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:
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.
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.