Airlines Could Soon Start Charging Different Fares for Different People (Video)
Fares based on your travel habits? Welcome to the future.
It’s common knowledge that passengers pay different prices for their seats. Someone who bought well in advance is likely to have paid a different airfare than a passenger who purchased their ticket at the last minute, while those who set flight alerts have a good chance of scoring a deal.
But according to one software company, airlines may soon begin charging passengers different prices based on who they are.
Revenue management software company PROS — which works with more than 80 international airlines — said that select airlines have already begun implementing “dynamic pricing” structures on their websites.
“2018 will be a very phenomenal year in terms of traction,” John McBride, director of product management for PROS, told Travel Weekly. “Based on our backlog of projects, there will be a handful of large carriers that move toward dynamic pricing science.”
Dynamic or “surge” pricing is an economic strategy wherein companies price services based on demand (think Uber charging more for rides in the rain or at rush hour). And although airlines have already implemented this type of fare — for example, making flights around the holidays more expensive — using new technology, they can tailor fares to specific passengers.
Airline websites will be able to identify customers by their IP addresses and mine data for their flying history. The revenue management system would then create a person-specific fare based off criteria like loyalty status or business/leisure traveler. Loyal customers and leisure travelers would likely pay less, while those who are willing to pay more — like business travelers with a company credit card — would likely see higher prices.
However, before airlines implement a “pure” version of dynamic pricing, reports Travel Weekly, they have to move away from the legacy distribution system put in place after 1978 deregulation. Airline pricing has a limited number of fare classes, each with their own price points and restrictions. Airlines rotate which fare classes are available through their sale cycles. While current customers may believe their fare is unique, they’ve actually fallen into a specific fare class.
If airlines switch to dynamic pricing, each customer on the plane could, theoretically, pay a completely different price. As George Hobica notes in USA Today, dynamic pricing could make finding a good price on airfare even more confusing than it already is.