Are “custom” airfares good – or evil?

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Studio Go/Shutterstock
One way or another, the way you buy an airline ticket is about to change.

Behind the scenes, the propellerheads who create your fares are working on a smarter way to sell tickets. The airline industry is developing technology standards that could serve up a special fare intended only for you, based on how often you fly, where you live, your gender, age or marital status. But online travel agencies and consumer advocates are skeptical of customization.

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Well, this is one time the airline industry almost got it right.

Custom fares are a terrific idea, as long as they’re done with the passenger in mind.

But the industry’s proposal, called Resolution 787, needs a little work before regulators with the Department of Transportation clear it for takeoff. There’s a right way to customize a fare, which puts air travelers in control, allows them to easily compare fares and doesn’t require they surrender any personal information. And, there’s an evil way.

“If by ‘customized’ you mean the airline will use its collected marketing knowledge of me to offer a special price just for me, then it is not going to be what I want,” says Jim Elekonich, a senior applications engineer from Toledo, Ohio. “It’s what they want me to want. How can it be anything else?”

Elekonich is afraid that custom prices, if they’re offered by the airline, will be a rip-off, “but with no way to prove it, since everyone else’s customized pricing will be known only to them,” he says.

The International Air Transport Association, the airline trade organization behind Resolution 787, claims custom fares would allow you to compare prices to ensure you’re getting the best deal, and it’s been making the rounds in Washington with a multimedia presentation to convince critics of its good intentions. But the association says the ability to generate a custom fare is just a technical standard, and can’t guarantee it will be used to make airfare shopping easier or more straightforward.

Passengers don’t trust the airlines.

“Just the fact that airlines want to do this should be a big clue that it isn’t in consumers’ best interests,” says Rachel Thuerk, a risk manager from Cambridge, Mass. She’s afraid airlines will use their technology to calculate the maximum price you’re willing to pay for a ticket, then make that offer directly to you, and no one else, meaning you could end up paying more than you otherwise would under the current system.

It’s something she says the aviation industry already does too well.

“Airlines are actually better at this kind of price-setting than most other industries, since they can charge different prices based on days and times of travel and length of time before flights are booked,” she says. Customization would allow them to do that on an individualized level, she adds.

Of course, there’s a correct way to customize a fare. Already, passengers feel betrayed by “unbundling” — the act of quietly stripping the ability to check a bag or make a confirmed seat reservation from a base fare, in order to earn more money. Last year alone, the airline industry pocketed $27 billion in these “a la carte” fees.

With customization, the airline industry could have the opportunity to rebundle its fares on its own terms. That would be the wrong way to do it.

Customization only works when the consumer has some control of the process. If you can click on your favorite online travel agency, type in a destination and tell the airline what you want, such as onboard wireless Internet, a meal and a checked bag, then see the best offers from several airlines and compare them side-by-side — now that would be customization done right. (IATA insists its system would do something “similar.”)

Travelers are also worried about how much personal information they’d have to give up to receive a customized fare. As it stands, airlines seem to want as much information as they can collect before quoting a price under the proposed new standards, including your frequent-flier number, full name, date of birth and marital status.

While some of that data is collected at the end of the booking process for security-screening purposes, none of it should be necessary to give you a fare quote, say travelers.

“I don’t have a problem if airlines want to use technology to help their customers find service more amenable to their liking,” says Frank Hawkin, an online consultant in Washington. “Where I have a problem is creating the lack of transparency in pricing so travel agencies and individuals can’t see all the fares and pricing offered.”

Will the airline industry do the right thing, using the technology to allow us to find and compare the best fares? Jim Davidson, president of Farelogix, a travel technology company, says competition will keep the airlines honest, and as long as passengers “don’t feel as if they’re being profiled,” the flying public won’t mind customization.

What’s more, the new technology standards, if approved, would allow your airline to offer you things you didn’t even know you wanted. For example, what if you’re flying with your family, and you all want to be seated together, and have a power outlet so you can recharge your iPad on the journey? Customization would let your airline present you with a special package that guarantees those amenities.

“The technology can be used for good or for evil,” he says. “I believe it will be used for good.”

I hope he’s right. But we can rest assured that putting us, the consumers, in charge of choosing what we want, rather than having the airlines tell us what we want, is the best way to fly.

Are "custom" airfares good or evil?

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51 thoughts on “Are “custom” airfares good – or evil?

  1. The article got it right. If it didn’t benefit the airline financially, at the expense of the consumer, they would not be putting any effort into it. I live in the San Francisco Bay area, and we see much higher airfares due to the fact that wages are so much higher and there are so many high tech corporate travellers on expense accounts. Companies have huge databases of info on us that can be used to instantly profile us. If they know who we are before quoting a price, what makes us think that we wouldn’t have $100 automatically added to the price if we drive a BMW, have Elite status on only one airline, and work for Google. Far fetched? That technology exists today with elasticity of demand modeling.

    1. I fly out of SFO regularly. That’s not true. Fares from SFO are not higher than fare from anywhere else. In fact, from 2008-2012, they were much cheaper than San Jose. I’ve gotten flights out of SFO as cheap as $29 each way,

      As far as benefiting the airlines,that is obviously true, but I don’t think the airlines care one way or the other whether it benefits or hurts consumers. I doubt if that’s a factor.

      1. Well, that’s true, but buying a ticket is, at its core, a business transaction. And generally speaking, in a business transaction, when something benefits one side (airlines), it’s to the detriment of the other side (passengers).

        1. Sometimes, but in the best transactions both sides win. Consider the airplane paid upgrades offered at the gate. The airlines win because they increase marginal revenue, the passenger wins because he or she gets a seat which is worth more to them, than the money was paid for the upgrade.

          If the airline marginal cost is $100 to bring a passenger from coach to first, if they sell say an international upgrade for $500, the airline made $400 in extra revenue.

          If that first class seat is worth say an extra $900, the passenger has a consumer surplus of $400 as well. Both sides made $400 from the deal.

    2. You might be confusing what you see online at the time of a ticket search to actual published fares. Professionals use the latter, because we have access to them in the GDS.

  2. I need some details to even begin to know what to think. Specifically, what information is the airline using to give me this custom fare and how does it obtain it? What are the disclosure requirements? Can I decline to give this information?

    Without this information I don’t see how I can have a considered or informed opinion, beyond a general distrust of airlines.

    1. Carver, even the airlines don’t know — or won’t say — what they’re going to use. Resolution 787 is just a proposed standard, for now. So we’re going to have to wait and see. But some air travelers are suspicious of what the airlines might do, and I can understand why.

      1. There is an assumption here that all airlines will act similarly. Like all airlines will have hubs? Wrong. Like all airlines will board from the rear? Wrong. Like all airlines will prices tickets the same? Wrong.

        What is lacking here is the perspective that many airlines carve our niches by unconventional competitive behavior and make a go of it, if not thrive. That is the beauty of the free market. Just because they can does not mean they do.

        You only have to trace the histories of Southwest Airlines, Peoples Express and Spirit to see nonconformists. One of the big hangups in the proposed USAirways-American merger is the way USAirways prices some round trips, making them lower priced for consumers. Justice specifically cited these fares, and their elimination as being anticompetitive. See

        It is this freedom to be different that makes capitalism work.

      2. Some practical applications of Resolution 787:

        Business Travelers – Frequent Travel results in discounts
        Family Size: More Travelers in a Party – Larger Discount
        Frequent Fliers Discount
        Unfortunately, travelers are going to have to give up privacy (like that exists) for these discounts. Register with Airlines, similar to loyalty programs, and allow their travel tracked. It already happens now, so not much of a change.

        The main difference will be these travel habits end up cataloged and shared (probably happens now through 3rd party marketing). Then, when you log in and book flights, the system knows your habits.

        At least that’s how I’d envision a custom fare system.

    2. From TonyA’s link (sorry for the crummy spacing – I just copied and pasted): data to identify who is making the request where an intermediary is

      present. Data may include, but not be limited to:

      ! ! specific IATA number (generic numbers shall not be sent),

      agent’s pseudo city code,

      electronic reservations service provider number,

      corporate or group identification,

      type of trip (e.g. leisure or business). data to identify on whose behalf the request is being made. Data may

      include, but not be limited to:

      Name/Age/Marital Status,

      Contact Details,

      Frequent Flyer Number or Profile number,

      Customer Type (e.g. adult/child),

      Travel History,


      Shopping History,

      Previously Purchased Services. attributes data for what is requested. Data may include, but not be

      limited to:

      ` Point of Sale,

      Travel Dates,

      Origin and Destination,

      ` Number of Passengers and passenger type,

      Trip type (e.g. open, round trip, one way).

  3. If you went to a grocery store and found no prices on the shelves, and discovered that swiping the loyalty card on your keychain charged each customer a differrent price for the same can of soup based on the address of the card holder, would you be OK with that? I have a sneaking suspicion that’s what the airlines are trying to do.

    The one simple question I have is this: Can I opt out of this “customization”? If I’m going to be required to buy a ticket this way, and only see what the airlines want me to see, then I would say it’s evil.

    1. IATA says that under the proposed standard, you would still be able to get a price without “authenticating.” The problem is, it could be a terrible fare, which would essentially force you to give the system your credentials. Who wants to pay a walk-up fare when they can get a consolidator ticket?

      1. So you would be OK with paying more for the exact same item at the grocery store because you live in an affluent neighborhood?

        1. Didn’t say or imply that. I am making a factual observation without commenting on its propriety, merely stating that there is precedent for this sort of pricing model.

          In actuality, living in an affluent neighborhood can makes you pay less for grocery items than comparable items in poor neighborhoods.

          Households located in poor neighborhoods pay more for the same items than people living in wealthy ones, according to a new study in the Journal of Consumer Research.

          Which doesn’t surprise me. The cheapest grocery store is within walking distance.

    2. Actually, many grocery stores do this now…there’s one price on the shelf, but a second, lower price is often available on sale items that one gets by swiping a loyalty card. The store uses this info for its demographics, and some even tailor sale items to the individual card holder.
      I’m not saying I’m a fan of this, but it is done. How about buying a car? You’re certainly free to pay the sticker price, but you’d be a fool if you did. The sales folks do size you up and have an idea what you’re willing to pay.
      Being a bit of a cynic, I’m not convinced the airlines will not try to push this game to the edge and abuse it (and worse, they would try to convince us it’s for our benefit!), but it is certainly an intriguing possibility and it could end up benefiting the consumers as well.

  4. I’m thinking that this could have disparate impact. What if all of a sudden certain groups of people were charged different rates as a side effect of where they lived or worked? Would the side effect be that people are paying more based on race, national origin, gender, marital status? It’s a tricky thing.

  5. I don’t see how charging “whatever the market will bear” magically becomes evil when you reduce your “market” to individual travelers. Individualized pricing simply changes airfares from fixed-priced goods, to goods where the pricing is flexible, based on the whims of the organization selling it. Most “trades” are sold this way (a plumber going to a $$MM mansion is likely to charge more than doing the same job in a low-end apartment), and most high-dollar transactions of all sorts don’t work off of a fixed price sheet.

    Is it customer-hostile? Yes. Might it backfire on the airlines that try it? Yes. But it isn’t inherently evil.

    (That is not to say there shouldn’t be the usual restrictions on the practice (similar to those in the financial industry): No price discrimination based on age, gender, marital status, religious affiliation, etc.)

  6. Full disclosure:I have no hard data, but my SWAG take on this is that any customization will be based primarily on billing zip code. Where you live gives vast amount of statistical information about you. From your zip code a company can make a reasonable guess as to you race, income, and educational level. If it also has historical flight information, such as it would obtain from your loyalty program, it can refine the information

    For example, if you fly live in a zip code that is heavily Race X. And you regularly fly to a city that is heavily race X, you are probably Race X. I live in the heart of Silicon Valley. About 45 percent of the residents are college education and many are techies. Another data point for the airline.

    1. I doubt race is an issue, since all money is green. My guess is the data point they’re really looking for is income, which also might be generally determined by zip code. An affluent suburb vs an inner city, or rural area, for example. In fact, I’d be surprsied if the average income by zip code isn’t already in somebody’s database.

      1. I wish that were true, but it’s been demonstrably show to be false 🙁

        That’s why redlining occurred and was made illegal. Banks felt that blacks ( and later others) regardless of credit score were bad risks and refused to make loans or open branches in minority neighborhoods.

        Insurance companies did the same thing.

        And yes, absolutely, income and other demographic data is prolific. It’s the basis of all direct snail mail and telephone marketing

        1. Yea, but that a totally different example. The examples you gave deal with risk. There’s no risk in selling someone an airline ticket, like there is in making loans or selling insurance. If the person pays for the ticket, why would the airline care if the person was white, black, or green.

          1. The examples you gave deal with risk.

            That’s the point. In business in general neither side should care, yet sometimes they do. Two people with the same profiles (e.g. credit score, income, etc) should present the same risk factor. But the guy living in the “wrong” zip code would be routinely denied. That’s why we have fair housing and Employment laws.

            An airline might offer different services based upon zip code ultimately having a disparate impact on the dynamics

      2. Race and sex are always issues and continue to be issues. If people were treated fairly we’d not need so many laws to stop discrimination on unreasonable biases. Banks until very recently made a single woman get a cosigner on her loan. You’ll find shortly that there will be no more joint accounts for credit for those reasons. Zip codes will tell race, sex, and another hot topic, marital status.

    1. Which is precisely why I never ask what someone else paid. 1) I think it’s kind of rude, and 2) getting pissed off isn’t a great way to start any trip. So I think I’ll just accept that fact that I paid what I paid and not worry about some deal someone else got.

      1. lol, thought the same thing, it is a question that makes one of the two parties upset and serves no purpose. If I were asked that I’d probably make up something to really get under their skin just because of the question being pointless.

  7. Fact is, we already have custom airfares. Are you a businessman trying to sell product? You typically cannot book a month in advance and stay overnight. There is a custom airfare for you, same-day round-trip at the last minute and you are hosed with the highest possible fare by most airlines.

    As for transparency, as long as airlines do not share individual information about you, such as through a credit bureau, then ordinary competition should take care of most problems. If three airlines fly a route both nonstop and with stops, then you can solicit three prices or more based on mixing vendors each way.

    This really is a return to the free-market. You enter the dry goods or wet goods (animal and produce markets) markets and bargain with merchants. You do not know in some cases what others paid. Some merchants post prices. Some quote them individually. Some size you up based on looks, body language, time of day and maybe the phase of the moon, and then price their product to you.

    Yes, safeguards are needed. But no, custom airfares are not inherently evil. We have them today, and will have them in some form tomorrow.

    1. This really is a return to the free-market. You enter the dry goods or wet goods (animal and produce markets) markets and bargain with merchants. You do not know in some cases what others paid.

      I’m not sure which formal free market principle this embodies. In fact, price transparency is a goal of free markets and this potentially operates in the reverse, leading to a perversion of the free market. A perfect example of that is the health care system. While not exactly analogous, consumers often don’t know the price until after services are render, thus leading to skyrocketing costs, obscene pricing disparities, and ultimately a breakdown of rhyme or reason.

      1. That is simply incorrect. Raw material pricing, either via spot markets and/or futures contracts, distribution pricing and retail prices are far from transparent. There are so many mechanisms to adjust prices that true prices are far from transparent in a free market. I think you are confusing unattainable perfectly efficient markets with free markets.

        Free markets enbody fewer regulations and restrictions, allowing vendors to choose on which features they will compete. A required “sameness” by whatever law or regulation further erodes the freedom of the consumer. Let them choose between airlines which have simpler, more transparent fares and those which customize fares to the zip code and car registration (as examples), just as they choose today between boarding patterns, seating classes and purchased meals.

        As for health care, the analogy is not applicable. In today’s system, a third party sets the prices and makes the payments for a vast majority of health care products. The payer (either the government or insurance companies) certainly knows the allowable costs for any health care code before services are rendered, or payment may be disallowed.

        Single payer comprehensive health care is not acceptable yet to a majority of Americans. That is the almost perfectly efficient system, and it is thought of as socialism. And, in a sense it is, Prices and providers are highly regulated. Any semblance of a free marketplace is gone.

        1. Raw material pricing, either via spot markets and/or futures
          contracts, distribution pricing and retail prices are far from
          transparent. There are so many mechanisms to adjust prices that true
          prices are far from transparent in a free market. I think you are
          confusing unattainable perfectly efficient markets with free markets

          Completely untrue. You are conflating the cost to the consumer with the cost to the seller. The seller’s costs are not relevant to this discussion. What is relevant is that the consumer can reasonably ascertain the retail cost of the item, not the wholesale cost.

          “One of the fundamentals of a market economy is the free flow of information about goods and services offered for sale.” -Federal Trade Commission

          “Governments don’t “intrude” on free markets; governments organize and
          maintain them. Markets aren’t “free” of rules; the rules define them. …” Robert Reich, former Labor Secretary

          None of my post suggest that we mandate sameness. Compete on whatever you think works. But free markets do not suggest an abandonment of consumer protections. Boarding patterns, seating classes, and purchased meals are all transparently priced. You know a meal costs “X”. Giving consumers sufficient information to make an informed choice.

          The health care example was spot on. The determining factor in making a financial decision is consumer benefit. Is the benefit greater than the cost. Since the decision maker, the consumer is removed from the cost equation, decisions become inefficient.

          1. All levels of free market capitalism have obscured pricing. Quoting “mixed economy” advocates such as the FTC and Reich does not bolster any argument regarding free markets. That is like quoting Marx on Catholicism. Interesting, but not appropriate.

            Even in airfares, there are numerous negotiated prices, from secret corporate discounts to bucket shops selling off-price tickets. This is obscure free-market pricing, an existing fact of life.

            No one suggested abandoning consumer protections. What is at question is customized pricing. Let them price how they want to whom they want. If you do not like that airline, go elsewhere. That is a free market, rather than imposed pricing “sameness.” You negotiate, like corporations do today, for the best airfare. In one sense, you are giving individual consumers the ability to get the same pricing and perks available to corporations.

            Health care is far removed from free markets. The structure of the industry is near monopolistic in most localities. Fact is, the vendor gets away with charging as much as possible, as the consumer does not know the options, much less take the time (or have the time) to dispassionately evaluate them. Most choose not to shop, hence subjecting themselves to monopolistic forces.

            The transportation industry is far from monopolistic. Generally, it is planes, trains and automobiles. Buses on occasion. You have so many choices, at different levels of service, convenience and pricing, that the marketplace works very well. Let the marketplace work, as it has since 1980.

          2. Red Herring upon red herring and misdirection:

            1. Merely claiming that since they disagree with you they are irrelevant is a poor argument and fails to advance the discussion.

            2. We cannot discuss corporations buyers and consumers in the same breath. The level of information and the ability to enter into negotiations makes them radically different elements. To have meaningful and sophisticated discussion we must separate the two, else we reduce the conversation to talking points. A position which boils down to, well Microsoft can do it why can’t you, is mind boggling.

            3. No its not a free market. Airlines benefit from government granted oligopoly. We cannot argue for free market principles without considering the substantial effect of the government actions.

            4. Are you seriously arguing that this gives consumers the ability to negotiate prices? That’s not even a difference between of economic philosophies, but simply factually untrue. It merely changes the criteria by which the airline dictates prices. The consumer has no ability to offer or counter-offer. Its still a take it or leave it proposition.

            5. Has the free market worked? How many airlines would have survived without the government loans?

            Its amazing. In this discussion group, I’m usually the one advocating free markets. But I humbly yield that spot to the greater free marketer.

          3. For all the obfuscatory points, you have never addressed the fact there is airline customized pricing today on a wholesale and retail basis in many forms. Expansion of this into real-time customized consumer pricing is an extension of existing practices. No one has demonstrated deleterious effects with current practices. Further, you have not addressed the fact that some airlines will not explore customized pricing, thereby creating a potential competitive advantage. The consumer will have a choice amongst the many forms of transport.

            I do not address the other irrelevant points, as they have no bearing on the above.

  8. Notice that the resolution number is 787. Those of us who follow the airline industry know that a 787 can fly ……..sometimes, and when it does, there is the lurking danger of a very smokey or fiery flight. I sincerely hope that Boeing can solve the problems of the 787 and it becomes a commercial success. As for Resolution 787, I would not feel sorry if the greedy airlines’ attempt to separate me from my hard earned money crashes and burns.

  9. To be clear, I don’t work in travel but to state “the propellerheads who create your fares” is beneath you Chris. Or it should be. It was rude and dilutes your point.

    1. I work in the industry and sometimes I feel like using less kinder words. Sorry but why should consumers trust anything coming out of IATA since the organization represents the interest of airlines and not consumers?

      1. Oh,I agree with the article; my point was it started me with a bad taste in my mouth with the name calling. As I read it, it didn’t appear it was in good fun (which apparently it was per the comment below) so I started out a bit put off since it didn’t add anything to the overall point.

  10. Fares custom? I really do not understand this concept, but it really is a pretty cool concept there. The development and it is convenient for the flight, there was obvious but not less negative

  11. This appears to be the next step in creating an airline”junkies”, the first step being frequent flier programs. Corporate America does not realize how much that their employees are ripping them off via FF programs. Instead of flying AirTran cheaplie and non-stop PIT ATL, the client will fly USAir via Charlotte to get milage at longer times and more expense. Any audit can prove this.
    Your article is dead on….it looks like another hook.

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