Airline Pricing Experiments: A Plot or Simple Business Savvy?

Some believe browser cookies allow airlines to “sense” when shoppers are just about to book a ticket. Then, the airlines jack up the price. I do not believe this.

So if I’m asked whether or not airlines take advantage of shoppers, I would respond with a resounding, “Well, to an extent.” Let me explain.

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Airlines Price Tickets to Their Advantage

Some facts to ponder:

  • All businesses take advantage of shoppers to the extent that they all try to sell their products or services for the highest price the market will bear (and any website worth its salt uses cookies, ostensibly to improve the user’s experience).
  • Airlines typically offer more than a dozen price points for the same seat on the same aircraft – prices that can and do change frequently throughout the day. At the same time, automated inventory systems decide at any given moment which price point to offer a shopper, based on dozens of factors including current and historical bookings.
  • Air travel quoting systems receive an avalanche of queries every day although the vast majority of these never result in a booking), and these systems use a variety of technology shortcuts like reusing earlier responses or guesstimating actual airline inventory.
  • When you are in the midst of the booking process, others may also be booking the same flight – and possibly scooping up the best deals (especially if these are very good deals) ¬†– even as you are still deciding whether or not to buy.

So – are these travel sites A.) smart enough (or brazen enough) to target your personal behavior via cookies to jack up rates? Or B.) is this price-jumping behavior simply part-and-parcel of current airline pricing technology (and the shortcuts used by quoting websites) to handle the insatiable demand for ticket quotes? My educated guess is, B. The future may be different though.

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Future Pricing Experiments

Airlines would like to try different pricing methods for different customers, no question about it. In fact, they’re already conducting such experiments (more or less ‘accidentally’) and they may try to implement the cookie myth at some point.

Example #1: Orbitz got a lot of folks upset recently for changing the default display of their quoting results for users of Apple products – the theory being that people who could afford such expensive gadgets could afford to pay higher ticket prices. By the way, I did not agree with the media’s presentation of the facts since I felt it was more a matter of Orbitz re-ordering its list of prices (the cheaper prices at the end instead of on top) but many raged over this strategy.

Example #2: Delta’s website tested pricing engines of two different companies, performing separate but simultaneous experiments for both loyal logged-in miles member customers and not-so-frequent flyers (those who do not log-in) which, as you might imagine, returned some very different results. Once again, this discrepancy became a huge story, prompting an explanation from a Delta vice president who opined that now with everyone back on the same search engine, all will ultimately get the “new improved search function.”

However, even as we speak, more than a dozen of the world’s largest carriers are in the midst of getting government approval to augment the current airline pricing technology into something more like the cookie urban legend but in reality, it’s all about prices tailored to specific shoppers¬†– a so-called “New Distribution Capability.” No surprise then that those who are concerned about privacy and higher fares are starting to give this situation their full attention.

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Published: April 18, 2013