The Technology That Is Teaching The Airlines How To Price
from the giving-customers-what-they-want dept
Buying plane tickets online is usually a pain. You put in the criteria you want, and then wait while the system pops up a few options that are way too expensive for what you’re looking for. So you hit the back button, and start over, adjusting your criteria slightly. What if you leave in the evening instead of the afternoon? How about if you stuck around through the following Sunday? Maybe if you agree to a second stopover. It’s slow, and you never quite find what you’re looking for. However, it appears this is slowly changing thanks to one company that built a system that basically circumvents the airlines’ legacy systems. Those legacy systems only know how to do one thing: look up price fare schedules and tell you how much a flight from point A to point B will cost. Being able to mine that data and do analysis just wasn’t possible. So, another company built a system that hooks into the same data, pulls it out, puts it on a Linux-based cluster of machines and then does the data mining and analysis. The result is that customers of their system can now offer much better and much more customer friendly methods of searching for flight information. This includes, amazingly enough, a “search on price” feature that will show you the lowest price to reach a destination and what flights it would involve. This is, of course, what customers want, but airlines are just now realizing it. America West (when their employees aren’t out dating the friendly skies, I’m assuming) realized this and now uses the system on their own website – saying it actually has saved them hundreds of thousands of dollars. They say they only hook into the actual legacy system when someone goes to book the flight.
Comments on “The Technology That Is Teaching The Airlines How To Price”
Wow, someone at America West finally realized that they can convert their fare rules into an organized table that can be searched by a program. Of course why is there a need for a network of computers to do the job? Not like America West has that many flights 🙂
Frankly, the article shows how outdated the airlines are. Maybe next year they’ll discover how to create reverse auctions for tickets! 🙂
Why does it take so long for so many businesses to really ‘get it’?
My father offered to fly myself, my brother and my sister to Las Vegas for a few days. My father and brother live in Iowa, my sister and I are further east.
Airfare for my sister and me was over $100 cheaper than for my father and brother, even though they would be flying a total of 800 miles LESS (round trip) than us. To further confuse things, changing the return date one day in either direction caused prices to jump by as much as $200 per person. I’m used to prices going down if you stay longer, but $200 to come back one day later (air fare only)?
When we finally got the flight with the best possible prices picked out and tried to buy the tickets, we were told those tickets were no longer available. We went back and did another search and those flights were still showing up as available. Tried again – still not available. Tried the next cheapest set of flights – not available. Finally called the airlines and got the cheapest flights available – almost twice what their online reservation systems show for flights that aren’t really available.
It’s a great deal – for the airlines, that is.
The Airlines and pricing
I think this technology is really cool, and hope we see widespread adoption one day. And not just from ‘get the lowest fare now’ perspective. I can see putting in your profile that you want to leave on a Friday, Return on a Sunday, and you’re willing to pay $200 for that round trip: notify me when it becomes available. Or I want to fly this weekend for $200, where can I go?
Okay… quick airline pricing lesson 101.
Lesson 1: Distance is not the primary factor. The primary factor in pricing is supply and demand.
If there is a lot of business traffic between two cities, than traditionally the prices will be higher for that market than for a market where it’s all leisure passengers.
Second, the really big factor is how full the flights are at the time of booking. If they are empty, than cheap seats abound. If they are full, good luck.
Third, as you get closer to departure, prices jump due to the rules associated with cheap fares. Most airlines use 21 days, 14 days, and 7 days to differentiate between vacationers and business travelers. And the cheap stuff gets harder to find as you go from three weeks from departure to buying a ticket for a trip 5 days from now. Even if the number of passengers booked on that flight is unchanged.
Lesson 2: Pricing is largely determined by competition, where it exists. If one airline lowers its prices between two cities, other airlines are likely to follow suit.
Okay… must go back to work now.
This is not news. I’ve been using ITASoftware’s travel website for almost 2 years. Their java applet is an awesome way to display every combination possible for getting from A to B, then filtering for undesirable flights.
Just wish they’d let you buy your flight from that website.