11 ms·

Airlines Are Backing Volantio (YC W09), a Startup That Could Fix Overbooking

68 points by abhiminator 9y ago

atanasb 9y ago
While this is a step in the right direction it just serves to show how far behind airline companies are in terms of tech. Swapping out passengers on the fly and handing out virtual miles in exchange is seen as "innovative technology"? Hopefully this will pave the way for technological disruption in the airline business.
- tyingq 9y ago
  That's a broad brush. Airlines aren't all at the same point in dealing with overbooking. It's also not a trivial issue given the slim margins and complexity. Consider connecting flights, different fare types (refundable or not, advance purchase, etc). Also, differing aircraft types, how many seats they have, and which crews are qualified to fly them. Oh, and weather. If you think the root cause is "airline IT is incompetent", you're probably off base. Google paid $700M for a crazy talented company (stuffed full of PhD genius level talent) that did a good job of solving shopping, but failed commercially at solving booking.
  - jptman 9y ago
    I'm not sure I'd call it "failed commercially at solving booking". Google stopped their work on creating a booking system after the acquisition since they were never interested in getting into booking.
    - tyingq 9y ago
      They had one small airline (Cape Air) using it for a long time, so I don't quite get your point. It was built, but almost nobody bought it. Google did squash it roughly 2 years after buying ITA, but it was pretty much dead anyway.
      - jptman 9y ago
        I have to admit I don't know this stuff first hand, but based on what I heard, it took quite a while for ITA to be fully "absorbed" into Google, during which time they didn't change much. I also heard that their first customer was more of a pilot or development partner. Also, from what I know about the airline industry, they change very very slowly and it'd take a long time from the time airlines are approached to the time things are actually in production, especially for something this critical.
        tyingq 9y ago
        That's fair. I'm not trying to portray ITA as a failure. Quite the opposite. Trying to say even an elite group of genius talent can't turn the ship quickly. That it's more about legacy thinking than it is about legacy tech. Airlines and OTA companies could be 10x more innovative with the tech they have now. TPF and other old tech is NOT the barrier.
    - bogomipz 9y ago
      Which acquisition was this?
      - tyingq 9y ago
        Google/ITA. https://www.google.com/press/ita/faq.html https://www.google.com/press/ita/faq.html
FLUX-YOU 9y ago
Just FYI, if you get asked to swap, there's no guarantee you get the same plane type. I opted to switch in exchange for $300, but the plane was an older 737, down from a 787.
- dawnerd 9y ago
  Is 300 dollars not worth the downgrade? That’s also a pretty small amount of money to accept to switch. Holding out would get you more, or force someone else to take it.
  - FLUX-YOU 9y ago
    Considering I don't fly much, not really. 787 vs. 737 is also worlds apart in terms of comfort (both flights were first class). The certificate they give you is valid for a year.
    - dawnerd 9y ago
      I won’t disagree about the comfort but man they got you. Should never accept a certificate, especially that low for first class. Next time just hold out. I’ve had it happen twice now and both times were close to 1k in certs.
      - FLUX-YOU 9y ago
        It wouldn't surprise me if Volantio or airlines automatically checked to see how often someone flies and tries to lowball them.
        kelnos 9y ago
        It depends. It seems like the goal here is to make the airlines money while still making it seem to the passenger like they've gotten a decent deal. A less frequent traveler who doesn't know that $300 is a low-ball offer might be perfectly satisfied with that, even while a more frequent traveler would laugh at such an offer. There's no objective measure of the feeling of "getting a good deal". It's entirely subjective and depends on what the customer values, as well as how much information the customer has about similar transactions. Obviously if the customer later gains new information that suggests they could have gotten a much better deal, that's a negative, but part of figuring out that optimum deal point is figuring out the likelihood of that, as well.
rahimnathwani 9y ago
I'm surprised that airlines wouldn't/couldn't build this functionality themselves. Does anyone here have insight into the 'buy vs. build' decision that any of these airlines went through in adopting this company's services?
- leeoniya 9y ago
  i've always had the same question about Uber (re the convenience of using an app to hail and pay)
  - a13n 9y ago
    The value of Uber isn't the app, it's the network of drivers/riders.
    - leeoniya 9y ago
      the value of Uber is convenience. flailing your arms on a street corner hoping that some vacant taxi will notice you is both silly and inefficient. at any one time there are tons of people needing taxis and tons of empty taxis burning fuel unable to find fares. if there was an app that allowed you to tap a button and have taxi arrive to pick you up, it's likely Uber would not be where it is today.
      - kelnos 9y ago
        This is actually an interesting idea. What if the city of SF created an Uber/Lyft-like app, and required that all registered taxis be listed on it and have the driver app running and active on their phone while on duty? Obviously taxis could still accept manual street-side hails and line up in hotel taxi lines if/when they want to. But they otherwise could accept fares on the app, and riders could still pay seamlessly through the app, and have the option to rate drivers and submit feedback. They wouldn't be able to charge the rock-bottom prices Uber and Lyft do in order to gain market share, of course. But with Uber (and to a much smaller extent Lyft) suffering some backlash wrt their business practices and tendency to increase traffic congestion, such an app might have a chance at pulling at least some market share back toward traditional taxis. If I could order a taxi using an Uber/Lyft-like experience[0], and get decent wait times, I wouldn't mind spending more in order to support a local alternative, if that local alternative was actually showing signs that it wanted to innovate and adopt a customer-first attitude. [0] Yes, I know Uber had UberTAXI for a while, but in practice the wait times were huge and most of the times I checked the option, it said there were no taxis available at all. Obviously Uber had little incentive to make the taxi part of their service attractive, and plenty of incentive to make it unattractive, so I don't really blame the taxi services themselves for this deficiency.
jaclaz 9y ago
>Volantio’s solution: Gather non-identifiable data about purchasing behaviors to learn what type of consumer is more likely to accept what type of offer. Call me a skeptic as much as you want, but the "non-identifiable data", must somehow end up being identifiable, or at least the passenger will be personally tagged as "type A", "type B", Type C", etc. in order to propose him/her the "best deal".
- walshemj 9y ago
  Well would not passengers the game the system by displaying signaling to maximise the best deal for them - just like there are ways of gaming the upgrade system wear a suit if you have a PhD book with Dr instead of Mr or MS.
wpietri 9y ago
A good start, but I think this could be taken much farther. If we look back 20+ years, we built up very strong rituals around scheduling because we couldn't make the system work any other way. But in-person plans have become much more dynamic as we become better connected. Air travel is still very much in the old world there: we book far in advance, slotting ourselves into fixed-schedule, fixed-capacity options, even though we are often much more flexible. For example, every August I go back for a big camping trip with extended family. I could fly from a few different airports into a few different cities over a few days. Since working remotely for a day or two isn't a problem, the return's even more flexible. Why do I have to buy a specific down-to-the-minute ticket now if I want a good price? I'd be happy to commit now, and then let the airlines (or airlines negotiating automatically with my booking agent) work out exactly when I'm going. They could use much more data to maximize efficiency, giving us lower total prices.
- jorvi 9y ago
  Tickets should also be liberated from being person-bound. If I have to cancel a NL-CHN trip a week in advance, I lose most (if not all) of the money spent on it, and any recoups are in the form of vouchers. And the airline still resells the seat! However, if I could just sell the ticket on the secondary market, I’d recoup most of my costs.
  - sjg007 9y ago
    You could do that in the past but airlines didn’t like it for the reason you mention.
    - monksy 9y ago
      The airline doesn't like it because it enables ticket arbitraging. (That's the reason they're fixed to your name) Also for tracking (err security.. but that's not really their fault)
      - fricat1ve 9y ago
        There was a story that checking ID's on plane tickets was at the top of the airlines lobbying wishlist after 9/11 so they could curtail the practice of people selling unused tickets to another (same gender) person.
nanis 9y ago
The title is a polite way of putting it. In reality, what they are backing is a startup which claims that the data they gather will allow airlines to gobble all consumer surplus by being able to offer compensation equal to the reservation price of the customer: I.e., the compensation that leaves the passenger indifferent between flying on this flight vs giving up their seat. I am going to claim that the airlines backing this and the investors of the startup have not studied Ultimatum Games[1]: One of the most debated results in experimental economics comes from studies of the so-called “ultimatum” game. In this game, one player (the “proposer”) goes first and offers a split of a pie of given size. The second player chooses whether to accept or reject. If the second player rejects, both get noting. If he accepts, they split the pie as was proposed. The ultimatum game has a unique subgame perfect equilibrium where the proposer gets (essentially) the whole pie. It also has many other Nash equilibria, where the proposer offers a more generous split, fearing an aggressive offer will be rejected. The experimental results are in stark contrast to the backward induction solution. [1]: https://web.stanford.edu/~jdlevin/Econ%20286/Experimental.pdf https://web.stanford.edu/~jdlevin/Econ%20286/Experimental.pd...
- mc32 9y ago
  As an aside, some have proposed a mechanism derived from this method as a way to fix congressional redistricting.
  - drewmate 9y ago
    That is an interesting and vexing problem and it's not clear to me how this applies. Could you post a link with more details?
- Fenn 9y ago
  The game theory is indeed complex. > offer compensation equal to the reservation price of the customer It's a little more complex than this. It's highly feasible to offer compensation higher than than the original purchase price of the ticket while inducing passengers to move to a different flight, meaning they're effectively being "paid to fly". In many cases, customers are actually not on their preferred flight in the first place, but merely the one that was cost-optimal at time of purchase. Changes in market demand in the intervening 3-6 months can easily mean that many passengers on an aircraft can be compensated above their original purchase value to move to their preferred flight. The above case is an idealised version, but the equilibria is complex and difficult to intuit without experimentation (which is primarily what we're working on). More news as it happens :) Sameless self-promotion (I'm cofounder/CTO): We're also hiring (https://angel.co/volantio/jobs https://angel.co/volantio/jobs / https://www.workatastartup.com/directory/270 https://www.workatastartup.com/directory/270)
vannevar 9y ago
There's a much simpler solution to the overbooking problem: eliminate the fraud exemption that airlines currently enjoy, allowing them to sell the same seat twice. The downside is that, if airlines are unable to resell unused seats, more flights will fly partially empty, reducing overall efficiency of the industry. But if they offer standby "tickets" at steep discounts (instead of making every ticket a probabilistic standby seat), that problem would solve itself.
- cybrjoe 9y ago
  Don't all airlines already sell standby tickets? I'm guessing the demand on the average flight isn't enough to cover the chance someone won't show.
  - vannevar 9y ago
    If demand were too low for standby tickets, the flight wouldn't be in danger of overbooking in the first place.
  - mseebach 9y ago
    I've never seen standby tickets on sale in a first order way. Usually, it's when you're on a rebooked or connecting flight, they'll offer you standby on a better (but sold out) option.
- intopieces 9y ago
  Your solution means higher ticket prices overall, which consumers have repeatedly indicated they do not want. Most people don’t get bumped from flights. Most people don’t want to pay x% more to see their family once a year.
  - vannevar 9y ago
    The percentage increase in price shouldn't be any greater than the percentage probability of getting bumped from a flight, which as you point out, is relatively low. If every hundredth seat is overbooked on average, then you've got 101 passengers for 100 seats. If they all paid $100, then you could offset the lost revenue from the 101st passenger by charging the remaining passengers $101 each. Not exactly a game changing cost increase.
sbussard 9y ago
Aviato
pilingual 9y ago
I love seeing old YC companies continue to try to discover product market fit. I remember this blog post which made me think they were toast because pg told them: “But until you’ve got a major discovery to show, or some serious growth, I can’t recommend you to investors” http://tomhoward.co/part-1-reality-check http://tomhoward.co/part-1-reality-check https://news.ycombinator.com/item?id=3941754 https://news.ycombinator.com/item?id=3941754
heisenbit 9y ago
Maybe I'm cynical here but any technology that allows safer overbooking will be used to squeeze more bookings on a plane again increasing the risk of upset passengers and PR disasters. Markets lead to exploring boundaries and the boundary to overbooking is the willingness of the company to suffer the consequences. That willingness is cultural and will not be changed by technology.
elbasti 9y ago
There's already a well-proven technique for price discovery: it's called a _market_. But because there's no real market for airplane tickets--the airlines basically forbid secondary transactions--we're forced into a world of centralized planning, and by an entity that's fairly incompetent at that. This entire thing would be solved if plane tickets could be bought and sold in some sort of marketplace. The airlines could even take a cut of every transaction! It's baffling to me that the overbooking problem is solved at the airport, minutes before take-off. Imagine instead a world where you could buy and sell plane tickets. - On purchase, I could set a reserve price for which I'd be willing to sell my plane ticket, and have the price go up as the time of flight got near. - Late to the airport--perhaps I could trade tickets with someone on a later flight that wants to leave sooner? - I have a flexible lifestyle. Standing order for tickets to the beach|family|wherever at a low price, as long as I have 5 hour warning before flight time. Gonna miss your flight? I'll buy it. Let the airlines take a cut of every secondary transaction and let app developers & market makers figure out the use-cases.
- tysonzni 9y ago
  Interesting idea. However I suspect that in such a secondary market most liquidity/volume would only exist last minute, making it less likely to improve yield optimization (for airlines) or consumer choice (for passengers). It's baffling to me that the overbooking problem is solved at the airport, minutes before take-off. Think about how excess seats usually come about: a passenger doesn't show up because of some unforeseen circumstance which occurs last minute. By the time that passenger decides they can't make the flight, it might be too late to generate sufficient demand for that ticket. Potential buyers of that ticket have to be packed and ready to go. And where do we find those people? At the airport. The population of people who are super flexible in both destination and time is probably not sizable enough to generate enough volume in a secondary market.
- kelnos 9y ago
  This assumes a market where participants are all acting in good faith. In any marketplace for a good like this, you'll end up with ticket scalpers. I suspect any cost savings will be eaten up by the premium people would have to pay to scalpers who buy up ticket stock early and wait to sell them closer to the flight date. You end up with a lot of value being eaten up by predatory third parties who have no interest in getting on planes themselves.
ggm 9y ago
The investment by non-US carriers intrigues me, because there is no significant overbooking problem worldwide: its a mostly US phenomenon as I understand it. The rebooking-because-cancelled, thats a huge problem anywhere. So, I suspect the JV partners are looking to benefits for unexpected surge loads and overflow from late/dropped flights in a tight jet schedule.
- mseebach 9y ago
  I think it's a media attention thing. Flights are overbooked all over the world, and people get involuntary bumped. I just did a couple of searches for "[lufthansa, british airways, qatar, emirates] overbooked", and it's not exactly unheard of. It's a relatively rare event, though, but one that caught US media attention due to the pretty gruesome removal of Dr Dao last year (which wasn't even an overbooking incident). There's also the factor of the uniquely dense and complex nature of the US domestic network. More flights with more connections make for more uncertainty in the system, to which overbooking is an answer.
  - ggm 9y ago
    "Flights are overbooked all over the world" Yes, but overall at a far lower intensity than in the US. I don't just mean 55/45 type things: I have flown continuously internationally for the last 20 years, worldwide, about 5-10 trips per year, and the only economy I have been bumped in was the USA. The data you gave about search matches in no way addresses the huge skew to events in the USA. Contrariwise, the UK is the only economy I have used trains in, which routinely has major commuter train cancellations. The commonality here is a lack of capital investment and oversight uniquely dense and complex nature of the US domestic network. More flights with more connections make for more uncertainty in the system, to which overbooking is an answer Yes. this I think is true. the US has far more dense flights, and has chosen overbooking as an answer but in no sense is it the answer to this problem: It's the one we've got. The regulator could have directed other approaches, but the cost consequences on airlines (who routinely seem to use chapter-11 methods to walk away from historical debt) would have been pretty bad. This answer maximises profit for airlines, at the expense of flyer convenience.
kwhitefoot 9y ago
As far as I can tell overbooking is an almost exclusively US phenomenon. In Europe I don't know of anyone who has been 'bumped' off a flight because it was overbooked. Low cost airlines like Ryanair manage to fill flights without overbooking. There is a lot to dislike about Mr O'Leary's company but I don't think anyone worries that their ticket is not going to be honoured.
- tysonzni 9y ago
  Low cost airlines like Ryanair manage to fill flights without overbooking. Presumably the reason why US airlines overbook is to maximize yield since almost always some passengers don't show up. Any reason why non-US airlines don't do the same? I suspect it has to do with ticket regulations but would like to learn more.
  - madeofpalk 9y ago
    These flights are still full though
  - URSpider94 9y ago
    European budget carriers have figured out how to lower the bar to a level unknown in the US. One carry-on, zero checked luggage allowance, pay to pre-assign a seat, pay for water on-board, pay 30 Eur if you don’t pre-print your own boarding pass at home, scan, tag and check your own luggage. Almost all tickets are 100% non-refundable - miss the flight, you’re going to pay for another ticket. Prices are low enough that people are willing to suffer through the experience, and keep the planes completely full. It’s more like a Greyhound bus in the air.
- mseebach 9y ago
  Ryanair doesn't operate connecting flights, and they sell very few flexible or refundable tickets. These are the main opportunities for people to not make their flights, and thus for overbooking to be attractive. A passenger not showing up is pure profit as Ryanair even gets to pocket the taxes, which are only payable on actually flying passengers (you can claim them back, but there's a substantial handling fee IIRC).
rdl 9y ago
I'd often be perfectly happy to take earlier or later flights on the same day, and potentially even change routing (OAK vs. SFO, or even something crazier like MIA vs. FLL). Wouldn't even necessarily need to offer cash; frequent flyer miles or upgrade to C or F or even lounge access while waiting would be fine. Rare other times, I'd probably want >$5-10k to change my flight (missing a speaking slot at a conference or a customer meeting or something when booked close). Being able to surface customer preferences like this seems valuable. I've had Alaska/Virgin call to offer compensation to change (or cancel) flights before, either due to overbooking or downgauging, and I've had international flights change and offer free rebook/cancel as a result, but nothing has really been technically efficient or easy to use yet.

68 points by abhiminator 9y ago

While this is a step in the right direction it just serves to show how far behind airline companies are in terms of tech. Swapping out passengers on the fly and handing out virtual miles in exchange is seen as "innovative technology"? Hopefully this will pave the way for technological disruption in the airline business.

tyingq 9y ago
That's a broad brush. Airlines aren't all at the same point in dealing with overbooking. It's also not a trivial issue given the slim margins and complexity. Consider connecting flights, different fare types (refundable or not, advance purchase, etc). Also, differing aircraft types, how many seats they have, and which crews are qualified to fly them. Oh, and weather. If you think the root cause is "airline IT is incompetent", you're probably off base. Google paid $700M for a crazy talented company (stuffed full of PhD genius level talent) that did a good job of solving shopping, but failed commercially at solving booking.
- jptman 9y ago
  I'm not sure I'd call it "failed commercially at solving booking". Google stopped their work on creating a booking system after the acquisition since they were never interested in getting into booking.
  - tyingq 9y ago
    They had one small airline (Cape Air) using it for a long time, so I don't quite get your point. It was built, but almost nobody bought it. Google did squash it roughly 2 years after buying ITA, but it was pretty much dead anyway.
    - jptman 9y ago
      I have to admit I don't know this stuff first hand, but based on what I heard, it took quite a while for ITA to be fully "absorbed" into Google, during which time they didn't change much. I also heard that their first customer was more of a pilot or development partner. Also, from what I know about the airline industry, they change very very slowly and it'd take a long time from the time airlines are approached to the time things are actually in production, especially for something this critical.
      - tyingq 9y ago
        That's fair. I'm not trying to portray ITA as a failure. Quite the opposite. Trying to say even an elite group of genius talent can't turn the ship quickly. That it's more about legacy thinking than it is about legacy tech. Airlines and OTA companies could be 10x more innovative with the tech they have now. TPF and other old tech is NOT the barrier.
  - bogomipz 9y ago
    Which acquisition was this?
    - tyingq 9y ago
      Google/ITA. https://www.google.com/press/ita/faq.html https://www.google.com/press/ita/faq.html

FLUX-YOU 9y ago

Just FYI, if you get asked to swap, there's no guarantee you get the same plane type. I opted to switch in exchange for $300, but the plane was an older 737, down from a 787.

dawnerd 9y ago
Is 300 dollars not worth the downgrade? That’s also a pretty small amount of money to accept to switch. Holding out would get you more, or force someone else to take it.
- FLUX-YOU 9y ago
  Considering I don't fly much, not really. 787 vs. 737 is also worlds apart in terms of comfort (both flights were first class). The certificate they give you is valid for a year.
  - dawnerd 9y ago
    I won’t disagree about the comfort but man they got you. Should never accept a certificate, especially that low for first class. Next time just hold out. I’ve had it happen twice now and both times were close to 1k in certs.
    - FLUX-YOU 9y ago
      It wouldn't surprise me if Volantio or airlines automatically checked to see how often someone flies and tries to lowball them.
      - kelnos 9y ago
        It depends. It seems like the goal here is to make the airlines money while still making it seem to the passenger like they've gotten a decent deal. A less frequent traveler who doesn't know that $300 is a low-ball offer might be perfectly satisfied with that, even while a more frequent traveler would laugh at such an offer. There's no objective measure of the feeling of "getting a good deal". It's entirely subjective and depends on what the customer values, as well as how much information the customer has about similar transactions. Obviously if the customer later gains new information that suggests they could have gotten a much better deal, that's a negative, but part of figuring out that optimum deal point is figuring out the likelihood of that, as well.

rahimnathwani 9y ago

I'm surprised that airlines wouldn't/couldn't build this functionality themselves. Does anyone here have insight into the 'buy vs. build' decision that any of these airlines went through in adopting this company's services?

leeoniya 9y ago
i've always had the same question about Uber (re the convenience of using an app to hail and pay)
- a13n 9y ago
  The value of Uber isn't the app, it's the network of drivers/riders.
  - leeoniya 9y ago
    the value of Uber is convenience. flailing your arms on a street corner hoping that some vacant taxi will notice you is both silly and inefficient. at any one time there are tons of people needing taxis and tons of empty taxis burning fuel unable to find fares. if there was an app that allowed you to tap a button and have taxi arrive to pick you up, it's likely Uber would not be where it is today.
    - kelnos 9y ago
      This is actually an interesting idea. What if the city of SF created an Uber/Lyft-like app, and required that all registered taxis be listed on it and have the driver app running and active on their phone while on duty? Obviously taxis could still accept manual street-side hails and line up in hotel taxi lines if/when they want to. But they otherwise could accept fares on the app, and riders could still pay seamlessly through the app, and have the option to rate drivers and submit feedback. They wouldn't be able to charge the rock-bottom prices Uber and Lyft do in order to gain market share, of course. But with Uber (and to a much smaller extent Lyft) suffering some backlash wrt their business practices and tendency to increase traffic congestion, such an app might have a chance at pulling at least some market share back toward traditional taxis. If I could order a taxi using an Uber/Lyft-like experience[0], and get decent wait times, I wouldn't mind spending more in order to support a local alternative, if that local alternative was actually showing signs that it wanted to innovate and adopt a customer-first attitude. [0] Yes, I know Uber had UberTAXI for a while, but in practice the wait times were huge and most of the times I checked the option, it said there were no taxis available at all. Obviously Uber had little incentive to make the taxi part of their service attractive, and plenty of incentive to make it unattractive, so I don't really blame the taxi services themselves for this deficiency.

jaclaz 9y ago

>Volantio’s solution: Gather non-identifiable data about purchasing behaviors to learn what type of consumer is more likely to accept what type of offer. Call me a skeptic as much as you want, but the "non-identifiable data", must somehow end up being identifiable, or at least the passenger will be personally tagged as "type A", "type B", Type C", etc. in order to propose him/her the "best deal".

walshemj 9y ago
Well would not passengers the game the system by displaying signaling to maximise the best deal for them - just like there are ways of gaming the upgrade system wear a suit if you have a PhD book with Dr instead of Mr or MS.

wpietri 9y ago

A good start, but I think this could be taken much farther. If we look back 20+ years, we built up very strong rituals around scheduling because we couldn't make the system work any other way. But in-person plans have become much more dynamic as we become better connected. Air travel is still very much in the old world there: we book far in advance, slotting ourselves into fixed-schedule, fixed-capacity options, even though we are often much more flexible. For example, every August I go back for a big camping trip with extended family. I could fly from a few different airports into a few different cities over a few days. Since working remotely for a day or two isn't a problem, the return's even more flexible. Why do I have to buy a specific down-to-the-minute ticket now if I want a good price? I'd be happy to commit now, and then let the airlines (or airlines negotiating automatically with my booking agent) work out exactly when I'm going. They could use much more data to maximize efficiency, giving us lower total prices.

jorvi 9y ago
Tickets should also be liberated from being person-bound. If I have to cancel a NL-CHN trip a week in advance, I lose most (if not all) of the money spent on it, and any recoups are in the form of vouchers. And the airline still resells the seat! However, if I could just sell the ticket on the secondary market, I’d recoup most of my costs.
- sjg007 9y ago
  You could do that in the past but airlines didn’t like it for the reason you mention.
  - monksy 9y ago
    The airline doesn't like it because it enables ticket arbitraging. (That's the reason they're fixed to your name) Also for tracking (err security.. but that's not really their fault)
    - fricat1ve 9y ago
      There was a story that checking ID's on plane tickets was at the top of the airlines lobbying wishlist after 9/11 so they could curtail the practice of people selling unused tickets to another (same gender) person.

nanis 9y ago

The title is a polite way of putting it. In reality, what they are backing is a startup which claims that the data they gather will allow airlines to gobble all consumer surplus by being able to offer compensation equal to the reservation price of the customer: I.e., the compensation that leaves the passenger indifferent between flying on this flight vs giving up their seat. I am going to claim that the airlines backing this and the investors of the startup have not studied Ultimatum Games[1]: One of the most debated results in experimental economics comes from studies of the so-called “ultimatum” game. In this game, one player (the “proposer”) goes first and offers a split of a pie of given size. The second player chooses whether to accept or reject. If the second player rejects, both get noting. If he accepts, they split the pie as was proposed. The ultimatum game has a unique subgame perfect equilibrium where the proposer gets (essentially) the whole pie. It also has many other Nash equilibria, where the proposer offers a more generous split, fearing an aggressive offer will be rejected. The experimental results are in stark contrast to the backward induction solution. [1]: https://web.stanford.edu/~jdlevin/Econ%20286/Experimental.pdf https://web.stanford.edu/~jdlevin/Econ%20286/Experimental.pd...

mc32 9y ago
As an aside, some have proposed a mechanism derived from this method as a way to fix congressional redistricting.
- drewmate 9y ago
  That is an interesting and vexing problem and it's not clear to me how this applies. Could you post a link with more details?
Fenn 9y ago
The game theory is indeed complex. > offer compensation equal to the reservation price of the customer It's a little more complex than this. It's highly feasible to offer compensation higher than than the original purchase price of the ticket while inducing passengers to move to a different flight, meaning they're effectively being "paid to fly". In many cases, customers are actually not on their preferred flight in the first place, but merely the one that was cost-optimal at time of purchase. Changes in market demand in the intervening 3-6 months can easily mean that many passengers on an aircraft can be compensated above their original purchase value to move to their preferred flight. The above case is an idealised version, but the equilibria is complex and difficult to intuit without experimentation (which is primarily what we're working on). More news as it happens :) Sameless self-promotion (I'm cofounder/CTO): We're also hiring (https://angel.co/volantio/jobs https://angel.co/volantio/jobs / https://www.workatastartup.com/directory/270 https://www.workatastartup.com/directory/270)

vannevar 9y ago

There's a much simpler solution to the overbooking problem: eliminate the fraud exemption that airlines currently enjoy, allowing them to sell the same seat twice. The downside is that, if airlines are unable to resell unused seats, more flights will fly partially empty, reducing overall efficiency of the industry. But if they offer standby "tickets" at steep discounts (instead of making every ticket a probabilistic standby seat), that problem would solve itself.

cybrjoe 9y ago
Don't all airlines already sell standby tickets? I'm guessing the demand on the average flight isn't enough to cover the chance someone won't show.
- vannevar 9y ago
  If demand were too low for standby tickets, the flight wouldn't be in danger of overbooking in the first place.
- mseebach 9y ago
  I've never seen standby tickets on sale in a first order way. Usually, it's when you're on a rebooked or connecting flight, they'll offer you standby on a better (but sold out) option.
intopieces 9y ago
Your solution means higher ticket prices overall, which consumers have repeatedly indicated they do not want. Most people don’t get bumped from flights. Most people don’t want to pay x% more to see their family once a year.
- vannevar 9y ago
  The percentage increase in price shouldn't be any greater than the percentage probability of getting bumped from a flight, which as you point out, is relatively low. If every hundredth seat is overbooked on average, then you've got 101 passengers for 100 seats. If they all paid $100, then you could offset the lost revenue from the 101st passenger by charging the remaining passengers $101 each. Not exactly a game changing cost increase.

sbussard 9y ago

Aviato

pilingual 9y ago

I love seeing old YC companies continue to try to discover product market fit. I remember this blog post which made me think they were toast because pg told them: “But until you’ve got a major discovery to show, or some serious growth, I can’t recommend you to investors” http://tomhoward.co/part-1-reality-check http://tomhoward.co/part-1-reality-check https://news.ycombinator.com/item?id=3941754 https://news.ycombinator.com/item?id=3941754

heisenbit 9y ago

Maybe I'm cynical here but any technology that allows safer overbooking will be used to squeeze more bookings on a plane again increasing the risk of upset passengers and PR disasters. Markets lead to exploring boundaries and the boundary to overbooking is the willingness of the company to suffer the consequences. That willingness is cultural and will not be changed by technology.

elbasti 9y ago

There's already a well-proven technique for price discovery: it's called a _market_. But because there's no real market for airplane tickets--the airlines basically forbid secondary transactions--we're forced into a world of centralized planning, and by an entity that's fairly incompetent at that. This entire thing would be solved if plane tickets could be bought and sold in some sort of marketplace. The airlines could even take a cut of every transaction! It's baffling to me that the overbooking problem is solved at the airport, minutes before take-off. Imagine instead a world where you could buy and sell plane tickets. - On purchase, I could set a reserve price for which I'd be willing to sell my plane ticket, and have the price go up as the time of flight got near. - Late to the airport--perhaps I could trade tickets with someone on a later flight that wants to leave sooner? - I have a flexible lifestyle. Standing order for tickets to the beach|family|wherever at a low price, as long as I have 5 hour warning before flight time. Gonna miss your flight? I'll buy it. Let the airlines take a cut of every secondary transaction and let app developers & market makers figure out the use-cases.

tysonzni 9y ago
Interesting idea. However I suspect that in such a secondary market most liquidity/volume would only exist last minute, making it less likely to improve yield optimization (for airlines) or consumer choice (for passengers). It's baffling to me that the overbooking problem is solved at the airport, minutes before take-off. Think about how excess seats usually come about: a passenger doesn't show up because of some unforeseen circumstance which occurs last minute. By the time that passenger decides they can't make the flight, it might be too late to generate sufficient demand for that ticket. Potential buyers of that ticket have to be packed and ready to go. And where do we find those people? At the airport. The population of people who are super flexible in both destination and time is probably not sizable enough to generate enough volume in a secondary market.
kelnos 9y ago
This assumes a market where participants are all acting in good faith. In any marketplace for a good like this, you'll end up with ticket scalpers. I suspect any cost savings will be eaten up by the premium people would have to pay to scalpers who buy up ticket stock early and wait to sell them closer to the flight date. You end up with a lot of value being eaten up by predatory third parties who have no interest in getting on planes themselves.

ggm 9y ago

The investment by non-US carriers intrigues me, because there is no significant overbooking problem worldwide: its a mostly US phenomenon as I understand it. The rebooking-because-cancelled, thats a huge problem anywhere. So, I suspect the JV partners are looking to benefits for unexpected surge loads and overflow from late/dropped flights in a tight jet schedule.

mseebach 9y ago
I think it's a media attention thing. Flights are overbooked all over the world, and people get involuntary bumped. I just did a couple of searches for "[lufthansa, british airways, qatar, emirates] overbooked", and it's not exactly unheard of. It's a relatively rare event, though, but one that caught US media attention due to the pretty gruesome removal of Dr Dao last year (which wasn't even an overbooking incident). There's also the factor of the uniquely dense and complex nature of the US domestic network. More flights with more connections make for more uncertainty in the system, to which overbooking is an answer.
- ggm 9y ago
  "Flights are overbooked all over the world" Yes, but overall at a far lower intensity than in the US. I don't just mean 55/45 type things: I have flown continuously internationally for the last 20 years, worldwide, about 5-10 trips per year, and the only economy I have been bumped in was the USA. The data you gave about search matches in no way addresses the huge skew to events in the USA. Contrariwise, the UK is the only economy I have used trains in, which routinely has major commuter train cancellations. The commonality here is a lack of capital investment and oversight uniquely dense and complex nature of the US domestic network. More flights with more connections make for more uncertainty in the system, to which overbooking is an answer Yes. this I think is true. the US has far more dense flights, and has chosen overbooking as an answer but in no sense is it the answer to this problem: It's the one we've got. The regulator could have directed other approaches, but the cost consequences on airlines (who routinely seem to use chapter-11 methods to walk away from historical debt) would have been pretty bad. This answer maximises profit for airlines, at the expense of flyer convenience.

kwhitefoot 9y ago

As far as I can tell overbooking is an almost exclusively US phenomenon. In Europe I don't know of anyone who has been 'bumped' off a flight because it was overbooked. Low cost airlines like Ryanair manage to fill flights without overbooking. There is a lot to dislike about Mr O'Leary's company but I don't think anyone worries that their ticket is not going to be honoured.

tysonzni 9y ago
Low cost airlines like Ryanair manage to fill flights without overbooking. Presumably the reason why US airlines overbook is to maximize yield since almost always some passengers don't show up. Any reason why non-US airlines don't do the same? I suspect it has to do with ticket regulations but would like to learn more.
- madeofpalk 9y ago
  These flights are still full though
- URSpider94 9y ago
  European budget carriers have figured out how to lower the bar to a level unknown in the US. One carry-on, zero checked luggage allowance, pay to pre-assign a seat, pay for water on-board, pay 30 Eur if you don’t pre-print your own boarding pass at home, scan, tag and check your own luggage. Almost all tickets are 100% non-refundable - miss the flight, you’re going to pay for another ticket. Prices are low enough that people are willing to suffer through the experience, and keep the planes completely full. It’s more like a Greyhound bus in the air.
mseebach 9y ago
Ryanair doesn't operate connecting flights, and they sell very few flexible or refundable tickets. These are the main opportunities for people to not make their flights, and thus for overbooking to be attractive. A passenger not showing up is pure profit as Ryanair even gets to pocket the taxes, which are only payable on actually flying passengers (you can claim them back, but there's a substantial handling fee IIRC).

rdl 9y ago

I'd often be perfectly happy to take earlier or later flights on the same day, and potentially even change routing (OAK vs. SFO, or even something crazier like MIA vs. FLL). Wouldn't even necessarily need to offer cash; frequent flyer miles or upgrade to C or F or even lounge access while waiting would be fine. Rare other times, I'd probably want >$5-10k to change my flight (missing a speaking slot at a conference or a customer meeting or something when booked close). Being able to surface customer preferences like this seems valuable. I've had Alaska/Virgin call to offer compensation to change (or cancel) flights before, either due to overbooking or downgauging, and I've had international flights change and offer free rebook/cancel as a result, but nothing has really been technically efficient or easy to use yet.