Airlines Can’t Be Stupid Enough to Charge People More For Sharing Personal Information

There have been a lot of stories floating around lately (like this one) about a seemingly-sinister plan for airlines to require you provide information about yourself and then charge you a higher fare based on what they learn. This isn’t a new idea, and I thought I had written about it before, but I couldn’t find it. So, let’s talk about how it would take an incredibly stupid airline to do something like this. Some of you may say “well, yeah, airlines are incredibly stupid,” but at least in this particular case, I disagree. Airlines do want your information and they do want to charge you differently based on what you give, but it should never be used to penalize someone. The second that happens, the whole model blows up. Let’s hope the airlines aren’t as stupid as some of you think.

Start with the obvious: airlines would love to charge different people different amounts for tickets. This idea, no matter what you may think, is actually good because for it to be done right, it should be used to benefit the traveler as well as the airline. To understand how this is good for everyone, let’s talk about how things work today in a simplified way. If you go to buy a ticket on an airline, it doesn’t matter who you are. The price you find at any given point in time on, say, the airline’s website, will be the same no matter who is doing the searching. From a marketing standpoint, that seems like a wasted opportunity. In this world of “merchandising,” airlines should be trying to better match their offers to what an individual traveler wants. But that doesn’t mean making people pay more for a ticket. If done right, it means things like this:

  • If United knows a Chicago-based traveler usually flies American, it could offer a discount when that person comes to United’s website to search for a flight. The discount can be even bigger in a market where American holds a significant schedule advantage.
  • Pretend Delta has a loyal traveler that always takes the same flight every week. Delta finds that it usually has to turn away demand for that flight while the one two hours later is half empty. So during the next booking, Delta offers a discount if the traveler books the later flight instead.
  • If Southwest knows someone lives in Houston but has to fly from LA to Vegas, it could offer a heftier discount knowing that it’s likely going up against United. But if that traveler lives in Midland and needs the same LA to Vegas flight, maybe it won’t offer a discount because it knows it has likely generated more loyalty.

I can come up with a million examples of how this could work, but the advent of ancillary services has made it even easier. Here are some ways airlines could do this without even touching the fare:

Club Passes
Let’s say United has an elite frequent flier who does not have a lounge membership, and she has to fly from LA to Harrisburg. These are the first two options that pop up:

Let’s assume United knows the 6:45am departure is going to be pretty full while the 5:39am won’t be. It can add this offer to the booking page showing a free United Club pass for taking the earlier option and dealing with a long layover.

Free Wifi
If American knows a traveler pays for wifi onboard regularly, and it’s offering a flight without wifi, it could do this:

That’s especially useful on a route like this where United is flying aircraft with wifi on every flight.

Legroom for Tall People
If Delta somehow knows that a traveler is a member of Tall Clubs International (this is a real thing, I’ve just learned) then it could do this:

That’s a great way to build loyalty by catering to that traveler’s very-specific needs.

Car Service Discounts
If JetBlue knew a traveler lived in New Jersey but was searching from flights from JFK, it could put this out there:

That could help woo someone from flying on United from Newark or even on Delta from LaGuardia.

I could do this all day. The point is that an airline can make more money by catering to the needs of travelers and presenting offers for services that will make the travel more likely to buy a ticket on that airline at that time. If the airline can overcome the obstacles to getting that booking done, then it can sell more tickets and more ancillary services. Everyone is happy. This stuff happens all the time in other industries, but the airlines are behind.

The common thread is that when the airline is given personal information about a traveler, then it can only use that to make life better for the traveler. That can mean saving money, but it can also mean adding service, or even reordering flight options (showing nonstops first if the airline knows the traveler will only fly nonstop regardless of price). The cardinal sin is when the airline tries to use that information to charge a traveler more. The nightmare scenario that keeps getting batted around is something like this:

United knows Bob is rich and Herb is not, and it knows nothing about Doug. Doug goes on to the website and gets a fare of $200. Phil logs on and he gets the same fare. But when Bob logs on, he’s presented a $400 fare just because United knows he will pay it.

If the airlines start playing games like in the scenario above, then why would Bob ever share any information when he looks for a flight? Bob will never log in to his frequent flier account when he books travel, and he may, if he’s savvy, even clear his cache and delete his cookies when he buys tickets.

In the short run, this could be a tempting and easy way to grab more money from people who you know will pay more. But as soon as people find out what’s going on (and they will find out), it’ll all crumble. In fact, this happened to Delta a few years back. There was a story about one man who was next to a friend and they both went to book the same flight. The man who was logged in with his elite status was charged more than the man who wasn’t logged in, and the news spread like wildfire. Delta says it was just testing two different pricing engines for its website, and it wasn’t deliberate. But this is a perfect example of how quickly things can turn if the airlines abuse the information they have on people.

I remain convinced that airlines (at least in the US) aren’t that stupid. There’s too much to be gained from doing this properly for airlines to risk losing everything. Then again, we’ve seen stupid airlines do bad things before.

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William
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William

Never underestimate the stupidity of the airlines management.

Mario in PY
Guest

On one of the Concord documentaries, I saw/heard a comment by the British Airways Concord Chief Pilot, on how BA achieved profitability with the Concord. Something that Air France apparently was unable to achieve. In the 1970s (or early 1980s) the flight crews noticed that the mayority of passengers were buisinessmen, who generally did not book the flight themselfs. So they they started asking the passengers to rate the service and how much they thought they paid for the ticket. Surprisingly the mayority responded with a price of at least double or triple the actual fare (if I remember correctly).… Read more »

Scotfree1999
Member
Scotfree1999

Ahhhha yes!! Another great idea.. Here is another..Airline seats are getting smaller and smaller yet airline passengers are getting larger and larger. No one ever wants to get stuck in the middle row between two obese passengers but this happens more and more often. I recently traveled on a very short flight and two passengers were complaining how small the seat are…I told them short flight ..small plane. ( it was a 737). These passengers were at least 300 lbs each. Im so glad I wasn’t sitting between them. If you ship anything on a FedEx or Ups plane you… Read more »

Kilroy
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Kilroy

Eh, a seat is a seat. Provided that someone can fit in a seat safely, the marginal cost (in terms of additional fuel burn) for having a 300 lb adult instead of a 50 lb kid in a seat is negligible on a plan the size of a 737. Sure, a plane with 100% kids will burn measurably less fuel than a plane with 100% NFL linemen, but that’s not a realistic comparison. Also, your analogy of shipping packages is flawed. Try shipping 20 lbs of styrofoam peanuts and 20 lbs of lead bars via FedEx, and you’ll see what… Read more »

Roger
Guest
Roger

Lets charge by weight then. Shouldn’t the people up front pay more since their seats weigh more and use more of the plane (floor space etc). And also why should someone pay for the weight of the catering carts and toilets if they don’t use them? In reality what you’ll find is that passengers make up a small proportion of the weight of the aircraft, and the variability of weight of the passengers makes up a small proportion of that. Fairly charging by passenger weight would make virtually no difference to each passenger.

Andy
Member
Andy

People up front do pay more for the larger seats.

cblock2
Member
cblock2

People up front do pay more, Roger. Quite a bit more, actually. Either for this specific flight or enough revenue to the airline to earn upgrades.

But you are right that, except for very small aircraft, passengers make up a relatively small amount of the plane’s total weight.

Dave
Member
Dave

Cranky, the abuse of this capability knows no bounds. We share our preferences, flight histories and desires everyday with airlines — and every time an airline puts a cookie on our computers. The result — the airlines know what they need to know about us. It’s up to a flier to take steps to “shop” when appropriate. To study options and move away from blind loyalty due to perceived value from highly inflated frequent flier miles. The airlines know it is less costly to dole out frequent flier miles than it is to pay people cash (in the former of… Read more »

Andy
Member
Andy

I don’t think anyone is loyal for the miles. The loyalty I see always has to do with elite status.
As for avoiding tacking cookies, you can just search through an aggregator like Google flights Even if you’re staying loyal to a single airline, their sorting and filtering is far superior to the airline’s website.

derrick.denny
Member
derrick.denny

I’m positive that hotels do this. I once had to book a last minute room and paid above $200. From that day on, all my rates went up across the board. Then one time, all of a sudden, the rates were significantly lower, then I realized I was on a computer I don’t usually use, and I hadn’t logged in to my account.

Chris
Guest
Chris

Orbitz and other aggregators have admitted as such before. Essentially, if they know you are last minute business traveler, your pain threshold on the rate is far higher than a leisure traveler. Technically, it’s just proper segmentation to maximize yield but it does start to get a little obnoxious.

John W
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John W

I think it is naive to believe they will “add” items to market flights. What they will do is not charge more for a similar ticket but in fact will charge more and add in extras. For instance, Traveler A bought a premium seat the last time they flew. Traveler B did not. When they both search the next time Traveler A is going to be offered the flight for $300 but it will include a premium seat, Traveler B will be offered the flight for $200 with no seat. While Traveler A gets a seat included he will not… Read more »

grichard
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grichard

I’m not convinced that your “best case” examples are actually much different than the “nightmare” scenario. It’s just that in one case you’re looking from the perspective of the winning consumer, and in the other, you’ve taken the perspective of the loser. Airlines won’t use this ability to bottom-line give more stuff to customers overall: that would cost them profits. Rather, they will use it to do more refined discriminatory pricing. And price discrimination based on WHO you are, rather than just the specific instance of when/where you want to book, is inevitably going to produce a heavy backlash from… Read more »

Tim Dunn
Member
Tim Dunn

Data mining in order to increase revenues is hardly a strategy that airlines have considered. There are many industries that do it.
Nonetheless, it is highly risky and companies that are caught doing it do face significant pushback.

However, no one should think for a minute that everything they do isn’t being tracked for the purpose of making someone else money.

Chris
Guest
Chris

Agreed. I heard UAL’s head of eComm speak a few years back and he shared the story of how UAL’s segmenting based on your travel habits and that plays into upsells. For example, when you checked in at the airport via a kiosk, the background picture they showed asking if you wanted to pay to take an earlier flight would vary based on what they knew about you. For a female traveler, it may be a photo of someone being reunited with their kids, for a male traveler, it’s the cocktail in the lounge, etc. It was fascinating to hear… Read more »

Martha
Guest
Martha

I work for a major airline in Reservations, and boy do I hope you are wrong. Fare structures are already complicated enough as it is. The last thing we need is more layers to explain to our customers.

Matt D
Guest
Matt D

Airlines long term strategy has always been to maximize short term hand-to-mouth opportunities. Even if the news catches on and results in bad publicity, so what? It’s not like anyone is about to give up their trips. The public may grumble and hold their nose, but they will still take their trips. I honestly don’t think there is no low, no matter how egregious or appalling, an airline can sink to, and it still won’t affect their bottom line. The Big 4 are like other companies such as Wal-Mart, Target, BofA, etc. They may be hated and get a lot… Read more »

Bgriff
Member

The problem with all of your examples is, the airline ends up spending extra money to get a customer who’s just paying the market price for their ticket. Maybe they poached that customer from one of their competitors, but with load factors as high as they are, does that even matter? Someone was going to buy that seat anyway. So unless you can use these techniques to charge more, why bother? (And in your examples where one flight is going to go out full and another one empty, why isn’t the airline already charging more for the flight that’s going… Read more »

Bob Schilling
Member
Bob Schilling

Your faith in the intelligence of airlines is endearing – and optimistic.  Airlines seem to have a lot of staff meetings where someone should raise a hand and yell, “stop!!”  For sure, they would offer passengers the opportunity to show up at 4:30 am for their 5:39am flight, only to find out that the lounge doesn’t open until 5:00am.  Airlines are all too frequently super-tactical, choosing short-term revenue or cost reduction without the slightest consideration for downstream effects. 

jaybru
Member
jaybru

Airlines already know just about everything they want to know about most of us. “So, cheese is your favorite pizza topping, and your favorite vacation is one at the beach? Have we got a beach fare with a cheese pizza for you!” In the not too distant future, buying fares will be like: “OK, inquiring consumer, here’s what we got” “Say what! Do you think I’m crazy?” “So, will you take ____ for that flight?” “No, but pay this and we’ll let you cancel or sell your ticket…additional fees and charges may apply. (Sorry, still a few old pricing kooks… Read more »

j.monat
Member
j.monat

I have no problem with an airline using data it mines from its own system.  I do have a problem with the airline using that information to charge differential rates for the same ticket based on that knowledge _unless_ it offers the traveler a benefit specific to his or her needs.  I think airlines have become so revenue focused that they try to squeeze the last drop of ‘blood’ from the passenger.  Airlines are expensive to run and cannot be revenue averse.  However, with all the a la carte pricing, enough is enough.  I may be the odd duck but… Read more »

Tobin
Guest

Will third party sites be able to handle this extra data? One of the greatest things about air travel now is the relative transparency in price/feature comparison. It’s starting to get more complicated with the basic economy levels and diverse fee structures and this only adds to the opaqueness

j.monat
Member
j.monat

Uh, yes they can.

Jim
Guest
Jim

Airlines can certainly charge passengers different amounts, they just have to phrase it properly. Rather than charging Doug $200 and Bob $400, they need to say the flight costs $500 and then give Doug a $300 discount and Bob a $100 discount. They also need to make it so that if you don’t provide any information (i.e., searching without logging in), you get no discount and have to pay the full fare. Safeway does this with their Just4U program. You get a “personalized” price on each item, based on your buying history. Their algorithm will charge you what it thinks… Read more »

MB
Member
MB

Well, this post got my juices flowing….. 1. You can give a million examples of how this would benefit customers and I can give a million plus one examples how this would hurt customers. Bad idea. 2. How would you even know the Airline is doing this? You think they are going tell everyone? What makes you think they don’t do it already? 3. IMO the average person too freely…..way way too freely gives up their personal information just to save a few bucks, get a coupon, watch a free movie, etc,etc. And I think the average person just doesn’t… Read more »

Mark Skinner
Guest
Mark Skinner

Here’s how Qantas thinks: I turn up early. They could put me on an earlier flight, possibly sell a ticket on the later flight, and save on the food and drink I otherwise consume in the Qantas Club. Or they could try to charge me extra to get on the early flight.

They try the extra charge route.

With that level of thinking, I am not convinced airlines would approach the knowledge problem intelligently at all.

gregm
Member

Some people think Delta is already doing this with award space. With no published “price list,” the answer seems to depend on who’s asking.

cblock2
Member

There’s one problem right away with the idea floated in the CBS New York article linked to above (well, two, but convincing Chuck Schumer that he really doesn’t know squat about airlines is probably impossible.) The article suggests airlines would use IP addresses to identify people searching for fares. The problem with this is that your IP address doesn’t always identify where you are. A couple of personal examples: * Every time I use Kayak from home (some other websites do it too), Kayak pre-populates my starting point with Orlando. But I live in St. Petersburg, about a hundred miles… Read more »

Nick Barnard
Member

I for one want to see this on Cranky Airlines, just so I can search and get those wonderful little messages in my search results

Juan
Member
Juan

The airlines already are charging everybody a different fare. How you ever compared prices with the stranger in the next seat? How often do you think your prices are going to be the same?