More Complicated Fares Coming to an Airline Near You

Fares

People have long complained about the complexity involved in airline fares, but you ain’t seen nothing yet. ATPCO — the industry’s fare clearinghouse and owner of Routehappy — had its annual Elevate event recently, and I found myself enjoying many of the panels. But it was one discussion with British Airways that I thought would translate well into a post. We’re going to dive into the weeds of Dual RBD. This is not for the faint of heart, but I’ll try to make it as clear as possible for those who really want to geek out in the details.

I suppose we should start with the basic concept of the RBD, or Reservation Booking Designator. That is more commonly known as a “bucket” in airline land. Airlines can traditionally have one selling fare per bucket for any particular origin and destination. (There can be many fares, but only the lowest that meets all rules will sell.) Each bucket has a letter assigned to it with F traditionally being full fare first class, J or C being full fare business class, and Y being full fare coach. In theory an airline can have up to 26 RBDs since there are 26 letters in the alphabet, but in reality that’s rarely the case.

Here is what a good example looks like in practice. This is the RBD line-up for United 2618 from Phoenix to Denver on May 10.

The first five buckets are first class, J/C/D/Z/P. I know I just said full first is usually in F, but awhile ago, United and others began coding their domestic first class with the same codes as international business class for consistency. That’s why it’s J. The rest in this line-up are coach with a special exception for the last one, N, which I’ll explain later.

The buckets are “nested” which means that the smaller buckets are a subset of the larger ones. This flight is operated by a 16-seat 737-800, and if we assume United isn’t going to overbook first class for this exercise, that means there are 16 seats available to sell in J. United’s plan could (very simply) look something like this.

It thinks it can only sell 2 seats in J, so that’s why it makes all but 2 seats available in C at a lower fare, holding two back for those high dollar, last minute travelers. Meanwhile, it thinks that out of the entire cabin, it can sell most at a higher fare, but 2 of the seats will not sell unless there’s an even lower fare, so those are put in the discount P bucket. If someone walks up tomorrow and inexplicably decides he wants 16 seats at the full J fare, he can buy that even though cheaper fares will be available. If seats are available, J is always available. It sounds somewhat simple, but it’s not. The fares that sell in each bucket can change regularly, and the allocations of number of seats available change as bookings build, but that’s not important for this exercise.

The point here is that airlines will file a variety of fares that are tied to each bucket, but there has historically only been one fare that can sell per bucket at any given time.

This has changed with the invention of fare families. Now you can have a basic fare, a regular fare, and a flexible fare, for example, that all sell in the same bucket. The hard part for the airlines is in figuring out exactly how to achieve this within the confines of an ancient system. The answer for Basic Economy was the use of Dual RBDs.

If this isn’t technical enough for you, feel free to peruse this ATPCO document from 2017 talking about the details of Dual RBD. The basic idea is that instead of having one bucket, fares need two buckets to determine if they can be sold.

For United, the official Basic Economy bucket is N. I told you we’d come back to this. That means that if N isn’t available, you can’t buy Basic Economy. If N is available, you can buy Basic Economy if a fare is offered, but that fare will vary depending upon the other bucket involved.

Here is a semi-real example that I’ve built out further. Let’s just say that United wants the Basic Economy fare to be $40 less than the regular fare.

Historically, to do this you’d need double the number of buckets. United has 14 fares for regular economy but it would then also need 14 for basic. That’s not feasible, nor does it make sense, because in this case, United wants the fares to move together and not act independently.

The way this has generally worked is that United leaves the N bucket open at all times if there are any seats available. Then, the system looks to see what the lowest regular coach bucket is available for sale. In the example up at the top, there are 2 seats in L left but nothing in K or G. In this case, that means basic will be $44 and regular will be $84. Once those two seats sell, the price will rise by a dollar into the T bucket and so on. Of course, if N has no availability, then basic will never sell regardless of what other buckets are open but that’s not common.

This is also a very popular plan when it comes to first class fares, but it uses a hybrid system. Most domestic airlines for short-haul flying will just base their first class fare on the selling coach fare, an upsell just as basic is a downsell. The difference is that to get that upsell fare, you have to find availability in Z or P, both buckets which are used regularly for fares that are filed directly in those buckets. That’s different than Basic Economy where there isn’t any fare filed exclusively for the N bucket.

All of this exists today, but what does it mean for the future? Well, if you take this further out, the airlines can use it to offer an incredible number of additional fares for sale, adding complexity to the purchase process in an unending quest to sell every ticket at each person’s max willingness to pay. The idea is that instead of tying an upgrade or basic fare to the regular coach fare, you can just tie buckets together within the same cabin to get many more options.

United has 14 coach buckets today. In the most basic sense, that means it can sell 14 fares on any given flight, and when you include that extra Basic bucket, that adds another 14. But let’s say United were to drop the number of coach buckets down to 8 and then has another 8 it uses as secondary buckets. That means United could go from having 14 fares for sale today (or 28 with basic) up to 8*8 = 64 + the original 14, or 78 total. That’s quite the change, and it doesn’t even use the full complement of buckets.

For airlines, this could be an interesting tool. The holy grail has always been trying to get pricing very personalized to cater to each individual traveler. That’s nearly impossible to do, but that won’t stop them from trying to get closer. This will allow more pricepoints in the market. For travelers, well, airline pricing is already opaque, and that’s always been a point of frustration. This would just make it more complicated if it were to happen, but whether travelers could be confused anymore than they already are is questionable anyway.

28 comments on “More Complicated Fares Coming to an Airline Near You

  1. This is technically interesting. But Basic and First aren’t just fare differences: they represent different products. Is the idea that airlines will use this two-dimensional matrix just to get a bunch more fare buckets, or is it a tool for unbundling services?

    1. I dont think that they *have* to be different products. An airline could simply state that a domestic first class seat is basically a seat that is 50% bigger than a coach seat, and thus sell it at a 50% adder on the coach fare for it.

      In the example above, basic coach could be $44, normal coach $84, and basic first $126 (==84*1.5).

      Then you could put on all of the restrictions we see for coach fares onto the pointy part of the plane, too. No refund-ability, no change-ability, boarding in the last group, no meals, no baggage, etc.

      I think that might be his point.

    2. Grichard – Well it’s being used frequently for different products, but the point of the attached doc is that this can be used to just create more pricepoints in a single cabin.

  2. Ticketing, fares, tariffs, loopholes, inventory control, and yield management are your true areas of expertise. When you blog on these topics, you do so with expertise, not opinion.

    1. And I thought BART/ WMATA transit fares were confusing. This brings a whole new meaning to “let the buyer beware.

    2. This deep expertise is exactly what makes his opinions about topics in this industry so valuable to many of us readers as well as journalists and other professionals in this industry.

      Far moreso than, for example, anonymous message board commenters.

  3. Dual RBD is an extremely powerful pricing tool for the reasons you mention. It is also very effective at preventing inversions- instances in which a superior product is sold at a lower price due to inventory differences. If airlines create a dual RBD premium economy product, validating against the economy RBD, it practical guarantees that there will be a consistent buyup to PY regardless of the inventory offered in PY and business class. In general, I tend to think dual RBD is a benefit to the traveler, since it enables upsell products that vastly reduce the price of a premium cabin versus the filed single-RBD fares.

    I personally would like to see triple RBD offered; it would enable business class upsell products validating availability against both the economy and PY RBD. I’m not clear if this can be done already in the chart 1, or if it is the next new thing coming.

    Please keep the pricing topics coming. It’s a fascinating area that most bloggers/consumers do not have any understanding of.

    1. Alan – I agree that there is a benefit to something that goes across fare families. There is less benefit when it’s within a single family just to create more pricepoints. Still very interesting.

  4. Did you cover Southwest’s move to dual RBD? They used to price Anytime and Biz Select at set amounts, would be way above the WGA. Within the last year or two they moved to dual RBD, Anytime and Biz Select are now buyups over WGA. I have seen basically no coverage of this or discussion from Southwest, though presumably it is helping them upsell to Anytime and Biz Select.

    1. Emac – I didn’t cover it since Southwest was fairly opaque to me until recently when they started participating in Sabre. It’s pretty interesting what they are doing, so I’ll spell it out for those who are interested in the detail.

      Wanna Get Away: Stands on its own as a regular coach fare Anytime: Books into the same class as the WGA fare (or in full Y, there is no WGA but Anytime is there) but prices based on the Business Select bucket availability.
      Business Select: Books into its own bucket but prices depending upon the available WGA fare

      Here’s a good example. Today from Phoenix to Denver, there is one flight that has all buckets open in coach, but in the Business Select buckets (K/L/B), one flight has B open and the other does not. On these, WGA fares both prices at $197.98 as the lowest coach fare. The fare basis is ILN0P2H. For the Anytime fare, however, one is at $247.98 (ILN0P6B fare basis) and the other is $297.98 (ILN0P6L fare basis). The telltale here is the last letter in the fare basis. The first Anytime fare is lower, because B is available, the lowest bucket. The second one is higher because only L is available. Then in Business Select, the first is $327.98 (LLN0P8I) and the second is $287.98 (BLN0P8I). As you can see by the last letter, they both price because I is available (and is the lowest selling WGA fare). But one is higher because it doesn’t have B open.

  5. Sorry for the intrusion, but a big Congratulations to Delta for being the first and only carrier to achieve operational profitability since the beginning of the pandemic. Their 3rd Quarter performance was all the more remarkable given the paucity of European and Asian opportunities.

    Today, Southwest announced the Delta variant cost them $300 million in revenue in July and August, sinking their profitability plans. They also said they will lose money in the 4th quarter, as well. To address your previous two blogs about their operational problems, today Southwest announced their December capacity will now be down 12% versus 2019, not 6% as they originally offered. That will be a big revenue hit for them.

    1. If you were indeed “sorry for this intrusion,” you would not have posted this completely irrelevant to the topic at hand comment in the first place.

      1. Well, it does have relevance to both of Mr. Snyder’s previous posts this week. So there’s that.

            1. Not remotely so none needed. Might have just been easier to answer the question though.

  6. > today Southwest announced their December capacity will now be down 12% versus 2019, not 6% as they originally offered. That will be a big revenue hit for them.

    That will definitely hurt, especially over the holidays, when planes run full and fares are high. That said, I assume/hope that Southwest (and other carriers) realize that they can’t afford to have operational meltdowns over the holidays, not only because of the immediate financial & PR hits, but also because of the potential regulatory costs (i.e., possibility of stricter regulations and stronger consumer protection laws) that they could face afterwards.

    Delays due to true storms etc are one thing, but (barring damage to airport/airline infrastructure) even a “once in a decade storm at a major hub” begins to sound like a bad excuse if it’s used for more than a few days.

  7. Thanks for the explainer and I certainly get the business need for this setup.

    However, something that really GRINDS MY GEARS is when this complex web becomes customer facing. I’ve had a few AA schedule changes during the pandemic and multiple times have had a customer service rep tell me “well we can’t rebook you on this (better) flight because your original ticket was a T class and that flight only has N class.” *Both dummy letters I’m using there are placeholders for regular economy cabin tickets simply booked at different times/prices – exact same product. I find that particularly enraging because a) obviously there’s no differentiation available when you book, and b) even if there was, its just piss poor customer service / human decency to tell someone “you now have to connect in Fairbanks because you didn’t pay enough for a Dallas connection if/when we scrambled our own schedule.”

    Another reason I think Doug Parker’s American should be shot out of a cannon into outer space with only 29 inches of leg room and have to pay $50 to use a “free” voucher to get back.

    1. Sam – That should not happen, and it is not the airline’s policy except in one small way that we’ve seen overridden regularly if needed. In business or premium economy, there are no restrictions. In coach, only the top two buckets, Y and H, are not allowed to be used if booked in a lower fare.
      That is more about ensuring a flight isn’t oversold too much via schedule change than punishing lower fares. The reality is that AA agents will override that often. This is more of a restriction against travel agents.
      The only other restriction is if you book Basic Economy, you have to stay in Basic Economy. But that isn’t usually an issue either since B is nearly always available

  8. Am I confusing/misunderstanding things (or of course, conflating or completely wrong?) but isn’t this what airlines like Emirates (& others “emulating” its pricing strategy) are doing with their recently segmented/“unbundled” Biz Class fares where lounge access and/or advanced seat selection is no longer included at the lowest/lower price point(s)?

    Or lower checked bag allowances and reduced frequent flier points/miles/whatever they’re called, etc.?

    Although NOT a fan of dynamic pricing because to me it seems more “black magic” and rife for abuse (I believe intentionally confusing, fee addled, “bait & switch” pricing structures are arbitrary, or even predatory especially towards less/least experienced flyers given its inherent opacity – but hey, that’s just me!), not to mention often endlessly frustrating my efforts at finding good airfares (in the “before times” anyway), I’ve (begrudgingly) accepted it as here to stay – and adapted accordingly as there can be great “fare finds” for those who make their peace and develop the patience needed to deal with the insanity that is (“dynamic”) airfare pricing!

    Or maybe my broken brain is just a little more broken today! ;)

    1. This is different from unbundling business class. What EK is doing is making use of something called “fare families”, where certain groups of fares have common attributes (i.e., no lounge access, mileage earning, etc., for the cheaper fares). In contrast, dual RBD allows airlines to offer price points that reflect two different sets of availability (one economy, one premium economy, for example) and thus create a more nuanced price structure. Dual RBD and fare families are two different tools, but ones that are increasingly being utilized.

    2. Howard – No, that’s different. Emirates puts their “basic biz” in H class. They file H fares and they just separate it out that way.

        1. Above reply intended to thank Alan & Cranky (CF) originally sent via email.

          Should simply be “Thanks! ?” *minus* the “?”

  9. I’m old enough to remember when “excursion” and “super saver” fares were introduced. Gone were the halcyon days of six fare types (F/FN/Y/YN/K/KN).

    Gotta run — my teleticketer jammed again!

  10. Much of this discussion has gone over my head, so please forgive if this question isn’t relevant: How, if at all, do married segments fit into this?

    1. Bumfuzzled – It’s not entirely related, but they all work together. The point of married segments is that the airline can make different RBDs available if you’re connecting vs flying local on the same flights. So it’s just a way to manipulate what is available and what isn’t.

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