airlines working hard to figure out how to customize pricing and make sense of travel for consmers, they’ll have to compete against Google as well. This competition is the best consumer protection.

  • We should welcome customized displays. Airfare pricing is incredibly complicated, very confusing for the average consumer. Maybe not for blog readers, but for most people. Airlines charge different ancillary fees, and these new standards help consumers make the best-informed comparisons against different options. The future of pricing displays is going to be figuring out how to be increasingly transparent, versus the opaque system we have now, that’s going to be on-net positive.

If anything there should be outrage about the current pricing displays, which really don’t do a good job at transparency and making it easy for consumers to comparison shop when accounting for the myriad options and fees. And we should recognize that while online booking has pushed out traditional brick and mortar agencies for simple airfare purchases, they haven’t replaced the handholding guidance that traditional agents could provide. The future competition in technology is going to be about doing a better job to replicate what those agents used to provide..

But the Times doesn’t seem to ‘get’ where we are in the progression of airfare booking, and worries more that we’ve lost some mythical consumer-friendly travel past.

The new pricing model comes at a particularly worrisome time, with mergers among airlines already reducing competition and pushing up fares. On many domestic routes Americans now have only one or two choices for nonstop service. Recently, American Airlines and US Airways announced a merger that would leave more than 70 percent of the passenger business in the hands of just four big airlines, down from five. And by adding fees for particular seats, bags, meals and other services, airlines have made it harder for customers to compare fares.

I wonder when most domestic routes had more than two non-stop choices? And why non-stop flying is the only relevant metric for competition? Or why even three major competitors is uncompetitive?

The Times even acknowledges that ancillary fees make it harder to compare fares, and yet they don’t like attempts to make those fees easier to compare. It rather boggles the mind.

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, 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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  1. Strange analysis, why if Delta has done it in the past would then not try to do it in the future just this time with more co-operation among competitors? Isn’t that how fares are currently raised.

  2. Good response. The harder airlines make it to compare fares, the more incentive there will be for companies like Google, Kayak, and Hipmunk to make money by restoring transparency.

  3. The US Government and Fortune 100 companies will have a conniption about vendors being presented with what can be asserted to be discriminatory pricing. If an airline takes my profile data and merges it with data such as what Experian sells and ascertains that most of my work travel is for government clients… and then jacks up my price accordingly… that’s going to be an interesting discussion.

  4. I’m not worried about the airlines not showing the lowest pricing to anonymous consumers. I’m worried that even if they offer “discounted incentive pricing” for average logged-in users, that based upon one’s profile (elite status, geolocation, average RASM history), that the airlines will offer higher pricing to folks they know are a captive audience. For example, if one is a UA Premier 1K, UA may say, “we can charge higher pricing, because we know the 1K consumer wants to maintain 1K status.” I understand basic laws of supply and demand, and that one airline cannot significantly (very subjective term, I know) deviate from other airlines’ pricing. But they can still deviate, and my bet is that they will deviate upwards, even if by just a few dollars to further incrementally pad marginal revenue.

  5. Gary, how dare you criticize the NYT? More evidence that your blob leans right……

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