Have you ever noticed the maximum rate disclosure posted on the back of most hotel room doors? Chains typically disclose the “maximum room rate” or the “rack rate”, which can be up to 400% higher than the amounts paid by most guests. Though few travelers actually pay the “rack rate”, at least consumers are advised of the price ceiling. If the hotel industry can provide pricing metrics for over 4.8 million U.S. hotel rooms, why can’t the airline industry do the same?
The answer is simple: they can, but choose not to, blogs Lars Condor who is the Managing Director of Passport Premiere.
Perhaps no other industry can infuriate its customers like airlines and get away with it. The Airline Deregulation Act of 1978 removed government’s role in setting fares and routes. The result was 52 new airlines commencing operations between 1978 and 2000, initially driving fares lower. Today, all of the start-up carriers from that era have either folded or merged. Regulators continue to give airlines a pass because of recent challenges ranging from terror threats to the Great Recession of 2008. After decades of operating in the red, carriers that survived are now in a position to thrive like never before.
Surging demand, plummeting energy prices, and limited competition helped airlines reach record profitability last year. In addition to positive macroeconomic events, deceptive sales practices may also be contributing to the industry’s success.
Significant evidence suggests that airlines routinely misrepresent the true value of airline seats on their own websites as well as on third party websites. Search results frequently return fares that are thousands higher than the average and lowest price paid for a particular route. When running a fare search, how do travelers know they’re actually getting a good deal? Flyers can “comparison shop” using airfare aggregators, but these sites only display the lowest fares at the exact time when a traveler runs a search. They don’t show key historic data, such as the lowest or highest a route has sold for over the past 12 months. Travelers are in desperate need of more meaningful metrics, including the 12-month highs and lows, to evaluate if today’s fare is really a good deal or if carriers are price-gauging the market.
Think you already have all the data to make an informed decision? Think again!
Take the following example: between March 1st and May 4th, 2015, the lowest business class fares between San Diego and London ranged from $2,931 – $3,371 + taxes. On May 5th, Delta slashed business class fares 82% to just $680 + taxes. Anyone searching flights to London from March 1st to May 4th was led to believe the lowest business fares always started at $2,931. There were no clues or information suggesting that an 82% fare drop on May 5th was even possible. In reality, the 12-month low for this route was $1,180 set seven months earlier on October 6th, 2014. The 12-month low measures how a carrier truly values its seats. On May 5th, Delta devalued business fares an additional 42% to just $680. Disclosure of the 2014 low of $1,180 to anyone searching fares on this route prior to May 5th would have provided buyers a more accurate concept of value.
It’s common for carriers to display the highest possible price (i.e. the equivalent of a hotel’s “rack rate”) despite selling few or even zero seats. Though most travelers won’t buy overstated fare levels, some will. Airlines constantly test the market’s resistance to overstated fares and search for uninformed travelers willing to overpay. During the peak of the deregulation era, low-cost carriers challenging established carriers kept fares in check. At that time, legacy carriers wouldn’t dare play fare games with the public, fearing loss of market share to a start-up carrier. Ironically, deregulation is what also keeps regulators from imposing more stringent fare disclosure rules.
Airlines have turned travelers into traders, requiring split-second purchases while providing minimal information to make informed decisions. Though most hotels only disclose “rack rate” data, this information does provide guests a measurement of value which is abundantly absent from the airline industry. It’s time for flyers to receive similar data, including the lowest and highest fares offered by a carrier on any given route. Carriers file fares with ATPCO (Airline Tariff Publishing Company), which in turn distributes the data to mainstream booking sites. There’s no technical reason why travelers shouldn’t be provided the knowledge of the highest and lowest prices before buying an airline ticket. It’s time for regulators to stop giving the airline industry a pass and start stepping up to protect consumer interests. If travelers are expected to be traders, carriers MUST be required to display both the “BUY IT NOW” fare and the 12-month low for all fare searches so travel consumers can make more informed buying decisions when it comes to airfare.