Dynamic airfare – A good idea, actually. Kinda.

I was reading news today of Allegiant Air, wanting the ability to change airfare up to and including right before departure. At first glance, it may seem like a bad idea, as the customer is always screwed in the end right?

Well, giving it some thought. This can make sense, if implemented fair and well.

Primarily, I’d love to see the fuel portion of the ticket be removed and in turn paid on the day of flight. That’s effectively what we do if we drive to a destination for a trip. Further, I’d like a very clear, standards-based way to determine the fee. Don’t just say “High fuel cost / $20 fee” or something. Something very specific like price of Brent crude barrel of oil multiplied by $0.013 per 250 miles flown. That is a $19.50 surcharge on a one-way (2500 mile) trip at $150/bl oil. The real rate that would make sense may be something like $0.04 or who knows.
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I don’t know what would make sense, but the airlines do. As long as the fuel is removed from the ticket, then this clearly defined and standard-based; I am fine with it.

What do you think?

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2 responses to this post.

  1. Rick

    You’re forgetting that the airlines already hedge their purchases of aviation fuel against the predicted future cost and that the cost of the fuel on the day isn’t indicative of the cost of the fuel for the journey.

    Your journeys are pretty erratic compared to how airlines operate – they know when they will be travelling for months in advance and for what distance, so they can product fuel demand. I suspect you don’t know your journey plans every day for the next 12 months…

    Because flights are so predictable, there’s no excuse for the airline to hedge the cost well ahead of time; of course the airlines don’t want to be charging you too high a price at the time you buy, so in reality I suspect they don’t need to hedge to 100% efficiency. Instead they keep the price low, get you hooked then slap the charges on later when you’ve no opportunity to change.

    Have you ever heard of the airlines offering a *rebate* when the oil price dropped? I doubt it.

    Chris

    Reply

  2. Chris: I’m aware of hedging. This airline example (Allegiant) doesn’t hedge, further; hedging will become more scarce as we go along. I’m not sure right now if any of the US airlines are hedging at all.

    Of course they don’t rebate surcharges if prices drops, but I think this will never be a fair process. It is no win for both I think.

    Reply

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