farely fairfare
359 days ago
 

Farely is like a Blue Book of airfares, letting you benchmark ticket prices

New website Farely lets users calculate the cost to an airline of flying a passenger between two airports.

Type in your departure and arrival airports, and the site will estimate what it calls the FairFare — the average amount per ticket that airlines need to charge to cover their costs (plus a “reasonable” profit of about 3%) between any two major international airports nonstop.

It’s the first site to make this cost available online in an easy-to-digest, free format.

New kid on the block

Farely isn’t the typical Silicon Valley startup launch.

It’s a project by two industry experts, looking to shake up the data that’s currently used to negotiate air contracts and buy air online. Depending on feedback for how customers want to use the data, they will invest in refining data tools or consumer search enhancements to make it even more actionable and invest in growing the business accordingly.

Farely is a joint-project by Scott Gillespie, who has worked as a strategic sourcing consultant specializing in travel for more than 15 years, and Evan Konwiser, who founded FlightCaster (acquired by NextJump), and who worked for about six years as a consultant with Bain & Company, and who is a Tnooz node.

Farely has a deal with a business intelligence company to have its product included on that company’s platform, and it is seeking other partnerships.

farely fairfare

Previously unpublicized information

Farely is reporting the fully loaded, or break-even, cost to the airline of any given market between two airports.

It isn’t using the revenue data that travel management consultants (TMCs) have traditionally relied on.

It’s also different from the fare forecasts issued by Bing and Kayak, which are based on revenue data and historical patterns. Farely focuses on pure fixed costs, regardless of time of day or day of the week or yield management on any given flight code.

Since 2008, FareCompare has had an unpublicised flight cost estimator. This fare per mile estimator represents the cost to the consumer, not cost to the airline — and only goes by the airlines’ published fares.

Posted online as unstructured data, experts have periodically cited the cost per available seat mile (CASM) data provided by the major airlines, multiplying the system-wide average figures by the number of miles on any particular route to make a rough estimate of any given flight’s typical cost.

CASM is “calculated by taking all of an airline’s operating expenses and dividing it by the total number of available seat miles produced”, according to MIT. For instance, it may cost US Airways 11 cents a mile to transport a passenger from Philadelphia to Las Vegas, while it might only cost Southwest 8 cents mile to make the same trip (to use hypothetical numbers).

Farely says it adds precision to the CASM + miles flown estimates by accounting for a variety of additional factors, such as equipment type and airport characteristics, plus soon-to-be-added proprietary airline data. It aims to present this information in a simple and intuitive user experience.

Seeking customers

Aiming to be an unbised metric for benchmarking fares, this US-based startup has two target customers globally.

On the corporate side (B2B), travel buyers can use Farely to assess for themselves if an airline is making a wild profit on any given route, helping to strengthen their hands when haggling over price.

On the consumer side, travelers can use Farely to benchmark what a reasonable plane ticket price might be.

Says Konwiser in a phone interview:

We would like to be the first place to go online when you want to take a trip.

After producing a price quote, Farely offers a link to Kayak so that a shopper can compare the benchmark price with actual pricing through a metasearch tool.

I’ve often referred to this as “the Blue Book of airfares.”

There is a difference, though, and it’s not a literal translation or perfect analogy. Kelley Blue Book is about the market value of an automobile.

Unlike the Blue Book, Farely is making a cost calculation — not a market value calculation. We’re ballparking the airline’s cost to fly a passenger.

For anyone who travels a lot, you win some and you lose some when it comes to getting plane tickets you think are priced reasonably. Farely will help you quantify the winning and the losing more accurately, potentially helping reduce frustration in the shopping game.

Some imperfections, at launch

Farely provides data on coach, nonstop fares. It doesn’t offer cabin-specific cost data for premium cabins, even though a core target market will be business travelers presumably interested in that information.

The startup faces the obstacle of obtaining comprehensive cabin-specific data on premium cabin paid load factors. In the meantime, it has made estimates of the paid load factors in the premium cabins, and allocated costs accordingly. This leaves a cabin-adjusted breakeven cost for the coach seats.

Farely’s estimates aren’t precise to the dollar, but have a margin of error to them.

Farely says it offers quotes for every origin-and-destination (OND) fare in the world. But at launch it’s using data provided by US airlines. The company is in the process of obtaining data from European airlines which will help it refine its estimates and fill in some coverage gaps.

In its initial days as an “Alpha” version, I found occasional hiccups in my test searches for fares on non-US routes (Hong Kong to Beijing, Manila to Singapore), where the site failed to return results.

At launch, it’s all publicly available data that we’re using from airlines that are publicly held and report their financials. We’re not vulnerable to any provider cutting us off from data.

That being said, we are having conversations with major airlines to receive proprietary data to refine our cost calculations. We will try to do that in the coming months for additional precision.

Farely is also providing a new type of information and the product may need a bit of salesmanship to catch fire. Konwiser acknowledges this:

We need to work really hard to educate people on what our cost estimates mean and how they can be used….

farely for business

Airlines as customers?

From the viewpoint of airlines, Farely could also prove useful.

A key purpose of recent airline mergers has been to allow carriers to push up their prices. But selling these price hikes to TMCs isn’t easy.

Third-party benchmark pricing could be used by airlines as a negotiating tool when working with corporate TMCs to demonstrate that their margins are still razor-thin on many major business routes and that volume discounts can’t be generous.

For competitive insights, Farely will also offer carriers airline-specific FairFares as a paid product.

 
 
Sean O'Neill

About the Writer :: Sean O'Neill

Sean O’Neill is a London-based reporter for Tnooz. He's also a regular contributor to BBC Travel.

Follow him on Twitter, Google+, and his personal site .

 

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  1. Ian

    Looks like a great tool.

    I implemented something similar to this for GetFlight last year (which has been featured by Google Maps API and was the winner of Web In Travel startup bootcamp in 2011).

    I analyse the sale fare data for major airlines in Australia and also look at when the route has last been “on sale” (ie: an advertised fare from an airline)

    You can check it out here:

    http://getflight.com.au/insights/

    (Note: this tool is only for Oz data).

    Keep up the good work and good luck with the project!

    Cheers,
    Ian

     
  2. John Pope

    @Scott

    I admire your adoption of a “lean” strategy approach to follow the “data” and go where the wind blows you, wherever that may be it sounds like.

    You and Evan have bigger cajones than I do – I personally prefer to only play (highly probable) winning hands, and quickly fold those that don’t have “the nuts” – bluffing isn’t my strength.

    On the up-side, from my perspective, you’re definitely a shining light on the radar of a potential aqui-hire candidates in the industry.

    And your branding (Domain Name) wreaks of “winning” potential for the next great meta-search site, and surely has tremendous value alone. Hmmmm…

    All the best.

     
  3. Scott Gillespie

    John,
    You raise very valid questions. Airlines should disclose proprietary information if they conclude it’s in their best interest. We haven’t made that case yet, mind you…but it doesn’t mean we’re not trying.

    We don’t yet know how consumers will end up using the information from Farely. I’ll be the first to agree that consumers cannot use this information to negotiate better prices… whoever solves that problem will make a nice ripple in the industry.

    But we do know from our research that a not-small segment of airfare shoppers do not like the opacity of airfare pricing. Farely now gives them a cost-based benchmark to judge an offer.

    We hope that those consumers will benefit by feeling better about purchasing fares that they can now deem “fair”.

     
  4. John Pope

    A few questions come to mind:

    1) Why would airlines want to make proprietary data publicly available? –

    Off hand, I can think of a number of reasons why they wouldn’t want to.

    2) Why is anything but market price data relevant to anyone? Or, said a different way. Is there enough of a value proposition for any stakeholder in the value chain to want to pay for this data, or regularly engage with the site – e.g. lower cost of business for suppliers or help a customer find a better deal?

    I can see the intrinsic value for airline “aficionados / geeks” but no “nuts and bolts” extrinsic value that run-of-the-mill customers or industry executives would be willing to pay for, or why consumers would consider Farely “to be the first place to go online when you want to take a trip.”

    I’d loved to be convinced otherwise – as it can only be a good thing when obviously super smart folks like Evan and Scott are a prominent parts of the industry – but I’m personally not seeing the value that makes Farely likely to become a commercial success.

    Am I missing something, or is this just the first step in a stealth-fully executed, at first glance non-obvious and ingeniously conceived of strategy for complete air distribution and world dominance?

    If that’s the case… Kudos. Doctor Evil is in big trouble.

    Somebody help me see the error in my ways… a tall order, indeed. :-)

     
    • Larry Smith

      Congratulations Evan and Scott! Well done, and really interesting.
      @Pope: Why is anything but market price data relevant to anyone? My immediate reaction was Corporate Travel Planners and purchasing, Airports, Tax commissions and regulators.

      Of course the follow on question would be: what impact will this knowledge have?
      - Is it forceful enough to affect pricing, yield, or marketing? (Internal and external factors)
      - Is it an ingredient to another report, such as the Airline Satisfaction Report or any number of financial/investment reports
      - Can it be used as a competitive tool? (proof for ad claims as the cheapest route)

      Can’t wait to see the next chapter. . .

       
      • John Pope

        @Larry

        You have an astute eye, to be sure.

        Re: “My immediate reaction was Corporate Travel Planners and purchasing, Airports, Tax commissions and regulators.”

        You’ve uncovered one of the reasons I was referring to in my first question above: “Why would airlines want to make proprietary data publicly available?”

        Do you not think it would be a strategic blunder (idiotic) for airlines to make this data publicly available, specifically, when negotiating or dealing with all of the entities you identified – “Corporate Travel Planners and purchasing, Airports, Tax commissions and regulators.”?

        On occasions when it IS advantageous for the airline to make the data available, they would obviously do so – for that specific purpose or occasion, only. But airlines certainly should not divulge any data when the reverse was true, should they? Does a cost-benefit analysis by the airlines somehow justify always making the data public? If so, I’d love to understand the rationale, and what that benefit vs. disadvantage is.

        Negotiations, in any scenario or industry, are like a hand of poker. Making this proprietary data publicly available would be like playing poker after exposing all your cards. If you’re willing to play following that game plan, can I play, too?

        Some of your follow on questions appear to have merit; of course, only time will tell if any of those scenarios materialise, and add enough PERCEIVED value to the audiences who matter, i.e. those who are willing to pay for it or regularly engage with it.

        We’re developing new models and applications for the broader travel industry, as well. I’ve consistently said that those who poke holes in our strategies and make us aware of any potential pitfalls are FAR MORE valuable than people who slap us on the back, and say “congrats, well done.”

        I’m personally here on the planet to learn – and typically move up the Learning Curve much faster by making mistakes, and subsequently being made aware of them and making the required changes to find a better solution, if required. A sort of a human (or in my case neanderthal) experiment in semantic memory or an Id vs. Ego Natural Language Processing experiment, if you will.

        All that said, I can only ask that if, and when, we reveal our plans and strategies to the Tnooz TLabs audience that all of you reciprocate my candid analysis and genuine sentiment. And if you deem appropriate, rip us to shreds – in fact, brutalise us. I promise that I’m a big boy and will appreciate your candor. :-)

        There was no malicious intent in my comments – just the opposite. Evan did a sparkling job at PhoCusWright’s Innovation Summit as a critic / industry sage. I offered my opinion in the same vein – albeit minus the sagacity. I’d sincerely be honored if he, and all others, did the same.

        Finally, I’ve come to understand a very important lesson relevant to today’s proceedings, and that is:

        “In business, a third of the people will love you, a third of the people will hate you, and a third just don’t care.” Contrary to conventional wisdom, it’s the first two (thirds) groups that are both equally valuable – especially for new ventures. The last (third) group are still using rotary phones, and that speaks for itself.

        Sláinte.

         
  5. mobileguy

    Does Farely calculate taxes and fees? For many flights overseas the taxes can be far more than the airline’s actual fare. I saw one us-europe flight which had 12 separate taxes/fees attached to it. Although I like the idea they are trying to do, control of the data necessary to be accurate for more than a select set of flights is hard to come by.

     
    • Scott Gillespie

      @mobileguy,

      Farely calculates taxes and fees for flights within the US with reasonably good precision. Farely uses estimated fees and taxes for flights between the US and other countries. We are keen to learn of any data sources that will improve our calculations in this area.

      That said, I suspect part of the discrepancy between Farely’s full-loaded cost and an airline’s ticket price may be the fuel surcharge. Farely calculates the estimated fuel cost for each flight, and reports it. The airlines may choose to include a fuel surcharge as part of the taxes and fees component, which sits outside the base fare.

      Whether or not the fuel surcharge represents the full cost of fuel for a ticket, or something beyond the cost of fuel is a fair question. Farely does its best to fully account for the fuel cost as part of its calculation.

       
  6. Scott Gillespie

    Sean,

    Thank you for this comprehensive and very accurate assessment of Farely.

    May I note that Farely does not yet claim to offer the FairFare “between any two major international airports nonstop.”

    Farely currently provides the FairFare between any two airports served online by the US-based airlines, in nonstop and one-stop markets. So Farely handles London>San Francisco, and London>San Diego, but not yet London>Hong Kong.

    Scott Gillespie
    Farely Co-Founder

     
 
 

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