Lawmakers Take Aim at Airfare Pricing, Transparency

For years, airlines have been known to cling to outdated and even antiquated technology, afraid that upgrading their tech infrastructure could lead to the catastrophic downages that have affected most major airlines, including a chaotic and expensive weekend for British Airways last year.

But airlines have been quietly upgrading their systems, with results that aren’t always favorable towards travelers.

Case in point, dynamic pricing, in which airlines collect their customers' personal data in order to “customize” airfares based upon history, location and other variables. While the airline industry isn’t quite there yet, it is rapidly heading in that direction and already reportedly testing the software in some cases.

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Now, New York Senator and Senate Minority Leader Chuck Schumer—a long-time airline industry watchdog—is calling upon the Federal Trade Commission to investigate the practice of dynamic pricing, which he called “'Big Brother' meets 'Big Business'” in a letter sent to the FTC over the weekend.

“It is a frightening combo for already-price badgered airline travelers," wrote Schumer.

According to Schumer, the new technology will be used to track user IP addresses in order to predict what fares customers would be willing to pay, based on their browsing history. According to the senator, a cloud software company called PROS is already testing the software with several airlines.

According to a press release on its website, PROS, which calls itself a “cloud software company powering the shift to modern commerce,” recently announced a new partnership with IATA.

“With increasing demand dynamics in a highly competitive industry, artificial intelligence is the new requirement for driving profit-optimizing offers with greater speed, consistency and precision,” wrote PROS in the release. “Carriers that are adopting modern commerce capabilities are winning the most profitable business by removing friction from the buying process. [PROS] is enabling real-time dynamic pricing in the cloud that’s designed to drive revenue and profit growth.”

While the press release itself strictly referenced cargo operations, it’s easy to draw some parallels as to how that same technology could also drive changes in the consumer space as well.

For its part, the American Society of Travel Agents is applauding Senator Schumer’s efforts on behalf of consumers and the travel industry.

“According to our consumer research, Americans are seven times more likely to say that government favors airlines over passengers,” wrote ASTA in a statement. “As such, we support Senator Schumer’s efforts and think it is entirely appropriate that both the Federal Trade Commission and the Department of Transportation keep a close eye on airline ‘dynamic pricing’ initiatives and the potential for widespread price discrimination.”

In the statement, ASTA also touted its earlier success in fighting the concept of “anonymous shopping,” back in 2014.

“In 2014, ASTA and others successfully fought to preserve the concept of ‘anonymous shopping’–that airlines can’t require personal information from consumers before providing an airfare quote–when the Department of Transportation was considering IATA’s ‘New Distribution Capability’ (NDC) standard,” wrote the association. “While the connection between the NDC standard and the types of personalized dynamic pricing being contemplated today is unclear, we remain steadfast in our support to protect the traveler’s ability to purchase airline tickets fairly and with confidence.”

The quote references a 2014 decision by the United States Department of Transportation (DOT) to approve Resolution 787, which set the table for the rollout of for the IATA-developed NDC technology, which would update how airlines communicate and transmit their product offerings.

After concerns were voiced that NDC technology could potentially require customers to provide personal data before receiving an offer, the industry collectively set about to ensure consumer protection was embedded into the resolution.

For its part, IATA asserts that consumers will benefit from the new technology, due to the "greater choice and transparency in air travel shopping that the NDC standard will enable.".

In related news, U.S. Senator Susan Collins of Maine, who chairs the Senate Transportation, Housing and Urban Development Appropriations Subcommittee, has announced that she is looking to revive a Notice of Proposed Rulemaking (NPRM) by the Department of Transportation on airfare transparency. Essentially, the senator is asking that airlines be required to clearly display all information on add-on charges.

In Oct. 2016, the U.S. Department of Transportation (DOT) opened a review known as a "Request for Information" (RFI) to explore airline industry practices on displaying (and shielding) of airfares, add-on fees, schedules and availability. Within the RFI, the DOT wrote of its concerns that current pricing practices could be anti-competitive and harmful to consumers. While some 60,000 consumers and organizations submitted comments to that RFI, it was suspended in March 2017 and remains suspended to this date.

Several organizations, including Air Travel Fairness Coalition, the Business Travel Coalition (BTC), The Travel Technology Association (Travel Tech), Travelers United and the European Technology and Travel Services Association (ETTSA), are applauding the senator’s leadership on the matter.

"Despite the improving economy and record industry profits, airlines have been aggressively moving to restrict the distribution and display of publicly available fare and schedule information by travel websites,” wrote the organizations in a joint letter to the Senator. "These changes have made it more difficult for consumers to find comprehensive flight and schedule information and shop for the best flight at the lowest price in a transparent, simple way."

"On behalf of millions of American consumers, we thank you for your leadership in support of transparency and competition in the airline industry."

The Air Travel Fairness Coalition also pointed to a study by Yale School of Management economist Fiona Scott Morton in partnership with R. Craig Romaine and Spencer Graf of consulting firm Charles River Associates, that shows travelers would pay an average of $30 more per ticket when denied access to easy comparison shopping information. In total, that would cost travelers $6.7 billion more in airfares annually, making travel unaffordable for some 41 million Americans each year.