19 ms·

Airlines inching closer to dynamic pricing

81 points by alex_young 9y ago

trophycase 9y ago
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.
- bmohlenhoff 9y ago
  Should be easy to game though if they offer "bargains to induce new users" as per the article.
- kylecordes 9y ago
  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.
  - paulddraper 9y ago
    Until one vendor figures out they can take the market by charging only $0.98 for each dollar.
    - pavel_lishin 9y ago
      By this line of reasoning, every single thing for sale today is at its minimum price.
      - allthenews 9y ago
        No. Every single thing (excluding occasional inelasticities) is at equilibrium between upward pressure on price (vendor objective) and downward pressure on price (consumer objective).
        pavel_lishin 9y ago
        My cow is perfectly spherical.
        allthenews 9y ago
        All models are wrong, but some models are useful.
- ataturk 9y ago
  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).
mbertschler 9y ago
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.
- dawnerd 9y ago
  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.
- ScoutOrgo 9y ago
  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.
  - opportune 9y ago
    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.
thriftwy 9y ago
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.
paulddraper 9y ago
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.
trendia 9y ago
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!
- nsnick 9y ago
  Airline tickets are nontransferable. You can't buy bulk tickets, and you can't resell them.
  - Johnny555 9y ago
    It's true that I can't buy bulk tickets and resell them, some businesses can: https://wikitravel.org/en/Airline_consolidators 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.
anilshanbhag 9y ago
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.
- quickben 9y ago
  "under forecast" They just wanted to oversell more. It's not like with the new system they'll want to oversell less.
  - nikanj 9y ago
    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.
  - chrismcb 9y ago
    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.
  - deleted 9y ago
    [deleted]
- Kequc 9y ago
pavel_lishin 9y ago
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.
- jtbayly 9y ago
  I would expect that if you did that you must actually be price sensitive. It’s an odd sort of recursive problem.
  - viraptor 9y ago
    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.
- dsfyu404ed 9y ago
  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.
  - pavel_lishin 9y ago
    Maybe I'm not price sensitive; maybe I'm driven by being upset at this system.
    - garmaine 9y ago
      Which is the same thing from the other perspective, which only cares about how much money it can get from you.
- nikanj 9y ago
  A better bet would be posturing as someone who flies all the time. Luring repeat customers with low introductory pricing is a well-known tactic
opportune 9y ago
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
- nikanj 9y ago
  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.
  - opportune 9y ago
    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
    - nikanj 9y ago
      Seats in the lowest class economy earn miles at -50%, sometimes even -75%. Seats in business class earn them at 300%. Yup, if you spend more of your employer's money, you earn a nicer vacation for yourself.
ihsw2 9y ago
Isn't price transparency a basic tenet of free market economics? How does anyone look at this and think it's in the best interest of consumers?
- ttoinou 9y ago
  No, free markets theories take into account information asymmetries and principal-agent problem. I don't believe https://en.wikipedia.org/wiki/Law_of_one_price https://en.wikipedia.org/wiki/Law_of_one_price to be true in the general case 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)
- Finnucane 9y ago
  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.
- chadlavi 9y ago
  Who said anything about the best interest of consumers? They're doing this because it's in the best interest of their shareholders.
Spooky23 9y ago
Meanwhile, Southwest offers predictable and transparent pricing, and actually makes money. I always got the sense that airlines spend more dollars to get pennies.
- tensor_rank_0 9y ago
  isn't the airline industry at a net loss since its inception? I know that is a common belief.
  - sokoloff 9y ago
    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. https://www.fool.com/investing/2017/03/05/7-ways-warren-buffett-blasted-the-airline-industry.aspx https://www.fool.com/investing/2017/03/05/7-ways-warren-buff...
    - Spooky23 9y ago
      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.
      - sokoloff 9y ago
        > 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.
kj65557 9y ago
It's really hard to imagine this will be good for anyone except airlines.
Overtonwindow 9y ago
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.
- kccqzy 9y ago
  You do realize that at the end you still need to provide your name, address, and credit card details right?
  - hueving 9y ago
    But they can't change the price at that point.
    - Overtonwindow 9y ago
      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!
      - mirimir 9y ago
        Well, there's no reason to use Tor, because you'll need to identify yourself before purchasing a ticket. But you can use a VPN service.
    - tluyben2 9y ago
      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.
- alkonaut 9y ago
  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.
3dGrabber 9y ago
This video does a good job explaining how airline pricing works nowadays: https://www.youtube.com/watch?v=y3qfeoqErtY 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.
- andruby 9y ago
  The link you posted goes to a video that explains "how overnight shipping works". Do they explain airline pricing as part of that video?
  - gpvos 9y ago
    Should be https://www.youtube.com/watch?v=72hlr-E7KA0 https://www.youtube.com/watch?v=72hlr-E7KA0 , an earlier video by the same guy.
- roscoebeezie 9y ago
  Yeah as a person who works heavily in the airline ticket pricing world, that’s not how it works.
  - dawnerd 9y ago
    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.
  - fphhotchips 9y ago
    Honestly the video GP meant to post is probably quite accurate; the GP has just summarised it poorly.
scottmsul 9y ago
Couldn't someone just create a service that spoofs cookies in order to trick the airlines website into giving the lowest possible price?
- dmitrygr 9y ago
  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.
eveningcoffee 9y ago
This is a very good example why you should not let anybody to identify you. 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.
- mirimir 9y ago
  Right. It's good to compare multiple searches.
stevedomin 9y ago
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.
landryraccoon 9y ago
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?
- seppel 9y ago
  The airline has to first name a price before I enter my credit card number.
  - landryraccoon 9y ago
    Sure, but airline could show anonymous browsers the maximum price for any tickets, and only display discounts for customers known to be price sensitive.
    - mirimir 9y ago
      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.
    - ajdlinux 9y ago
      Which isn't a very good way to get new customers to buy your tickets to begin with.
- akkat 9y ago
  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.
  - Y_Y 9y ago
    Furthermore, there's no way that would be allowed in the EU. All the same I can see airlines trying to justify it on the basis of assessing risk.
Yetanfou 9y ago
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. [1] http://business.time.com/2012/06/26/orbitz-shows-higher-prices-to-mac-users/ http://business.time.com/2012/06/26/orbitz-shows-higher-pric...
- dannyw 9y ago
  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.
0x7f800000 9y ago
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!
vadimberman 9y ago
> 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?
mrep 9y ago
So basic price discrimination [0]? 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://en.wikipedia.org/wiki/Price_discrimination
- imglorp 9y ago
  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. https://abcnews.go.com/Technology/story?id=119399&page=1 https://abcnews.go.com/Technology/story?id=119399&page=1
  - ComputerGuru 9y ago
    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.)
timcederman 9y ago
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.
- dannyw 9y ago
  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%.
- nikofeyn 9y ago
  yea, and i hate it there too. we’re quickly turning society into a numbers game, making a very low percentage of us rich.
  - rayiner 9y ago
    Except that someone is getting an Uber ride for cheaper than they otherwise would, at the expense of the person who can better afford to pay more.
    - gaius 9y ago
      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.
      - rayiner 9y ago
        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.
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rdiddly 9y ago
rdiddly meanwhile inching closer to lifelong air-travel boycott
bsmithers 9y ago
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'.
- gshulegaard 9y ago
  I'm pretty sure both of those labels are avoiding calling it what Economists refer to it as: Price Discrimination.
  - sokoloff 9y ago
    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.
    - gshulegaard 9y ago
      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.
keymone 9y ago
I wonder how much of this still applies: http://www.ai.mit.edu/courses/6.034f/psets/ps1/airtravel.pdf http://www.ai.mit.edu/courses/6.034f/psets/ps1/airtravel.pdf
aloukissas 9y ago
I wonder how this will affect the algorithms of fare-prediction tools like hopper.
aloukissas 9y ago
I also recommend some of the videos on this topic (this is fantastic channel overall): - https://www.youtube.com/watch?v=BzB5xtGGsTc https://www.youtube.com/watch?v=BzB5xtGGsTc - https://www.youtube.com/watch?v=069y1MpOkQY https://www.youtube.com/watch?v=069y1MpOkQY
dzhiurgis 9y ago
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.
- chadlavi 9y ago
  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.

81 points by alex_young 9y ago

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.

bmohlenhoff 9y ago
Should be easy to game though if they offer "bargains to induce new users" as per the article.
kylecordes 9y ago
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.
- paulddraper 9y ago
  Until one vendor figures out they can take the market by charging only $0.98 for each dollar.
  - pavel_lishin 9y ago
    By this line of reasoning, every single thing for sale today is at its minimum price.
    - allthenews 9y ago
      No. Every single thing (excluding occasional inelasticities) is at equilibrium between upward pressure on price (vendor objective) and downward pressure on price (consumer objective).
      - pavel_lishin 9y ago
        My cow is perfectly spherical.
        allthenews 9y ago
        All models are wrong, but some models are useful.
ataturk 9y ago
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).

mbertschler 9y ago

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.

dawnerd 9y ago
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.
ScoutOrgo 9y ago
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.
- opportune 9y ago
  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.

thriftwy 9y ago

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.

paulddraper 9y ago

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.

trendia 9y ago

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!

nsnick 9y ago
Airline tickets are nontransferable. You can't buy bulk tickets, and you can't resell them.
- Johnny555 9y ago
  It's true that I can't buy bulk tickets and resell them, some businesses can: https://wikitravel.org/en/Airline_consolidators 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.

anilshanbhag 9y ago

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.

quickben 9y ago
"under forecast" They just wanted to oversell more. It's not like with the new system they'll want to oversell less.
- nikanj 9y ago
  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.
- chrismcb 9y ago
  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.
- deleted 9y ago
  [deleted]
Kequc 9y ago

pavel_lishin 9y ago

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.

jtbayly 9y ago
I would expect that if you did that you must actually be price sensitive. It’s an odd sort of recursive problem.
- viraptor 9y ago
  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.
dsfyu404ed 9y ago
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.
- pavel_lishin 9y ago
  Maybe I'm not price sensitive; maybe I'm driven by being upset at this system.
  - garmaine 9y ago
    Which is the same thing from the other perspective, which only cares about how much money it can get from you.
nikanj 9y ago
A better bet would be posturing as someone who flies all the time. Luring repeat customers with low introductory pricing is a well-known tactic

opportune 9y ago

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

nikanj 9y ago
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.
- opportune 9y ago
  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
  - nikanj 9y ago
    Seats in the lowest class economy earn miles at -50%, sometimes even -75%. Seats in business class earn them at 300%. Yup, if you spend more of your employer's money, you earn a nicer vacation for yourself.

ihsw2 9y ago

Isn't price transparency a basic tenet of free market economics? How does anyone look at this and think it's in the best interest of consumers?

ttoinou 9y ago
No, free markets theories take into account information asymmetries and principal-agent problem. I don't believe https://en.wikipedia.org/wiki/Law_of_one_price https://en.wikipedia.org/wiki/Law_of_one_price to be true in the general case 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)
Finnucane 9y ago
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.
chadlavi 9y ago
Who said anything about the best interest of consumers? They're doing this because it's in the best interest of their shareholders.

Spooky23 9y ago

Meanwhile, Southwest offers predictable and transparent pricing, and actually makes money. I always got the sense that airlines spend more dollars to get pennies.

tensor_rank_0 9y ago
isn't the airline industry at a net loss since its inception? I know that is a common belief.
- sokoloff 9y ago
  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. https://www.fool.com/investing/2017/03/05/7-ways-warren-buffett-blasted-the-airline-industry.aspx https://www.fool.com/investing/2017/03/05/7-ways-warren-buff...
  - Spooky23 9y ago
    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.
    - sokoloff 9y ago
      > 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.

kj65557 9y ago

It's really hard to imagine this will be good for anyone except airlines.

Overtonwindow 9y ago

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.

kccqzy 9y ago
You do realize that at the end you still need to provide your name, address, and credit card details right?
- hueving 9y ago
  But they can't change the price at that point.
  - Overtonwindow 9y ago
    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!
    - mirimir 9y ago
      Well, there's no reason to use Tor, because you'll need to identify yourself before purchasing a ticket. But you can use a VPN service.
  - tluyben2 9y ago
    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.
alkonaut 9y ago
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.

3dGrabber 9y ago

This video does a good job explaining how airline pricing works nowadays: https://www.youtube.com/watch?v=y3qfeoqErtY 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.

andruby 9y ago
The link you posted goes to a video that explains "how overnight shipping works". Do they explain airline pricing as part of that video?
- gpvos 9y ago
  Should be https://www.youtube.com/watch?v=72hlr-E7KA0 https://www.youtube.com/watch?v=72hlr-E7KA0 , an earlier video by the same guy.
roscoebeezie 9y ago
Yeah as a person who works heavily in the airline ticket pricing world, that’s not how it works.
- dawnerd 9y ago
  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.
- fphhotchips 9y ago
  Honestly the video GP meant to post is probably quite accurate; the GP has just summarised it poorly.

scottmsul 9y ago

Couldn't someone just create a service that spoofs cookies in order to trick the airlines website into giving the lowest possible price?

dmitrygr 9y ago
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.

eveningcoffee 9y ago

This is a very good example why you should not let anybody to identify you. 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.

mirimir 9y ago
Right. It's good to compare multiple searches.

stevedomin 9y ago

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.

landryraccoon 9y ago

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?

seppel 9y ago
The airline has to first name a price before I enter my credit card number.
- landryraccoon 9y ago
  Sure, but airline could show anonymous browsers the maximum price for any tickets, and only display discounts for customers known to be price sensitive.
  - mirimir 9y ago
    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.
  - ajdlinux 9y ago
    Which isn't a very good way to get new customers to buy your tickets to begin with.
akkat 9y ago
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.
- Y_Y 9y ago
  Furthermore, there's no way that would be allowed in the EU. All the same I can see airlines trying to justify it on the basis of assessing risk.

Yetanfou 9y ago

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. [1] http://business.time.com/2012/06/26/orbitz-shows-higher-prices-to-mac-users/ http://business.time.com/2012/06/26/orbitz-shows-higher-pric...

dannyw 9y ago
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.

0x7f800000 9y ago

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!

vadimberman 9y ago

> 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?

mrep 9y ago

So basic price discrimination [0]? 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://en.wikipedia.org/wiki/Price_discrimination

imglorp 9y ago
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. https://abcnews.go.com/Technology/story?id=119399&page=1 https://abcnews.go.com/Technology/story?id=119399&page=1
- ComputerGuru 9y ago
  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.)

timcederman 9y ago

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.

dannyw 9y ago
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%.
nikofeyn 9y ago
yea, and i hate it there too. we’re quickly turning society into a numbers game, making a very low percentage of us rich.
- rayiner 9y ago
  Except that someone is getting an Uber ride for cheaper than they otherwise would, at the expense of the person who can better afford to pay more.
  - gaius 9y ago
    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.
    - rayiner 9y ago
      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.

jk2323 9y ago

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rdiddly 9y ago

rdiddly meanwhile inching closer to lifelong air-travel boycott

bsmithers 9y ago

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'.

gshulegaard 9y ago
I'm pretty sure both of those labels are avoiding calling it what Economists refer to it as: Price Discrimination.
- sokoloff 9y ago
  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.
  - gshulegaard 9y ago
    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.

keymone 9y ago

I wonder how much of this still applies: http://www.ai.mit.edu/courses/6.034f/psets/ps1/airtravel.pdf http://www.ai.mit.edu/courses/6.034f/psets/ps1/airtravel.pdf

aloukissas 9y ago

I wonder how this will affect the algorithms of fare-prediction tools like hopper.

aloukissas 9y ago

I also recommend some of the videos on this topic (this is fantastic channel overall): - https://www.youtube.com/watch?v=BzB5xtGGsTc https://www.youtube.com/watch?v=BzB5xtGGsTc - https://www.youtube.com/watch?v=069y1MpOkQY https://www.youtube.com/watch?v=069y1MpOkQY

dzhiurgis 9y ago

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.

chadlavi 9y ago
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.