Sounds like a way for airlines to engage in illegal/unethical behavior (price fixing, collusion, etc.) behind the thin veil of "algorithms." At least third-party referral websites have already done this using cookies, though I guess airlines doing it is the next logical step.
I'll simply have my nephew buy my tickets (for a $5 tip) if they price gouge based on third-party lookup of my personal information.
Airlines will make money from this in the short term, and poorer relatives will too I guess. But I think in the end it's the lawyers that will profit the most. It's a class-action lawsuit just waiting to happen
I think they will gouge your nephew more, if he has less money. Offering better benefits and lower prices to frequent customers is widespread across every industry, and airlines want to get in on that too.
It’s the opposite model of traditional enterprise sales, where prices go up when the customer has more money.
Depends on the implementation. I have no loyalty to any particular airline and someone referencing a third party database containing my address/ZIP/employment history could reasonably deduce that I have disposable income - I could see myself either getting gouged as a result or getting a lower price in an attempt to secure a loyal customer.
An interesting side-effect I just thought of could be that business commuters' flight prices may increase, and business travelers may even prefer that. I have a consultant friend that is allowed to use personal cards for work-related expenses so he would enjoy the increased cash-back and miles. What a world of perverse incentives
Same with BA. They hired a new CEO from a budget airline so budget that noone had even heard of it in the UK. And now he is determined to turn our once-prestigious flag carrier into a clone of it.
Having flown BA to Turkey last year, I was not impressed. I'd choose a budget airline like Norwegian over BA now. BA didn't do anything wrong, I just can't see how they justify charging 5-star carrier costs for a budget experience.
Do you have any evidence that anyone is "price fixing?" The airline market is about as competitive as it gets. Allegations of "price gouging" amount to little more than complaints that you don't like how the price discrimination works out, like a teenage boy who doesn't like having to pay more for car insurance, or someone upset that Apple charges $100 more for 32GB more of flash on an iPhone.
I interpret "price-gouging" as price discrimination. I can understand why people are unhappy about it. For the consumer in me, it feels invasive.
They're getting into both my head and finances to charge me more. Despite any good intentions of rewarding loyalty, I imagine the model rarely suggests to charge someone less than they normally would.
The business owner in me understands the pressures of leaving money on the table, particularly in very competitive industries. It's only costing them more money if they don't do this.
It's a tough one. I've seen many examples of algos behaving badly, where my life is being run by companies that think they know everything about me. In many cases they're close, but there's still several where there's an uncanny valley of sorts and I'm trapped with recommendations that are over-optimized or close-but-not-quite-right.
I'm hopeful that at some point we'll be better off, but it's a painful interim process.
An aside, I don't see your teenage boy comparison being that relevant. A teenage boy has to pay more for car insurance because he's higher risk, not because he has a higher willingness to pay. Cost of insurance scales directly with risk of payout by the insurance company. Your Apple example holds up better.
Before deregulation, there was almost no competition. There is now some competition, and prices have fallen, which is a very good thing (putting aside the mispricing of carbon and other pollutants).
The parent claimed that airlines were very competitive absolutely. I linked to three separate articles saying that that was not the case; European skies are far more competitive (although they still have a very long way to go, especially regarding how capacity at airports is allocated).
Airlines are highly competitive because there are numerous competitors, the product is fungible, and prices are transparent. It’s not perfectly competitive, but nothing you pointed to suggests collusion or price fixing, as the OP suggested.
> They want the Open Skies agreements between the United States and Persian Gulf governments thrown out and to deny Etihad Airways and Qatar Airways access to American cities because they're subsidized by their governments. But so are other U.S. airline partners, many of whom happened to also be government-owned. Such subsidies are unfortunate, but they're hardly a reason to rip up the very system that's pressuring governments around the world to reduce protectionist behaviors.
If an airliner can read social media and find out you have a important funeral to attend they can triple the price. But I'd hope that would be illegal.
Historically, airlines have been sympathetic to those situations rather than extortionate. Bereavement fares have been declining as ticketing has moved online but several major carriers still offer them.
It was my understanding that device fingerprinting can give you a unique ID anyway?
I know retargetting has been able to tell when I have been in a store without a link between the stores accounts and my incognito session that I am aware of. Also when I have just entered the store that day.
I no longer shop there because of it by the way, any advertisers reading this. If you were curious where the limit is, it's using information based on my physical location.
Mozilla is not holding your back against browser, device or user fingerprinting. There are many attacks to fingerprint a browser/device/user, and Firefox doesn't protect you against them but instead it gives lots of data right away. It's disheartening to see so little care for defending the user.
There's anti-fingerpinting code in development which should ship in a few weeks in FF59. It's part of a broader initiative to port Tor Browser security features to mainline FF.
Whenever I've purchased airline tickets, while logged in to my United account and so clearly very tied to my specific identity (and is specifically the kind of tie that is mentioned in this article), the part of the process where I provide the information on the traveller comes well after I've been quoted solid prices. They would have to completely change the purchasing flow for your concern to make a difference (and in a way which would be extremely awkward for the process of purchasing multiple seats).
This looks like pure speculation and borderline false.
What is happening: Many airlines are moving toward a better pricing system. If you look at United's recent quarterly earnings call, they talk about how their previous system (age old system) constantly under-forecasts demand leading to lower pricing for tickets. Their new system is said to do a better job leading to better prices realized.
There is no way to dynamically price as shown in the article as a large fraction of the tickets are purchased through third party sites. Except maybe Southwest (which requires people to book through their site), I don't know how any airline can accomplish this. Also, if you show a higher than normal price to a repeating customer - they he will either switch to browsing in incognito or take his business else where.
The entire article reads like blog spam. They make a contradictory statement in the same paragraph here:
> Experts say such technology is most likely to be used to offer discounts to customers with loyalty status <...> such as to induce a new customer with an especially affordable ticket.
Yeah exactly you're going to always offer the lowest price you can. I've never heard of someone being loyal to an airline who wasn't already getting significant discounts with a loyalty card. A loyalty card is going to be replaced with a browser cookie?
They’re trying to maximize revenue R, which is seat price P times seats filled S. S goes down when P goes up, but the linkage is very complex.
Some people take flights to wherever if it’s cheap enough, some fly a given route on given days, no matter the cost. Some will tolerate layovers and transfers for some cost, but that cost needs to be high enough.
Forecasting these components lets you increase total revenue without overselling.
Actually you do want to oversell less... But you do this by raising the price. They don't really want to oversell to the point where they have to accommodate the overage.
If the demand for the flight is higher then they expect, they could charge more and still sell all the seats.
I look forward to gray-hat software that allows you to posture as someone who's very price sensitive, and thereby allows you to purchase tickets fairly cheaply.
Could go either way. Some people will pay lots to save just a few cents more. Kind of like spending time and money to drive further to a petrol station that has slightly lower prices. Or paying lots to your accountant to save roughly the same amount in taxes.
If you're that price sensitive you shouldn't have to use software to do it because the seller will know from metadata and offer you the lowest price they think you'll take.
Well, sometimes I check prices in multiple ways. Logged in at ISP-assigned IP. Not logged in, on another machine, via VPN service. My wife and her friends sometimes get different price quotes for the same flight/class, at the same time.
Pretty sure there will be a whole industry of intermediaries. Just like the consolidators and travel agencies now, they could brand the process "price optimisation".
I find it odd that they refer to this as dynamic pricing. I know someone in this industry and they've been doing 'dynamic pricing' for decades - specifically pricing for expected and actual demand.
I suspect they've deliberately avoided the more contentious-sounding 'personalised pricing'.
Price Discrimination, done well, can be beneficial for market participants on both the buy and sell side.
Businessperson who needs to go somewhere to close a deal? Flight on a very specific day/time on short notice might be worth $5K+ to the company.
Grandma coming to visit the grandkids on "oh, anytime in March or April" might only be able to allocate $300 to the flight.
Businessperson gets to fly where/when they need to go for only $3K. Grandma gets to see the grandkids on a $250 ticket with a lot of restrictions that don't bother her. If everyone had to pay $1.5K for the tickets, it's possible that the airline wouldn't sell enough seats to fly the route at all.
Price Discrimination is inherently beneficial to producers since it maximizes producer surplus.
In theory, Perfect Price Discrimination is also beneficial to sub-equilibrium market consumers since they can access goods at prices they can afford. But at the same time it is proportionally harmful to consumers above equilibrium as they start paying more for goods that unaltered equilibrium would have ordinarily priced lower (decreasing their surplus). It's unclear that given the opportunity firms would perfectly price discriminate below market equilibrium at all since it's unclear if the incentive structure would make it beneficial to do so.
And as a whole, to the best of my rudimentary knowledge, it's unclear as to whether or not Perfect Price Discrimination, with the reduction in consumer surplus as a result, would be beneficial to the economy as a whole. A simplistic conservative view would be that Price Discrimination prices goods based on what you can "afford" and therefore lowers prices. An equally simplistic liberal view would be that it's companies taking money from consumers. Neither of which are complete pictures...but factually Price Discrimination is a firm strategy that is a result of non-competitive markets. Generally speaking, non-competitive firm strategies disproportionately favor the firm over consumers.
Would you agree that the domestic airline industry is reasonably competitive on the whole? Sure, there are limited gates and slots at some airports, and not every Smalltown USA is served by multiple carriers, but if I wanted to start an airline this year, I could. (I don't, because I'd rather have money... ;) )
Booking flights already has such a horrible user experience, because the princing often seems totally random, and this will just make it worse. Hell no.
It might seem that way if you don't fly often, but pricing is pretty normal across the board when you look year over year. For the most part, prices are higher when you're less than a week from departure or when flying on a holiday or business heavy travel day (Monday morning/Friday night).
Also just use the new google flights interface and look at the price trends chart. Makes it way clearer whats going on.
The part that IS annoying is airlines selling basic econ seats so you think you're getting a good deal but realize you'll end up spending more just for a checked bag + reserved seat.
I would disagree. I track on google flights 3+ months before I want to go and feel that I get a reasonable price every time. 3 months in advanced obviously doesn't work for everyone, but using google flights (or any other tracking site) to track will definitely help you get tickets at the right time.
Yep, google flights is especially useful because it makes it easy to observe the effects of arriving/departing a few days before or after you planned to. Another commenter in this thread mentioned that certain booking patterns (e.g. booking popular business routes over weekdays) result in higher prices and this is a great way to circumvent that.
Google flights isn't perfect though. You still need to check a more old-school aggregator (I prefer skyscanner) first before pulling the trigger, and of course Southwest as they aren't on any aggregators that I know of.
Checking out skiplagged is a good idea too because it shows you the hypothetical prices of booking legs of a trip a-la-carte rather than as a full ticket. This has the added risk of leaving you SoL if a connecting flight gets delayed/cancelled, causing you to miss a later flight on the same journey but different ticket. If you're careful to not book flights when you know there might be weather or time concerns, though, it can save you some money. For example, I wouldn't be concerned about flying a leg on ORD-LAX during the summer time with a 4 hour layover because that's unlikely to get cancelled/delayed, and if it is, you could get rerouted quickly. Airlines hate that this website exists which is at least adequate evidence that it can save you good money.
For me the annoying part is that it's hard to find out when reasonably priced tickets are available. When booking for family I can be very open to suggestions, like "give me good prices to any of these cities for 4-7 night trip with 0-1 stops" whenever in April-May".
I've had good results from kiwi.com. They allow you to use date ranges and will can show a map with fares to various locations. They also include airlines that don't normally participate in aggregators (e.g. Southwest). They also allow multi-leg itineraries, which is really useful for longer trips.
Kiwi also comes up with suggestions to stitch the trip together from multiple, individually issued tickets. This can bring down the cost, but the drawback is that airline is then not responsible for helping you in case of delays and you may need to pick luggage mid travel and check them in again.
I believe Kiwi underwrites this in that they will rebook you another flight and pay costs incurred hence they pad with long layovers even if a shorter connection is available to reduce the risk exposure. They will probably get better at this over time, it seems at the moment they are quite risk adverse and it's all very manual - i.e. you have to call them to tell them that your flight was late and you've missed second connection.
The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.
-- Warren Buffett, in the 2007 Berkshire Hathaway shareholder letter
This article (from which I extracted that quote) suggests the industry has been profitable since 2010. Low oil prices haven't prevailed for that entire time, so it's not just that.
Airlines are just another common carrier or utility... they were profitable until the GOP deregulated it.
The technology itself doesn't provide competitive advantage, and the local monopoly aspect of the transportation system in the regulated days allowed for sustainable competition. The change you've seen in recent years is another sort of government intervention -- cheap capital has driven consolidation. So instead of an FAA commission allocating gates and routes, companies are buying up the competition.
They were profitable because the CAB asked airlines how much it cost to run their business and then worked backward from whatever they said to arrive at the fixed fares for routes. While this is great if you want to build an airline with a giant internal bureaucracy, its not great for people who just want to get from point A to point B.
The members of the CAB were all political appointments and generally did not act for good of the consumer. When Louis Hector was appointed to CAB he insisted that air service be instated to his parent's home town of Carinda, Iowa (as a joke). No one on the commission had any objections.
Incidentally, if you are looking for a good read on the history of the US airline industry from the early days of flying mail routes until the mid 90s the book 'Hard Landings' by Thomas Petzinger is really great.
> they were profitable until the GOP deregulated it.
Ted Kennedy was the driving force in Congress and President Carter signed the legislation. Airline deregulation was a good thing (IMO), but the GOP doesn't get the credit/blame for it.
I, for one, look forward to a ten-fold increase in ticket price when the airlines know my grandmother has just died and I need to fly to the funeral. Rah rah Capitalism!
Amazon for sure displays different prices to different people. They'd be foolish not to, considering they know so much about you and your shopping habits.
Amazon is one of the few companies that has gone on the record and said they do not do this (as a naive 1st-order price discrimination where two people viewing the same item with the same ASIN from the same vendor see two different prices).
(I’m looking for the source link. It was in a different discussion here on HN about price discrimination.)
Will this make travel agents valuable again? They would essentially have an arbitrage position by buying bulk tickets early and selling them to customers at a discount compared to the airline price. The airlines win because it reduces risk/uncertainty for them, while the customers win because they pay a lower price. (Unfortunately, the travel agents also soak up nearly all the risk, exposing them to large losses in the event that all travel goes down. All it would take is one event like 9/11 to depress tickets sales and bankrupt the agency.)
> Experts say such technology (dynamic pricing) is most likely to be used to offer discounts to customers with loyalty status and to generate bundled fare offerings that fit the customer's profile.
They don't need AI to do that--the airlines could do this already if you log in to their site. But they don't change pricing based on loyalty; instead, they often give "perks" that are not very valuable. And because of the inflation in airline miles, it is harder and harder to get those perks in the first place -- to get a sky lounge membership through Delta requires 47,000 miles, or the equivalent of 10 roundtrip flights from LA to NYC. So, it seems disingenuous to claim that airlines will give preferential treatment to loyal customers. If anything, it would do the opposite: customers who are loyal (and trying to get the next "perk") are more willing to pay a higher price, not less willing!
I don't know how viable that business is today with the plethora of online booking websites, but I've gotten some good deals from consolidators in the past on international trips.
This video does a good job explaining how airline pricing works nowadays:
https://www.youtube.com/watch?v=y3qfeoqErtY
Basically, from the info they get, (destination, departure date, return date, etc.) they try to guess what kind of traveler the customer is and price the ticket accordingly.
E.g. if there is no weekend between departure and return, they think that you must be a business traveler so the ticket is more expensive.
I fly fairly frequently and cal tell that’s not always how it works too. I don’t work in airlines but I wager it mainly has to do with demand and filling seats, much like hotels.
I’m curious about all the people in this thread that think that they can evade discriminatory pricing by using proxies or buying tickets anonymously. Do they not know how airlines work? They can’t sell you a ticket without your identity and your identity has to match the name on the ticket. You can’t get into the gate without a passport / government ID that matches the ticket. How do you plan to evade discriminatory pricing?
Sure, but airline could show anonymous browsers the maximum price for any tickets, and only display discounts for customers known to be price sensitive.
Yes, they could. Or maybe the opposite. So you check simultaneously from two machines. One where you're identified, and the other where you're anonymous.
I doubt any airline would require you to input your passport number before giving you your price. The first airline that tries that will drive away their customers.
A lot of interesting things are happening in the travel distribution space. Airlines have discovered retailing and the way we buy tickets will change a lot over the next couple of years.
I would say that true dynamic pricing is probably not for tomorrow, especially for business travellers. Most of business flights are booked via GDSs and integrating these new capabilities is going to take a while.
This has already been done, amongst others by Orbitz which showed higher prices to those searching with an Apple product [1] with the justification that "...Mac customers book the pricier hotel rooms anyway...". Well, that is one way of looking at it, users of Apple products are most likely less price-conscious than average. It does however inevitably lead to a new war of attrition between the pricing algorithms on one side and the countermeasures on the other. Those who believe dynamic pricing will only be used to lower prices through incentives are in for a meeting with reality when the likes of Orbitz flex their pricing algorithms by charging higher rates to those using flagship mobiles, those ordering from up-market hotels, etc.
I don't think Orbitz _quoted_ higher prices; they just surfaced higher priced hotel rooms anyway.
I am not a fan of price discrimination, but this is not far from Amazon recommending people who have purchased official Lightning cables, more official Apple products, while recommending people who purchase amazon basics cables more amazon basics cables.
I think it was much of a things 15 years ago. Same was dynamic pricing on Amazon (flushing caches would lead to 30% off).
These days, less of a thing I imagine. People would use things like skyscanner more, up to the point of not going to airlines' websites, ever. I don't think they want that.
Just another great example of how big data and AI are making the world a better place! I can't wait until they find out roughly how much money I have and charging me accordingly!
Why should rich people pay the same to fly as poor people? Rich people are soooooo much more stylish when they fly.
Yes, the whole thing seems transparently dystopic.
Set aside the notion of "rich". Perhaps in a few decades it will be impossible to ever "get ahead" because with each dollar you earn, cumulatively all of your vendors will find a way to charge you another $0.99.
No. Every single thing (excluding occasional inelasticities) is at equilibrium between upward pressure on price (vendor objective) and downward pressure on price (consumer objective).
Rich people fly on private jets, what is your point? They never see a security line or any of those vile body scanners that blast you with tumor-triggering radiation. They get to drive right up to the plane most of the time and if they want to bring guns or drugs or whatever on the flight, there's nobody standing there to tell them they can't (flying domestically).
Orbitz and others have already differentiated on user agent, right?
IDK if this will make a huge difference for airlines to do. Most folks shop travel sites, where (1) they have to report a consistent price, at least to the agency (2) airlines are side by side compared with their competitors.
What's interesting is Uber does this exactly already. They charge what they think each person "is willing to pay", and then pay the driver standard fees per mile.
Yup. It is US-specific for now. As a regular Uber customer, I consistently observe higher fares on my Uber account / iPhone, for the exact pick-up and destination spots, at the exact time, as compared to a friend who has an Android and only recently started using Uber.
The difference in my quoted fare can be as high as 15%.
at the expense of the person who can better afford to pay more
But this is a silly argument... if you or I had worked hard for a promotion or a raise only to be no better off because companies try to gouge us, why would we want to play that game? Enriching Uber’s shareholders is not an act of charity.
I mean, you can say the same thing for progressive taxes. The point is that "gouging" implies something somehow unethical, while price discrimination is at best morally ambiguous because it benefits customers with less means at the expense of customers with more means.
I'm very surprised they're not already doing this. I guess in the future I will have to use Tor and play around with various exit nodes until I find the best fare.
Any decent algorithm here would be tailored to give rebates to anyone they can reliably pin an identity to, and only if that identity is also known to be price sensitive.
Anyone they can't identify reliably they'd want to charge the most expensive price. Meaning that only would you need to hide your identity, you'd have to manufacture or hijack a completely different identity.
Because they'll know with what confidence they have your identity pinned. You better use a small number of IP numbers for the same credit card, and they better not be known TOR nodes. They better find their tracking cookies in your session or their confidencie in your identity will rank as 0% and your price will be the default no-rebate price and so on.
An even simpler trick would be to "log in to get the best deals". Crap prices shown until you log in, and after that, some customers will see rebates, and others will not. But at that point you are completely known.
I get, very often, ‘this flight is no longer available at this price’ after filling all pages. That is the same thing but presented in an infuriating manner.
True they can't change the price at that point, but I just tried out for S&G's and apparently all of the major airlines now block Tor. There goes that idea!
Will we also see dynamic seating? I do not mind paying 20-30% for being taller and heavier. I will never be able to pay 200-400% more tho for premium or business class.
Those of us above about 6'4" are already in this boat. Pay more for the "economy plusultra" or whatever seats just to get the extra 2-6" of leg room, or suffer knee pain.
> McBride of PROS said that 11 of the company's airline clients are already using its software to generate real-time dynamic offers within direct sales channels, including their websites.
So, no changes then? It's just a matter who else will buy their software?
That would require you to know what their algorithms are. I don't imagine they will volunteer this information. The rules could be arbitrarily complex. The bugs in the implementation of those rules doubly so.
How does anyone look at this and
think it's in the best interest of consumers?
As the article said, discounts for people very sensitive to the price. Some people might not care about spending 2 % more and want to book their flight right now, and some others are ok to spend time to look for price 2% cheaper (+ taking the time to know about the existence of dynamic pricing and techniques to avoid it)
The airlines see their customers as a) wealthy people who can pay whatever for convenience and service, b) business people who travel a lot for work, schedule-driven and not generally paying out of their own pocket, and c) folks who fly only once in a while, for vacations, and are very price sensitive. These are cattle to be shuttled around as cheaply as possible. Any consumer-oriented change the airlines are going to make are mostly for a, somewhat for b, and cost-cutting for c.
I'll simply have my nephew buy my tickets (for a $5 tip) if they price gouge based on third-party lookup of my personal information.
Airlines will make money from this in the short term, and poorer relatives will too I guess. But I think in the end it's the lawyers that will profit the most. It's a class-action lawsuit just waiting to happen
It’s the opposite model of traditional enterprise sales, where prices go up when the customer has more money.
An interesting side-effect I just thought of could be that business commuters' flight prices may increase, and business travelers may even prefer that. I have a consultant friend that is allowed to use personal cards for work-related expenses so he would enjoy the increased cash-back and miles. What a world of perverse incentives
Yup, if you spend more of your employer's money, you earn a nicer vacation for yourself.
Tip for the pro: Change your airline. I can recommend Aeroflot and Turkish Airlines.
They're getting into both my head and finances to charge me more. Despite any good intentions of rewarding loyalty, I imagine the model rarely suggests to charge someone less than they normally would.
The business owner in me understands the pressures of leaving money on the table, particularly in very competitive industries. It's only costing them more money if they don't do this.
It's a tough one. I've seen many examples of algos behaving badly, where my life is being run by companies that think they know everything about me. In many cases they're close, but there's still several where there's an uncanny valley of sorts and I'm trapped with recommendations that are over-optimized or close-but-not-quite-right.
I'm hopeful that at some point we'll be better off, but it's a painful interim process.
An aside, I don't see your teenage boy comparison being that relevant. A teenage boy has to pay more for car insurance because he's higher risk, not because he has a higher willingness to pay. Cost of insurance scales directly with risk of payout by the insurance company. Your Apple example holds up better.
Citation needed: the American airline industry is a textbook example of regulatory capture and protectionism [1-3].
The first reference has a nice chart which suggests that price gouging might be occurring; where else is all the extra profit coming from?.
[1]: https://www.economist.com/news/leaders/21721201-americans-ar...
[2]: http://www.latimes.com/opinion/op-ed/la-oe-welch-united-comp...
[3]: https://reason.com/archives/2017/07/13/flying-the-fairer-ski...
The parent claimed that airlines were very competitive absolutely. I linked to three separate articles saying that that was not the case; European skies are far more competitive (although they still have a very long way to go, especially regarding how capacity at airports is allocated).
> They want the Open Skies agreements between the United States and Persian Gulf governments thrown out and to deny Etihad Airways and Qatar Airways access to American cities because they're subsidized by their governments. But so are other U.S. airline partners, many of whom happened to also be government-owned. Such subsidies are unfortunate, but they're hardly a reason to rip up the very system that's pressuring governments around the world to reduce protectionist behaviors.
Like that’s a problem?
I know retargetting has been able to tell when I have been in a store without a link between the stores accounts and my incognito session that I am aware of. Also when I have just entered the store that day.
I no longer shop there because of it by the way, any advertisers reading this. If you were curious where the limit is, it's using information based on my physical location.
https://wiki.mozilla.org/Security/Fingerprinting
What is happening: Many airlines are moving toward a better pricing system. If you look at United's recent quarterly earnings call, they talk about how their previous system (age old system) constantly under-forecasts demand leading to lower pricing for tickets. Their new system is said to do a better job leading to better prices realized.
There is no way to dynamically price as shown in the article as a large fraction of the tickets are purchased through third party sites. Except maybe Southwest (which requires people to book through their site), I don't know how any airline can accomplish this. Also, if you show a higher than normal price to a repeating customer - they he will either switch to browsing in incognito or take his business else where.
> Experts say such technology is most likely to be used to offer discounts to customers with loyalty status <...> such as to induce a new customer with an especially affordable ticket.
Yeah exactly you're going to always offer the lowest price you can. I've never heard of someone being loyal to an airline who wasn't already getting significant discounts with a loyalty card. A loyalty card is going to be replaced with a browser cookie?
I don't think so.
They just wanted to oversell more.
It's not like with the new system they'll want to oversell less.
Some people take flights to wherever if it’s cheap enough, some fly a given route on given days, no matter the cost. Some will tolerate layovers and transfers for some cost, but that cost needs to be high enough.
Forecasting these components lets you increase total revenue without overselling.
I suspect they've deliberately avoided the more contentious-sounding 'personalised pricing'.
Businessperson who needs to go somewhere to close a deal? Flight on a very specific day/time on short notice might be worth $5K+ to the company.
Grandma coming to visit the grandkids on "oh, anytime in March or April" might only be able to allocate $300 to the flight.
Businessperson gets to fly where/when they need to go for only $3K. Grandma gets to see the grandkids on a $250 ticket with a lot of restrictions that don't bother her. If everyone had to pay $1.5K for the tickets, it's possible that the airline wouldn't sell enough seats to fly the route at all.
In theory, Perfect Price Discrimination is also beneficial to sub-equilibrium market consumers since they can access goods at prices they can afford. But at the same time it is proportionally harmful to consumers above equilibrium as they start paying more for goods that unaltered equilibrium would have ordinarily priced lower (decreasing their surplus). It's unclear that given the opportunity firms would perfectly price discriminate below market equilibrium at all since it's unclear if the incentive structure would make it beneficial to do so.
And as a whole, to the best of my rudimentary knowledge, it's unclear as to whether or not Perfect Price Discrimination, with the reduction in consumer surplus as a result, would be beneficial to the economy as a whole. A simplistic conservative view would be that Price Discrimination prices goods based on what you can "afford" and therefore lowers prices. An equally simplistic liberal view would be that it's companies taking money from consumers. Neither of which are complete pictures...but factually Price Discrimination is a firm strategy that is a result of non-competitive markets. Generally speaking, non-competitive firm strategies disproportionately favor the firm over consumers.
Also just use the new google flights interface and look at the price trends chart. Makes it way clearer whats going on.
The part that IS annoying is airlines selling basic econ seats so you think you're getting a good deal but realize you'll end up spending more just for a checked bag + reserved seat.
Google flights isn't perfect though. You still need to check a more old-school aggregator (I prefer skyscanner) first before pulling the trigger, and of course Southwest as they aren't on any aggregators that I know of.
Checking out skiplagged is a good idea too because it shows you the hypothetical prices of booking legs of a trip a-la-carte rather than as a full ticket. This has the added risk of leaving you SoL if a connecting flight gets delayed/cancelled, causing you to miss a later flight on the same journey but different ticket. If you're careful to not book flights when you know there might be weather or time concerns, though, it can save you some money. For example, I wouldn't be concerned about flying a leg on ORD-LAX during the summer time with a 4 hour layover because that's unlikely to get cancelled/delayed, and if it is, you could get rerouted quickly. Airlines hate that this website exists which is at least adequate evidence that it can save you good money.
You know one great disadvantage? Emails! "Hey customer, your flight schedule has changed, please confirm!"
Random prices? They totally make sense to me.
I always got the sense that airlines spend more dollars to get pennies.
-- Warren Buffett, in the 2007 Berkshire Hathaway shareholder letter
This article (from which I extracted that quote) suggests the industry has been profitable since 2010. Low oil prices haven't prevailed for that entire time, so it's not just that.
https://www.fool.com/investing/2017/03/05/7-ways-warren-buff...
The technology itself doesn't provide competitive advantage, and the local monopoly aspect of the transportation system in the regulated days allowed for sustainable competition. The change you've seen in recent years is another sort of government intervention -- cheap capital has driven consolidation. So instead of an FAA commission allocating gates and routes, companies are buying up the competition.
The members of the CAB were all political appointments and generally did not act for good of the consumer. When Louis Hector was appointed to CAB he insisted that air service be instated to his parent's home town of Carinda, Iowa (as a joke). No one on the commission had any objections.
Incidentally, if you are looking for a good read on the history of the US airline industry from the early days of flying mail routes until the mid 90s the book 'Hard Landings' by Thomas Petzinger is really great.
Ted Kennedy was the driving force in Congress and President Carter signed the legislation. Airline deregulation was a good thing (IMO), but the GOP doesn't get the credit/blame for it.
I thought everyone has been doing this since the early 2000's seeing at is so easy to track people online?
[0]: https://en.wikipedia.org/wiki/Price_discrimination
https://abcnews.go.com/Technology/story?id=119399&page=1
(I’m looking for the source link. It was in a different discussion here on HN about price discrimination.)
> Experts say such technology (dynamic pricing) is most likely to be used to offer discounts to customers with loyalty status and to generate bundled fare offerings that fit the customer's profile.
They don't need AI to do that--the airlines could do this already if you log in to their site. But they don't change pricing based on loyalty; instead, they often give "perks" that are not very valuable. And because of the inflation in airline miles, it is harder and harder to get those perks in the first place -- to get a sky lounge membership through Delta requires 47,000 miles, or the equivalent of 10 roundtrip flights from LA to NYC. So, it seems disingenuous to claim that airlines will give preferential treatment to loyal customers. If anything, it would do the opposite: customers who are loyal (and trying to get the next "perk") are more willing to pay a higher price, not less willing!
https://wikitravel.org/en/Airline_consolidators
I don't know how viable that business is today with the plethora of online booking websites, but I've gotten some good deals from consolidators in the past on international trips.
I would say that true dynamic pricing is probably not for tomorrow, especially for business travellers. Most of business flights are booked via GDSs and integrating these new capabilities is going to take a while.
[1] http://business.time.com/2012/06/26/orbitz-shows-higher-pric...
I am not a fan of price discrimination, but this is not far from Amazon recommending people who have purchased official Lightning cables, more official Apple products, while recommending people who purchase amazon basics cables more amazon basics cables.
These days, less of a thing I imagine. People would use things like skyscanner more, up to the point of not going to airlines' websites, ever. I don't think they want that.
For example if you have purchased a ticket for the price X then it is a clear identification that you are more likely to pay the same amount.
The more information you are leaking about yourself, the more unfair everything is going to be for you.
Why should rich people pay the same to fly as poor people? Rich people are soooooo much more stylish when they fly.
Set aside the notion of "rich". Perhaps in a few decades it will be impossible to ever "get ahead" because with each dollar you earn, cumulatively all of your vendors will find a way to charge you another $0.99.
IDK if this will make a huge difference for airlines to do. Most folks shop travel sites, where (1) they have to report a consistent price, at least to the agency (2) airlines are side by side compared with their competitors.
The difference in my quoted fare can be as high as 15%.
But this is a silly argument... if you or I had worked hard for a promotion or a raise only to be no better off because companies try to gouge us, why would we want to play that game? Enriching Uber’s shareholders is not an act of charity.
No you can’t, because taxes theoretically at least benefit The People.
Anyone they can't identify reliably they'd want to charge the most expensive price. Meaning that only would you need to hide your identity, you'd have to manufacture or hijack a completely different identity.
Because they'll know with what confidence they have your identity pinned. You better use a small number of IP numbers for the same credit card, and they better not be known TOR nodes. They better find their tracking cookies in your session or their confidencie in your identity will rank as 0% and your price will be the default no-rebate price and so on.
An even simpler trick would be to "log in to get the best deals". Crap prices shown until you log in, and after that, some customers will see rebates, and others will not. But at that point you are completely known.
- https://www.youtube.com/watch?v=BzB5xtGGsTc
- https://www.youtube.com/watch?v=069y1MpOkQY
So, no changes then? It's just a matter who else will buy their software?
I don't believe https://en.wikipedia.org/wiki/Law_of_one_price to be true in the general case
As the article said, discounts for people very sensitive to the price. Some people might not care about spending 2 % more and want to book their flight right now, and some others are ok to spend time to look for price 2% cheaper (+ taking the time to know about the existence of dynamic pricing and techniques to avoid it)http://statusmatcher.com/
https://bookwithmatrix.com/
http://www.flightconnections.com/
http://www.cleverlayover.com
https://skiplagged.com
http://opodo.de/
https://www.kiwi.com
http://www.expedia.com
http://www.vayama.com
http://www.mobissimo.com
http://www.momondo.com/
http://www.kayak.com
http://www.swoodoo.com
http://www.gotogate.com
http://www.opodo.de/
http://www.hipmunk.com/
http://faregeek.com/
http://matrix.itasoftware.com/
http://www.skyscanner.net/
http://adioso.com/
http://www.secretflying.com
http://www.fueldumpstrike.com
http://www.wheretocredit.com
http://www.dohop.com
http://www.easylow.com
Please share nice links/tools.