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Custom Fares: The End of Flying as We Know It?

airplane sunsetWhile many of us lament the airlines' unbundling of so many of the services once thought a routine part of your paid airfare -- a checked bag, a snack, a reliable seat assignment -- the International Air Transport Association (IATA) member airlines have been stealthily plotting to rebundle everything that is still left over into what has been dubbed "custom fares" or "customized airfares." These offers would take into account your previous travel preferences and purchases to find you the itinerary that fits your profile best.

This sounds like a promising idea, and could be a nice starting point for your own searches. The problem, however, is that the airlines are likely also to eliminate the ability for you to do your own searches. In fact, they might not even show you a price until you tell them your name and show them your money.

The potential changes emerge from IATA Resolution 787, which despite appearing to be a modest 10-page document about migrating computer systems to an XML standard, could lead to what many are calling a revolution in how we find and purchase airfares.

What Is Resolution 787?

The potentially massive change to how we shop for airfares is the iceberg tip of an issue that arguably originates in the larger airline industry's need for better, more flexible software to serve its numerous and diverse constituents. It is a tremendously complicated issue, with tendrils looping through many factors including information technology challenges, software compatibility, consumer behavior, turf wars over customers and fees, consumer privacy, collusion concerns and a lot more.

There are so many stakeholders and potential winners and losers that only a few experts are able to keep track of it all; some even think the whole thing is a gambit by the IATA to justify its high-flying membership fees. If you want to read more on the topic, clear out an afternoon and then look up "IATA Resolution 787" and "New Distribution Capability" (NDC) online; there is a lot to see.

If you just want the basics, read on.

So What Is the Problem, and Why Do I Care?

As I suggest above, this is a computer problem mixed in with a massive turf war -- and your travel dollars are the spoils. In the simplest terms, the airlines would like to try to figure out personal details like how you prefer to fly, what kind of financial resources you have, who is paying for the flight and what you do on other airlines, and then try to sell you a flight they think you will be likely to purchase.

For consumers, the main thorny points arise when the airlines start to talk about no longer filing all their fares with the global distribution systems, which supply information to Expedia/Travelocity/Kayak/travel agents, etc. Instead, they may only publish pricing in response to a specific request that includes a lot of personal information about the person making the purchase -- including info that tells them how much you are able and likely to pay. And you may not be able to opt out; no personal information, no price quote, sorry.

IATA claims that consumers will always have a choice about sharing their data, but the Business Travel Coalition, or BTC, makes a convincing case for how easily the airlines could demand this information before showing fares.

This could pretty much eliminate the transparent and fantastic access we now have to airfares via our favorite online sites. No more searching on all available airfares; you would see only the airfares the airlines choose to show you.

No more anonymous (and admit it, fun) comparison shopping. No more schedule and price transparency (except for the "products" the airlines want you to see). Just Big Mommy and Daddy Airline deciding what is best for us.

How to Hack Your Way to a Cheaper Airfare

Charlie Leocha of the Consumer Travel Alliance (CTA) sees the problem with this customization in stark terms, stating the main concern for consumers to be "that the customization [could be] done by the airlines based on extorting the most revenue from passengers, rather than allowing consumers to customize their travels as they wish."

And then there are the privacy concerns, which are formidable, since to be able to offer you custom fares, airlines would require you to log in before you could see them, at which time they would have access to those true heaps of information about you.

What They Want to Know About You

Before an airline would show you a fare, it would require information to help it pick that fare for you -- and it turns out the airlines want a lot of information. This includes not only your flight history on that particular airline, but potentially all of the following and more:

- Flight shopping and purchase history on 240 different airlines
- Your marital status
- Your nationality
- Your date of birth
- Your email address
- Frequent flier numbers and data on all carriers
- Whether you are flying for pleasure or business, and who is paying for the flight
- Whether you are researching the flight yourself or have a travel agent doing it for you

What will they do with this information? That is where the dispute arises. The airlines say (more or less) that they they want to show you fares that they think you will like best. But as Leocha suggests, what may be more likely to happen is that airlines will show you fares that they think they will like best.

The most cited concern is that the airlines will quote you prices at the very upper limit of what your profile indicates you would be willing and able to pay -- and then just not show you the cheaper fares. You won't even know it is happening. Do you tend to pay a bit more for direct flights that leave in the morning? Then the airline won't show you (cheaper) connecting flights that leave midday.

And it would be everywhere; a plan like this would never work if only a few airlines decided to hold back prices until you identified yourself, so the IATA solved the problem by having the plan adopted and agreed to by its 240 member airlines, which could start sharing all the information they have about you almost immediately.

From there consumer and business travel advocates go on to cite privacy, transparency and antitrust concerns that arise from having very personal information about how you shop available to a whole lot of people, from your neighborhood travel agent to 240 airlines worldwide and everyone in between.

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Potential Upsides

laptop credit card online shoppingIn fairness to the airlines, we'll admit that these changes could benefit consumers in some ways. For example, Air New Zealand currently offers a Skycouch upgrade that allows a flier to purchase an entire row of three seats for a certain fee, ensuring him- or herself more space in economy class. This kind of offer isn't something that the main global distribution systems can handle, so you won't find it on a site like Expedia or Travelocity; you have to go to the airline's own website to be able to purchase or even find out about it.

That said, IATA Director General Tony Tyler has acknowledged that the current system of fare transparency works in consumers' favor, and has stated his intent to shift that balance (as quoted by the BTC):

"We've done a great job of improving efficiency and bringing down costs, but we've handed that benefit straight to our customers," Tyler says. "As soon as someone's got a cost advantage, instead of charging the same price and making a bit of profit, they use it to undercut their competitors and hand the value straight to passengers or cargo shippers -- and you've got to ask why? I think one of the reasons is that the way we sell our product forces us to commoditize ourselves."

It seems pretty clear from Tyler's comments that the IATA wants to eliminate fare transparency mainly so they can charge higher prices -- end stop. So being able to see that Skycouch offer on any site would be nice, but it sounds like we would pay for it eventually.

We have all seen tricky pricing schemes in the past, but this one seems particularly broad; I asked Leocha if the tactic of formalizing this approach seemed beyond bold just to me.

"It is beyond bold," he agreed. "However, the airlines claim that they are only doing this to provide passengers what they want (in the eyes of the airlines). Hopefully the weight of consumers, business travelers, travel agents and central reservation systems will force IATA back to [its] senses."

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What Can Ordinary Fliers Do?

These measures were originally intended to go into action in early 2014, but the pushback from various industry players has stalled it a bit. There currently isn't much consumers need to do (although donations to organizations like the CTA and BTC would go to good use here). Leocha notes that the several organizations are doing the hard work -- the CTA is watching out for passengers, business groups like BTC and the Global Business Travel Association are looking out for the business travelers and corporate travel managers, and the American Society of Travel Agents (ASTA) is a leader in trying to stop unilateral action by the airlines.

"The latest World Passenger Symposium was a disaster for IATA when CTA together with ASTA, BTC and the [global distribution systems] called for more collaboration," Leocha said. "I think IATA has agreed to a meeting of stakeholders in January and agreed that collaboration is necessary."

Finally, Leocha offers some sane, reliable and eternal advice: "Consumers should always comparison shop, even when the airlines make it difficult."

Go Anyway,
Ed Hewitt
TravelersEd@independenttraveler.com
Features Editor
IndependentTraveler.com

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