As you know from my trip report last week, I was in Miami attending Farelogix media day. But what is it that Farelogix actually does? The company’s end goal is to give airlines the freedom to sell tickets the way they want. Ultimately, this will make it easier for travelers to buy tickets with the options they want. In fact, Farelogix has put together a system that would make buying tickets much better today… if there weren’t so many roadblocks preventing it from being implemented.

As a traveler, you shouldn’t care about the name Farelogix. Farelogix sells directly to airlines and won’t be the name you’ll see as a traveler. The idea is to create a system that the airlines can use to distribute fares and ancillary options to anyone who wants them. And I do mean anyone, because this is really just putting the information into an XML format that can then be sliced and diced in a million different ways. It’s up to the airlines to use this technology to reach the end customer, but as a customer today, you aren’t going to see it.

Today, I’m going to talk about what the system is, but then I’ll address why you can’t use it yet in a future post. Keep in mind that these screenshots are just of a basic system showing functionality, so it’s not meant to be pretty. The bundle names and fares have been changed as well.

When you do a search, you will be able to see fares in the way the airlines want them displayed. In this case, we see American’s fares on top with the three different bundles that the airline rolled out earlier this year. Then United’s fares are below and they don’t do bundles. So you can display it all in one place, expanding each airline if you want to see more details.

Then when you pick a fare, you can see all options available to go with that fare. Here’s where it gets really interesting. The idea is that you would have logged in and all of your airline frequent flier numbers would be stored, so it would know if you have elite status or not. It would then enable you to see exact fee information instead of just seeing ranges of fees as you do today.

In this particular example, there were two travelers. The one on the left is an elite member and the one on the right is not. As you can see, the guy on the left gets priority boarding and first two bags free while the guy on the right has to pay. But the guy on the right can simply click to add that to his cart before checking out.

Each of these options also gives the ability to integrate multimedia. So here you can see a picture of the meal that you would be buying. They can also put video in there as well. It means no more searching for pictures on random sites online to find these things.

You’ll also be able to pull up the seat map and see which seats are available at which price. It would include premium economy seats and those “choice” seats where you have to pay to sit. And you would be able to mouse over and see the seat that you’re going to get (maybe not the EXACT seat but, well, you get it).

Then when you’re ready to check out, you can see a final price that shows everything that’s included and everything you’ve opted for. It can process the payment and issue the tickets right there.

If you purchased something like a lounge pass, how would you get it? Well, the system can just send it directly to your phone if the airline is set up to use a QR code to allow you to enter. It can all be done very easily. But it doesn’t stop at the purchase point.

You can even check in using this system and it would be able to push upgrade offers right there, with payment handled in the system. Then you can get your boarding pass and be on your way.

Of course, for Farelogix, this is just something they mocked up to show what could be done. It’s pretty impressive, but it’s far from limiting. It’s all about having the data in a simple format that can be manipulated in a million ways. Online travel agents can use this data to create a far better display than what they have today, comparing options in a much more intelligent way incorporating fees as needed. Real travel agents can use a system like this to manage their own ticketing as well. In fact, it’s set up so that you can plug anything into it. In other words, if American did this, a travel agent could then pull in American’s data and combine it with that of other airlines that sell only through the Global Distribution Systems (GDSes). Then it can all be presented and acted upon in one place. How ideal.

So why hasn’t this happened? Oh me, oh my. It’s a long and painful tale. That will have to follow in a later post.

More than 5 years ago, in the early days of the blog, I awarded American a gold star for changing its booking interface to show different fare categories. The different categories were superficial at the time with no real product differentiation and that’s why I said that it was a “gold star-in-waiting so we can see what they actually do with this technology.” Five years later, American has finally done something with it. I like the idea a lot, but I’m not completely sold on the pricepoints.

Last week, American announced “Fare Choices” with three different tiers for travel within the Continental US only. The current fares remain as-is under the Choice name. The first buy-up is to the Choice Essential fare for $34 each way, or $68 roundtrip. (American has started displaying prices as roundtrips on its website, so it’s focusing on the $68 cost.) People who are used to flying Southwest will actually find the benefits quite familiar. The Choice Essential fare looks a lot like Southwest’s regular fare.

But the similarities don’t end there. American then created a second buy-up into the Choice Plus fare. This one is $10 each way or $20 roundtrip over Choice Essentials (so $88 roundtrip over regular Choice fares.) You’ll find that this looks a lot like Southwest’s Business Select option.

In general, I like this idea. Fare bundling doesn’t make sense when you bundle everything into the base fare, but it does makes sense as an add-on. When it’s all in the base fare, you end up giving people something they might not want and making them pay extra for it as part of the fare. (See Southwest and its often higher fares.)

But bundling as an add-on makes a lot of sense because you can make people pay more than they would if they did it a la carte. For example, somebody might pay the $50 roundtrip to check a bag but they wouldn’t pay for priority boarding. Now they might be tempted to pay a little more to get the Choice Essential fare which includes both and a waived change fee as an added bonus.

That’s why this whole thing depends upon the math working out right. Bundling, when done well, can mean more money for the airline and better options for customers. But when it’s done poorly, it just ends up diluting the revenue that’s already there. And I’m not convinced that the price is right here.

Making the Math Work
For Choice Essentials, the early boarding thing isn’t likely to sway a lot of people. It also doesn’t cost American anything, so it’s a throwaway. The real math here is between the change fee and bags. And there are two different types of people that need to be considered.

For someone who is checking a bag at $50 roundtrip anyway, American is betting that he’ll pay $18 more for the right to not pay a change fee. But what American is really betting here is that for every 9 bag-checkers who buy this, only one will make a change. Because it needs 9 people paying $18 roundtrip to make up for the one person who will no longer pay $150. From a bag-checking traveler perspective, it seems like a no-brainer to me unless you’re booking at the last minute and know for sure that you won’t need a change. From American’s perspective, this seems like it should be priced higher.

The other traveler is the person who doesn’t check a bag. The bet here is that she’s more likely to need a change and so will pay $68 on a roundtrip to avoid paying the $150 later. For $68, you’re really only going to appeal to someone who has a high likelihood of needing to make a change because otherwise the price is too steep. But American only succeeds in this plan if less than half the people who buy it make a change. It may be even less than that, because this allows for unlimited changes without a fee. So multiple changers will get an even bigger benefit at American’s expense. For these people, however, I’d say the price might be too high. At this price, you’re only going to get people who expect to have to change and it will be hard to get many others onboard.

Of course, it could be that one group signs up in droves and the other doesn’t. That’s ok too as long as they add up to higher revenue in the end. This is incredibly complex, and I’m only scratching the surface of all the different possible behaviors here. I assume American has crunched the numbers pretty handily – the airline should certainly good at that – but this is really a study in consumer behavior. We can’t know how people will perceive these new pricepoints or how many will buy-up in advance.

The Choice Plus bundle faces a similar set-up. The benefits are pretty minor, so I can’t imagine anyone buying up all the way from Choice to this fare. But since it’s only $20 roundtrip over the Choice Essentials fare, some people might buy it just to get the bonus miles or the $75 same day change fee waived. It probably appeals to the same market that buys Southwest’s Business Select today, and that market isn’t that big. Choice Essentials should be the bigger seller with Choice Plus just some gravy on top.

Implementation Issues
As I said earlier, I do like the idea of trying to get people to buy-up with bundles (and I’ve given praise to Frontier for the exact same thing), but the implementation so far seems to be lacking a little. It was delayed due to tech reasons more than once. That’s not uncommon, but when the multiple delays happen after the press has already been briefed, that’s not good.

And when it did come out, some very important functionality was missing. On AA.com, you can no longer sort by price, duration, etc. American tells me this is on the wish list, but it never made it the first cut. Let’s hope that gets fixed very soon because it severely hurts usability.

There’s also the issue of selling this on the travel agency side. It can be done, so that’s good, but it’s not simple. For those who know travel agent-speak, they filed the fares with a different passenger type, so you have to be proactively looking for the higher fare bundles – they won’t just show up. And of course, the online travel agencies aren’t likely to do anything with this because, well, they generally don’t change even though it’s sorely needed. (Maybe Priceline will since they have a direct connection with American.)

All of this makes you wonder if this was rushed out too quickly – it’s all about timing, right? Anyone want to bet that it’s no coincidence that American management is currently fighting to stay in control of the airline? It’s trying to prove that it can do things differently. This is different, but whether it’s actually a revenue-positive move for the airline remains to be seen. Even if it’s not, the basic idea is a step in the right direction.

The Exact Dates When No One Wants to Travel and You Will Find Cheap Airfare – Conde Nast Daily Traveler
Southwest launched a great sale this week, but others matched more aggressively. It was a great deal for those who could fly at off peak times.

In the Trenches: Getting Feedback from Partners – Intuit Small Business Blog
It’s tough to get good feedback, but we have some great sources.

Holiday Travel Tips for Small-Business Owners and Their Families – Intuit Small Business Blog
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Delta tests ‘basic economy’ fares on some flights – Atlanta Journal-Constitution
The AJC wrote about Delta’s Basic Economy fares out of Detroit and I was asked to comment.

An Argument in Favor of Fees for Aisle and Window Seats – Conde Nast Daily Traveler
While people love to instantly hate on any fee, including the misguided Sen Chuck Schumer (D-NY), there is a reason to actually like the fees for choosing aisles and windows toward the front of the airplane.

Airlines charging extra for everything is good for consumers, report says (poll) – Cleveland Plain Dealer
This article looked at a study showing that fees are good or travelers. I was asked to comment and of course I agree.

In the Trenches: Preparing for Vacation – Intuit Small Business Blog
I’m not taking a break anytime soon, but I’m working toward that goal in a few months.