Airlines are now able to collect more data than ever on their passengers, and they’re using this data to build profiles on individual passengers. By building individual profiles on passengers with information such as lifestyle purchase choices, flying habits, and even passenger financial position, they’re able to come up with clever ways to give you pricing options for flights. This means that your travel and daily habits give airlines a glimpse into your price sensitivity and what you’re likely to be willing to spend on a plane ticket.
To understand how data is becoming important for airlines and how airline booking engines are getting more sophisticated, we’re going to look at how data about each passenger can be used, analyzed, and combined with other data sets. The analysis of data is a smart way for airlines to increase ticket sales because it allows them to understand passenger motivation for purchasing various products.
To get a clear understanding of passenger travel and other behavior, airlines heavily promote their frequent flyer programs. By getting customers to join loyalty programs, airlines have the opportunity to record behavior with a specific passenger tied to a number.
Once a passenger has a frequent flyer number assigned to them, airlines are able to begin gathering and organizing information that provides key insights on each customer. Customer insights are then used to customize pricing based on past behavior.
The behavior predictions that airlines make are grounded in your past actions. For example, an airline is likely to know that whenever you fly from Denver to New York City, it’s a business trip. If you’re going on a business trip, a company is probably paying for the ticket which means there is less price sensitivity when the purchase is being made (so the airline can charge more).
In addition to that simple example, these are some of the additional data points that airlines use:
- When you abandon your purchase. By analyzing when you typically abandon your ticket purchases, airlines can understand what you’re not willing to pay for a ticket.
- The amount of times you look up a flight before purchasing a ticket. This is useful because it means the airline can predict which visit is the visit you’re likely to make the actual purchase on.
- The amount of money you’ve spent on tickets in the past. This allows the airline to understand what you’re willing to pay for tickets.
- Third party data tracking. This allows airlines to map your behavior while you’re not on their site. If the airline knows that you are likely on a business computer, they can assume that work is paying for your ticket and you likely have almost no budget. If an airline predicts you’re booking a work trip, they will show higher priced options.
- How loyal you are to the airline. This information allows airlines to know how much you typically spend on a certain route and which airline you typically fly on for that specific route.
- Your hotel reservations at the destination you’re looking up. When an airline knows you already have a hotel booked, they know you’re committed to getting to a place. When airlines know that you’re committed to getting somewhere but don’t have a flight ticket yet, ticket prices will begin to increase.
- How much people like you spend, on average, for the same flight. This data is often combined with other information, including aircraft type, how full the flight is, the time of day, day of the week, and more.
- How motivated you are to achieve the next status level (or retain your current level). This could either increase or decrease your ticket price since an airline may want to entice you to achieve the next level of status to keep your loyalty. However, an airline knows that if you want to achieve or retain status your willingness to pay for a ticket may be higher if you’re very close to a status goal (especially if it’s close to the end of the year).
- The seats that you typically book. If an airline knows your seat preference is already taken, they know you’re less likely to fly on that specific flight (moving the price needle down). If the seats you love are available, it’s likely that the flight will be more expensive.
- Your typical payment method. By knowing your typical payment method (either using the same card repeatedly or storing a card), the airline knows what bank you’re using to pay. By knowing what bank you’re using (from the first handful of digits on your card) an airline can better predict if you typically make business or personal travel purchases.
There are more data points analyzed by airlines, but the ones above are some of the key data points of interest. Viewing the way airlines analyze data visually is a useful way to understand how various data sources help airlines calculate pricing for specific passengers:
All of this collected and analyzed information is incredibly valuable and it’s the information that powers the reservation system and allows it to increase the likeliness that you will make a purchase. The airline pricing you see on a flight search is a highly educated guess as to what the airline thinks you are willing to spend on a flight ticket, during that specific search.
Each nugget of data collected is also scored, to help the predictiveness of airline booking engines. Various things, such as a passenger being on a delayed flight on a different airline, receive a score that is applied to a passenger profile. This might change the text that you see on the airline website to say things along the lines of, “95% of our flights are on time.”
These calculations being made can feel somewhat creepy to some, but in reality they only improve the customer experience for passengers. The airline customer experience improves with these calculations because passengers are likely to get the pricing that they feel most comfortable with on their searches. In addition, the flights that have seats, times, and other passenger preference available will be shown first.