Farelogix CEO: If government interferes with fare transparency, “all sides will suffer”

Farelogix CEO: If government interferes with fare transparency, “all sides will suffer”
By | September 24th, 2010

Today is Mad as Hell About Hidden Fees Day. Full disclosure: I co-founded one of the organizations that created this event, so I have a horse in this race.

I’m also something of a contrarian. And one thing I’ve noticed is that, apart from a few soundbites, the airline position on fees hasn’t been fully articulated.

So I asked an airline to do just that, and it referred me to Jim Davidson. He’s the president and chief executive of Farelogix, a travel distribution systems company based in Miami. Here’s our interview. (Warning: Parts of this discussion may be a little techie for a general audience.)

Do customers have the right to an “all in” price for an airline ticket? And if so, when?

Absolutely, customers deserve complete visibility and transparency in the airfare shopping and buying experience. And contrary to much of what you hear these days, many airlines support this through newer XML connectivity to their reservations systems.

What’s stopping airlines from offering a full price right up front, then?

In most cases, the root cause of the so-called “hidden fees” is that technology – both on airline websites and even more so in agency distribution systems (i.e. GDS) – has not caught up to leverage the latest connectivity to airline systems that provides full access to this information.

Airlines seem reluctant to embrace price transparency. Is that a wrong impression?

I don’t believe that the airlines want to keep things the way things are today. This is demonstrated by the fact that most airlines continue to make significant investments in their airline websites for the purpose of changing the traditional workflow of purchasing travel. There is a very clear movement to evolve from commodity shopping, to providing the consumer with a more personalized travel product and corresponding experience.

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What do you mean by that?

We are seeing a movement whereby the airline product choices or optional services are offered and priced based on who the customer is and the corresponding relationship that the customer has with the airline.

Variables such as frequent flier status, past travel experience, current trip status, as well as real-time inventory can increasingly drive the offer that is presented to a particular customer. This concept of matching a specific set of airline travel options with a specific traveler is often referred to as traveler authentication pricing or the Who’s Asking Pricing Model.

It is becoming increasingly common on airline.com websites every day. As evidence, compare the experience you have when you log into an airline site versus shopping anonymously.

Why are airlines doing “Who’s Asking”?

The motivation for this new, customer-centric pricing is very simple. The airlines need to get closer to and create greater loyalty with their existing customers. The airlines need to compete more aggressively for new customers. Given the history of marginal at best airline financial performance, the airlines also need to create new revenue opportunities.

Historically, airlines have only been able to compete on price and schedule. Within those two parameters, given that “schedule” is often limited by airport capacity, price was historically the only true competitive card to play, i.e. the proverbial Airline Price War.