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May 11, 2015

Personalized Airfares

Last time we were talking about mass transit systems collecting fares on the honor system.  This time, something completely different.  But to understand it, consider this analogy:
Let’s say you’re in a store shopping for a commodity.  You and another shopper each select one of the same items at the same time and head for the cashier.  But before you can pay, the cashier asks for your name and some identification.
You’re from Darien or New Canaan and a new customer.  The other shopper is from Hartford, but a regular at the store.  The cashier plugs in that info and you’re told that your purchase will cost 10% more than the other shopper’s.
What?  Well, welcome to the world of “personalized prices”.
You may not realize it, but this happens all the time when you’re buying gasoline, thanks to “zone pricing” where gas stations charge higher prices in more affluent communities, not just in Connecticut but nationwide.
And giving discounts to “best customers” is also quite common.  Monthly pass holders on Metro-North pay only half of what their peak fares would cost purchased separately.
But never before have these concepts been combined in some secret algorithm to apply to purchasing airline tickets… until now.
IATA, the International Air Transport Authority, has petitioned the US to allow its 250 members to capture and use new kinds of personal information about would-be flyers before quoting them a fare.
Most frightening of these could be some sort of “means test”.  In other words, as in a bazaar when the salesman sizes you up and asks “how much do you want to pay?” the airline would figure out that answer itself based on your zip code and flying patterns. 
So if you live in a rich town, they’ll assume you can pay more and quote you higher fares while folks in poorer communities are offered discounts.
To his credit, our US Senator Richard Blumenthal along with others in Washington are questioning the fairness, if not the legality, of all this.  They’ve written to the US Transportation Department asking if this plan isn’t hurting more consumers than its helping.
Airline flights have never been fuller.  Because they’ve shrunk their fleets and customer demand has come back, almost 80% of all seats are full on domestic and international flights.
Gone are the glory days of my mis-spent youth when students could fly “stand-by” hoping
for an empty seat just before departure in return for a 50% discount. That only worked because planes were empty.
Today the incentive to get a cheap seat is to book early, weeks in advance, not to show up at the last minute hoping to find an empty seat.  There are none.
But to price the same seat bought at the same time at two different prices simply because of shoppers’ demographics seems unethical if not illegal. 
Airlines are not allowed to discriminate on the basis of race, gender, national origin.  So why would we allow them to, in effect, look at our credit report before quoting us a fare?


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