chess king falls
957 days ago
 

Epic web battles: Airlines fees vs lower fares

There have been some epic battles over the years as industries have had to reinvent themselves as a result of the internet and electronic devices.

chess king falls

The media is a classic one (we’re online-only at Tnooz, just in case anyone is wondering when the print version will come out) and while the music industry was turned on its head by MP3 players and file sharing (much of its illegal initially).

The battles described in a recent piece in Infoworld techie journal included items on medical support, customer service, media, and many others.

One area the article focused on was Cheaper Flights vs Hidden Cost. Oh dear.

The point is relevant in that the web eliminated barriers to airline pricing information – and it makes sense to look at the impact of the web from the consumer’s perspective.

But while the article focused on air, the same could actually be said for other products in the travel industry.

In the first phase, previously privileged information that only an airline or a travel agent could provide became publicly available.

This was initially via airline websites and online travel agencies, and more recently via the general metasearch/search players such as Kayak and Skyscanner or niche offerings such as Getflight.

This enabled search and shopping, but caused the demise of the legacy channel (agents who only acted as agents for airlines). The scale of data processing that the web enabled was fantastic and opened the digital world up for many new players.

In the next phase, a degree of quality was introduced – better offers, and more information. The writing was on the wall for homogenous information.

Now, most travel and travel-related experiences are now available online. The long tail arrived.

Today we see that the social element has changed how we obtain ideation and validation in our search for travel. This helps get us better results – we hope.

TripAdvisor is the primary example of how we get to find out what others feel about travel. There is also a strong sense of community and personalization. But, sadly, travel products are not keeping pace.

Furthermore the ability to de-commoditize one’s product and to allow different services to be sold either directly or indirectly has changed how travel is presented.

Dynamic packaging allows us to mix and match services in a way that previously only a travel agent used to be able to do. Suppliers learned that their products needed to fight harder for space on the virtual shelves of the web.

But the key question from the article is clear:

Did the web enable cheaper fares and did the web create airline fees? Yes to the former, no to the latter.

Cheaper fares are now easier to find, but the logic underpinning the article claims that cheaper fares are only possible through unbundling.

That is obviously an over-simplification. Product owners/sellers, particularly in air, want to obfuscate the true market price. That is the pure price argument. But there are two other factors that the article misinterprets:

1. Functionality and unbundling enable a la carte and de-commoditization.

This is decidedly a benefit to the consumer. Buying what we want and need rather than a one size fits everything powers consumer choice.

This has to be a benefit. But not purely in terms of travel. Almost every product category has undergone this process.

2. Personalization down to the consumer of one (aka ME!!!) has benefitted all of us.

True, there have been a lot of abuses and many of these remain but in general “mass personalization” has driven consumer benefits unimaginable prior to the web.

Because the infoworld article was short, it did not draw a conclusion, but it’s worthwhile to consider some.

The logical argument should be that the infrastructure of travel needs to get a whole lot better to support additional functionality and personalization at a lower cost.

Now THAT is an epic battle – and price point is just one element of that.

The world is changing and the infrastructure to support it needs to change. The focus on consumer user experience hides some of the ugly stuff behind the scenes – but that cannot last.

We (collectively) must provide more efficient processes to enable the coming wave of better services and products. Innovation will find a way. But that is not a battle – except in the execution.

 
 
Timothy O'Neil-Dunne

About the Writer :: Timothy O'Neil-Dunne

Timothy O'Neil-Dunne is a contributing Node to Tnooz and managing partner at travel consultancy firm, T2Impact. He serves as the lead for the airline, aviation and airport practice. He is also a Co-founder of VaultPAD an accelerator devoted exclusively to travel and travel-related startup businesses.

Timothy was a founding management team member of the Expedia team where he headed the ground transportation and international portfolios, before founding T2Impact in 1998.

He has worked in aviation and travel distribution for more than 30 years, including time with Worldspan as head of technology where he managed international technology services from product to infrastructure.

He is also CTO and deputy CEO of Lute Technologies, a permanent advisor to the World Economic Forum and writes on the T2Impact Blog.

 

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  1. Hrush

    The author blithely calls another article’s point of view an “over-simplification”, while happily engaging in whatever over-simplifications and unfounded statements support his own viewpoint.

    Exhibit 1: “Functionality and unbundling enable a la carte and de-commoditization. This is decidedly a benefit to the consumer… This has to be a benefit. But not purely in terms of travel. Almost every product category has undergone this process.”

    Repeating the same statement “XYZ is a benefit”, does not and will not make it a fact. Facts need to be supported by evidence. Airline fees and unbundling could, potentially, have been benefits if the airlines decided to charge customers for new ancillary items that customers are willing to pay for. Unfortunately, most airline fees are simply new charges for things that were previously free, such as checked baggage and visits to the toilet.

    The author makes an over-simplified statement and then supports it with ZERO evidence. How exactly does unbundling enable “de-commoditization”? Checking a bag is checking a bag, and all other things being equal, customers are likely to choose the airline with lower or zero checked bag fees.

    Further, the author goes on to make the wild and completely unsubstantiated claim that “almost every product category has undergone this process.” What are the non-travel product categories that have undergone the unbundling process? How did the process benefit consumers? How did it benefit sellers outside of giving them the chance to charge for things that were given away earlier?

    Exhibit 2: “The logical argument should be that the infrastructure of travel needs to get a whole lot better to support additional functionality and personalization at a lower cost.”

    No argument there, but it is hard to fathom how this is connected to “the key question” this article is attempting to address — “Did the web enable cheaper fares and did the web create airline fees?”

     
    • Timothy O'Neil-Dunne

      Thanks Hrush for the comments.

      Ah the joys of English language (of which I am no wordsmith as my esteemed editor will attest). I think you miss my point. I did answer the question, but the point I hoped to make was the impact of battle not necessarily the question of the battle itself.

      It would take volumes (as you well know) to dissect the issue thoroughly. What was a short 121 word statement has resulted now in many times that of discussion. And we are hardly scratching the surface of the issues related to it.

      For clarity sake – I believe that travel is better as a whole as a result of the web. The transparency and information access has changed the process. But is it just about pricing? In my view no. And that to me represents a greater challenge than just answering the question of the “lowest” fare.

      We will still be debating this even after a better infrastructure is enabled.

      Cheers

       
  2. Martino Matijevic

    What “cheaper flights vs hidden costs” is trying to point out is that price comparison websites like the ones mentioned in Infoworld article and the ones you named above display a comparative table of cheap flights without knowing all the hidden costs which will be added by the time the flight is purchased and will sometimes significantly increase the cheapest price.

    “the web eliminated barriers to airline pricing information” sentence would have been true 5 years ago, but today airline pricing information is so complicated there is no web software out there which has overcome this barrier.

    In my view, price comparison flight metasearchers are not only incorrect but missleading. While airlines have complicated their price structure, price comparison websites are unable to keep up. Can’t blame them either: there are 100s of new parameters to take into account. Before I can compare price of airline A and airline B I don’t just need to know where and when you are flying but how many bags have you got, how heavy are the bags, which methods of payment you dispose of, can you print your boarding card or are you in an internet café, will you be dying for a coffee (or a wee, if Ryanair has its way) while on board, etc.

    Regards,
    Martino Matijevic
    CEO, WhichBudget.com

     
    • Timothy O'Neil-Dunne

      Martino, I think we are in agreement that Travel is complex and air fare search is hard. Dynamic pricing of products with arcane and illogical rules is hard to code against (duh!). Rational behaviour doesn’t necessarily exist in the process. In some cases yes – but by its very nature pricing of airline products is designed to obfuscate so there will not be ever in my opinion a solution that is perfect. But there are some good tools to work. In addition to those I mentioned above look at some of the advanced tools from companies like Farecompare. Indeed the emergence of Kayak’s Hacker fares and the like is exposing yet another level of complexity. Not necessarily to the betterment of the consumer.

      In my head I have mapped the ability (from my years as a travel agent and someone who works in fares) to say what is a good or bad fare and right for me. But my ability to turn that into machine level code has been thwarted for many many reasons!

      I am not a huge fan of “meta” search and real search is not possible in most cases. Air search is nothing like Google. The consumer is smart enough to realize that. The lack of “honesty” in tools is tempered by the fact that ubiquitous search across all forms in real time is impossible. The consequence is that we need to have a breadth of tools to work with as consumers. Almost any information is good information.

      Where I think we will agree is that there is no qualitative measurement or tool that can tell me what is right for me.

      Cheers

      Timothy

       
  3. Timothy O'Neil-Dunne

    Murray – thorough as usual. However not entirely accurate.

    Rather than engage in a big blow by blow debunking of each other’s arguments, allow me to pick on just a few.

    Competition was enabled by the web. So we are both right. Yes it was competition and yes the web enabled airlines such as Easyjet and Ryanair to become the power houses that they are today.

    I think you may have misinterpreted the point made about what an agent can or cannot do. So let me lay out the edges. There are still things an agent can do which a web engine using a GDS cannot do.

    Agents cannot do everything an airline can do. I some cases they can do different things. Can agents “tweak and fiddle?” Sure they can. Does this mean you have never had a debit memo. (Rhetorical not a question).

    The system is full of holes but as you say it works… sort of. I think we will both agree it is flawed. I will go further and say many of those flaws are in place today because no one has challenged them. Those challenges are always there and always being exploited. But the ability of the airlines to prevent them has increased. And agents do not scale well. (Well known human failing).

    For example I would challenge your supposition that you can book a flight from Caen to Spokane. Sure you can… But … if left just to an agent who didn’t know their geography – they would charge the customer a lot of extra money when there is a perfectly acceptable connection to Paris and then take the train.

    You asked a question. Whether it was fair that passenger 1 and passenger 2 paid different prices but received the same treatment. Yes it is. Its called capitalism. You get what you pay for. Of course I would much rather be passenger 1.

    I have to disagree with you. Travel Agents have plenty to fear. Unless they change their ways a large percentage of them will be toast. I have been saying that for more than 20 years. And it would seems I am right. Those who remain should be better at their jobs. Sometimes they are not.

    Where we do (hopefully) agree is that there are some travel things that machines cannot do. For which a human is better equipped. That will always be the case. But how many and for how long is an open question. The consumer in general is voting with his wallet. Corporate travel is increasingly automated. Looking at USA numbers we see a long term trend of the simpler tickets being handled by channels other than ARC.

    Cheers

    Timothy

     
  4. Murray Harrold

    “previously privileged information” Like what, pray? What information is now displayed by an online agent that an airline or agent did not previously disclose – answer – nada. It was never “privileged” – indeed, any airline or agent would be in deep trouble if they did not disclose all information. Totally spurious. What the likes of skyscanner do provide is a useful tool from a routing perspective; which provided information, nearly always requires an element of interpretation. What agents did, was not to act simply as agents for the airline; though dichotamous, agents had to act for the client as well.

    In travel, what a client asks for is not always what they want. They may have an idea as to what they are looking for – but that does not mean they are able to find what will satisfy their needs. The big failing of the interent in the travel arena is that, though it will answer the question, there is not yet a website that can tell if the right question has been asked to begin with.

    Everything mooted here relates to very simple, basic travel requests. It seems that an awful lot of time, energy and money has gone into to selling something cheap. This is strange. I can never understand why so many should expend so much on producing so little.

    The web has attempted to dispose of the traditional agent… yet has failed to do so. True, a lot of order takers have disappeared but as I have said on many occasions, the only thing traditional travel agents have had to worry about, is that they have had to become travel agents. Tripadvisor has, maybe, seen a few clouds darken its horizion and many OTA websites offer fares which have been over and above what I, as a traditional agent, can offer – and no websites know any of the – shall we say – “wrinkles” which traditional agents can employ.

    Did the web enable cheaper fares? No, of course it did not. Competition – stiff competition – from the likes (in the UK) of RyanAir, Easyjet, Air Berlin and many others made cheaper fares – and those cheaper fares (funnily enough) only appear on those routes where there is true competition. Compare, say, Dusseldorf to Moscow – Air Berlin will do it for £250 – then look at London to Moscow – BA want about £900. (No Saturday night stay on either, most booking classes available) Why the big difference? Competition – it’s got naff all to do with the web. (And please do not try and tell me its down to the extra hour flight/ landing costs at LHR).

    In most cases, the cheaper fares are a complete myth. The lead in fare might be, but that is more than made up by things such as the “fuel surcharge” and other rather spurious add ons which, incidently, are convieniently ignored, before we even start looking at the charge for a bag and a cup of tea. Did the web create airline fees – Yes, it did. The functionality of the web made fees possible. We only had about 4 or 5 “tax” boxes on the (very) old tickets… but with the website Hey! Suddenly we can add on what we like!

    Now, dynamic packaging became available to agents at the same time that it became available to the public. Indeed, we were not allowed to dynamic package anything unless you had an ATOL – if anything dynamic packaging has affected the tour OPERATOR not the agent… and a lot of good it has done Jo Public – I will not dilate on this here, suffice it to say one only has to look at the huge mess at the time of the Xcel Airlines crash to see what wonders dynamic packaging brought to people. Sure, the package holiday wasn’t everything to everyone but you knew where your money was…. and how to get it back. We also have “tailor made” holidays, as well.

    Unbundling is, of course, total hogwash. There is no unbundling. If you are going to unbundle, then unbundle. I am going to New York First Class… I don’t need a lounge or 40 kilos baggage (so why do I have to pay for those). I don’t drink, so no Champagne, thanks … Oh! And I have brought some sandwiches… and I don’t need the arrival lounge and I am quite happy queuing with everyone else – How much do I get off? Nothing.

    What you have (and this has naff all to do with the web) is this crass situation of seats at the rear (mainly due to over-capacity and the inability of airlines to manage capacity and demand – mainly due to slots and other such – but that’s another story)- having to be sold at any price. Then airlines found this great wheeze of charging for bags – Look if the only way a legacy airline can make any money, is out of the $10 for the odd extra bag, then it should not be in business – and other elements – but, of course, only in the cattle cabin. Now, doing this on the likes of RyanAir is one thing, clients expect it. They know it’s no prisoners taken, no quarter give – that’s what you sign up for – but a legacy airline? Passenger one pays £300 for a long haul journey … and has to pay for food, bags this and that… fair enough but where it goes wrong is that passenger 2, beside him (or her) has to pay those same charges even though passenger 2′s fare was £1,300. That’s right in your book, is it?

    Hill Rider mentions this – the business traveller – and he is right. Frankly, business travellers are paid to do business. They are not paid to faff about over a number of sites, airline, metasearch or whatever trying to work out the best deal in the 10 minutes they have between meeting 1 and meeting 2. They do not want to have to decide how many bags or if they want a Gin and Tonic when passing cloud number 3 – further, there are not that many firms who are prepared to say “Hey! Let’s give all our staff a company credit card and free reign to book their own stuff”. It can’t be “shopped”; further, there are few serious business travellers who would want to have to shop for their travel anyway… and given that using an agent (probably) costs less than a couple of baggage fees – why should they? If I don’t measure up… if I don’t find the best value (which is NOT the same as “cheapest”) for every travel dollar my clients have to spend, there are plenty of others willing to do so. What better motivation than that?

    A lot of this is psychology. Techy types looked at travel and said “Wow! This looks fun and look! They use really, really old stuff” Old models… Costs… What frustrates techys is that what we have, works and works very well. We don’t want to change, because we don’t need to, because it isn’t broken – despite the best efforts of many, mainly techys, to say it is. This, they find very, very frustrating. They cannot cope with it. Many airlines scream about “broken models” and rather then simply fix it, or even attempt to fix it, have been convinced by (again, mainly techys) that the only answer is to re-invent the wheel… and at the same time lets use some long words and fancy titles just for fun. As far as ailines are concerened, it means we may not have to loom at real cost issues… like overpaid pilots, inflexibility in operational systems, unionised staff and age old Spanish practices.

    Oh! And, yes, here we go again! – the technology. Our technology is no good, it’s old hat. Sure it is. It will book you, on a flight from anywhere in the world to anywhere else in the world in the blink of an eye, safely and securely. You can call me up from your hotel room, say to me: “I’ll be at the airport in an hour, there is a flight to Paris in an hour… I need to be on it” and guess what? Yup, your on it with all the info on your mobile – all courtesy of that old fashioned Sabre/ Amadeus/ Galileo. Pretty backward technology, Huh?

    Ooops! Sorry, forgot (don’t know if I should say this) … but we have been able to do it for … what? … 20 years or so, now?

     
  5. Timothy O'Neil-Dunne

    Hill Rider,

    You are spot on – this sort of thing is not readily available. This is not what I meant as personalization. But boy wouldn’t that be nice to be able to do!

    Personalization is the ability to engage in a 1:1 relationship. It is not the functionality.

    Suppliers (whether they use it or not) in many cases now have the ability to change the results of what you see vs what someone else may see. Its still early days yet. The big OTAs and some niche sites too have the ability to have a “conversation” with you which is based on more factors than just the pure availability and product.

    We are nowhere near the form of personalization of say an Amazon but the capability to do that will increase in my view.

    Cheers

    Timothy

     
  6. Hill Rider

    Hogwash on the “personalization”.

    I want to search for a flight from A to B, will be traveling with a bag, and will want a meal with wine. Plus I don’t want to be late (DOT 65% or greater).

    Can you please tell me where to go to price shop the total cost for the above?

    You know the answer: this simple typical business traveler trip (one that is carrying a bunch of stuff with him) cannot be shopped ANYWHERE.

     
 
 

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