If You Think Fares Are Confusing for Travelers, What About the Poor Pricing Analyst?

When I first came out of college in 1999, I started work as an analyst in pricing & tariffs for America West Airlines. I realize I sound like an old man when I say this, but back then it was a simpler time. When I left in 2002 to go to grad school, the industry had changed but pricing really hadn’t. A la carte pricing had yet to take hold, and the fare was still pretty much all people paid to travel. Since then, of course, things have changed rapidly. While it is obviously hard for travelers to keep up with these changes, I hadn’t even thought about how it would be for those doing my old job. A press release about a patent that ATPCO just received got me thinking.

ATPCO is the airline-owned Airline Tariff Publishing Company. For decades, ATPCO has been the clearinghouse for airline fares and rules. Airlines would file everything with ATPCO, and then it would compile and distribute that information to travel agents, distribution systems, other airlines, etc. As a one-stop shop, it just made it easy to propagate changes to everyone who was selling tickets. Now I know I acted like times were simpler back then, but they were never really simple. When fares combined with rules, airlines could put last ticketing dates, restrict travel dates, pick only certain days/times where a fare was valid, limit availability to specific flights or combinations of flights with other airlines, add seasonal restrictions, apply surcharges, require an advance purchase, apply minimum and maximum stays, use blackout dates, and restrict by routing. There was a lot in there, but when it came to the consumer making a decision, the only real difference within any single cabin was whether the fares were refundable or not. The rest of the product was the same.

Now, different fares bring very different product offerings with them. To make some sense of this, airlines have organized fares into various fare families, but these aren’t standardized. It can be very difficult to compare apples to apples. Consumer-facing websites have done a truly lousy job of displaying product differences between fares, though there has been some effort to fix that. I just wrote about how American was adding a carry-on bag back to the Basic Economy fare, because Google Flights put a simple filter that allowed consumers to request only fares that included a carry-on in the price. When people selected that, American was not competitive with Delta, an airline which includes a carry-on in its Basic Economy fare. That seemingly simple ability to categorize fares into what people want has materially impacted American’s ability to make money, and so American had to change its product to align with the market. But now think about it from a pricing analyst perspective.

I looked up fares from LA to Frankfurt in November and found far more than 650 different fares filed. (It caps at 650 unless you narrow it down further, and the 650th fare was still a low coach fare for under $2,000 roundtrip.) Just look at the dizzying array of fare families from some of the European carriers:

• Aeroflot – Economy Saver, Economy Classic, Economy Flex
• Air France/KLM – Economy Standard, Economy Standard Plus, Economy Full Flex
• Alitalia – Economy Classic, Economy Flex
• British Airways – Basic Economy, Standard Economy, Economy Fully Flex
• Finnair – Light, Standard, Flexible
• Iberia – Basic, Optima, Flexible
• Lufthansa – Without Bag, Including Bag
• SAS – SAS Go Saver, SAS Go, SAS Go Flex
• TAP Air Portugal – Basic, Classic, Plus

How the heck is an analyst supposed to keep this straight? Airlines do use sophisticated tools to analyze pricing in the marketplace. Some airlines have developed their own tools while others purchase them off the shelf. Presumably some are better than others (it’s been years since I’ve looked at one), but there’s always room for improvement. This, apparently, is the focus of this patent from ATPCO. The press release is fairly vague, but I did have the chance to speak with John Murphy, VP of Technology, Navid Abbassi, Chief Architect, and David Peart, R&D Innovation Architect so I could try to wrap my head around what they’re doing.

So far there aren’t a ton of tools that are out there using this patented technology, but ATPCO has started to develop some. Here’s a look at the Total Price Comparison tool which is the most interesting so far.

This looks at the lowest fare by airline in each market over time, and it includes all surcharges and taxes. Presumably this will also have the ability to do it by fare attribute (carry-on bag, etc) over time. The idea behind the patent is that it can deconstruct and compare fares to each other in real-time based upon the attributes.

ATPCO isn’t interested in this patent just so it can sell some tools, however. This is really a play by ATPCO to remain relevant any way it can. The base functionality of ATPCO as a fare and rule aggregator is a relic from another time. That’s not to say the function isn’t useful, but there’s so much technology today to allow disintermediation that ATPCO has to find a way to stay in the game. It is planning on not only developing its own tools using this technology but also allowing others to develop off this.

I know what you’re saying… “this makes it easier for a pricing analyst, but what the heck do I care?” Well, if pricing analysts can get better information and get a true sense of the dynamics of the market in real time, it should allow them to keep their airline more competitive with others. That doesn’t guarantee fares will come down, but increased competition usually pushes things in that direction.