Skip to content
Insights

Airline Marketplace Inefficiencies

I’ve been thinking quite a bit about how inefficient our airline marketplace really is, and how it continues to heighten consumer stress and add unnecessary costs for both airlines and their customers.

Specifically, I am talking about the market inefficiencies and related costs and unproductive consumer behaviors in the process of searching for the “best” airline offer down to the penny – let’s just say, the inefficiencies in search.

Today, it seems consumers feel compelled to search multiple sites, i.e., various OTAs and meta search, because prior experience has taught them that airline prices do vary from one site to the next. I am not referring to negotiated rates, but rather published fares where despite the fact the airline intends a consistent fare, variations exist from storefront to storefront. Often times this price variance is minimal (perhaps taxes rounded up or down!), yet this is enough to motivate consumers to keep searching, believing that the airlines are “up to something” with how they are pricing their product.

The reason for this is, for the most part, that the airlines themselves are not even pricing their own product. Instead, it’s a few third-party companies – primarily the airline’s PSS and the GDSs, using their own home-grown pricing and availability applications – that actually create these pricing discrepancies throughout the marketplace. Why? Well each of these pricing systems use “interpretive” pricing algorithm logic and tax calculation methodologies that, in the end, can (and do) easily create pricing discrepancies. And since the consumer search sites deploy these various pricing applications, variability in pricing exists.

The unintended (or maybe not so unintended over time) consequence of this situation is higher costs to the airline from excessive search and availability transaction costs (or scan charges) imposed on the airlines by those very same third party companies that create the airline prices. It’s a bit odd when you think about it. And, to top it off, the prevailing consumer perception appears to be that the airlines are taking advantage of their customers, when in fact the airlines are powerless over this issue… or are they? What if airlines could replace those disparate pricing systems with a single, airline-controlled pricing engine capable of delivering a “single source of truth” to all channels?

Perhaps now is as good a time as any to Ask the Question.

Latest insights

You might also be interested in

Insights

Finding a balance between maximizing revenue and meeting customer needs is the core challenge of airline schedule building and availability calculation. It’s tough for airlines and distribution partners, yet metasearch seems to get it right. What is their “magic formula” and what can airlines learn from these digital-first retailers? Traditionally, the order in which flight […]

READ

Insights

The Airline Voice Radio series “Reaching New Heights” returns to the airwaves with Accelya CEO Jim Davidson chatting to Birgir Jónsson, CEO at PLAY Airlines. This Icelandic startup airline is benefiting from the resurgence in international travel and has added many new routes to its portfolio, including various US destinations. Not all CEOs can claim to be rockstars, but Birgir was a professional drummer in one of Iceland’s most famous bands. Now he’s setting the tempo for a great startup performance.

READ

Insights

The recent CAPA Airline Leader Summit event provided the perfect forum for airline and technology partners to discuss the current distribution landscape and steps needed to meet customers’ growing expectations. What did we learn from the thought-leaders taking the stage and conversations over coffee?

READ

News

Accelya today announced it has established a Center of Excellence (CoE) as part of its commitment to accelerating the digital transformation of airlines globally through its FLX Platform.

READ
SUBSCRIBE