Dynamic Pricing of Award Tickets: Can it Bite the Airlines as Well as Benefit Them?

ould the dynamic pricing of award tickets potentially cause negative consequences for the airlines as well as benefit them?

A recent announcement from Delta Air Lines heralded the era of dynamic pricing pertaining to the redemption of SkyMiles for reward travel…

We know your miles are important, so we want to provide the most notice possible regarding Award price changes. For travel on or after June 1, 2016, the number of miles needed will change based on destination, demand and other considerations. But most Award prices will remain unchanged. To see the best availability and deals, search at least 21 days prior to departure and use our Award Calendar by selecting “flexible days” when searching for a flight.

Miles needed to upgrade will increase, and to provide greater access to these upgrades, we’ve expanded the eligible types of fares.

and the response from frequent fliers and fellow “bloggers” has been overwhelmingly negative. Consider, for example, this recent article written by René de Lambert of Delta Points:

Can you even, in your wildest dreams, think about spending over 1/2 MILLION SkyMiles for a one-way ticket? What about  1 MILLION+ miles  for a round trip? This is what not having award charts and Delta SkyMiles2015 has given us. There literally is no limit on just what an award ticket will cost you on any given day when you go to spend your SkyMiles.

He may very well be right. Without an award chart to which one can refer, it will be increasingly difficult to judge exactly what is a good benchmark of the redemption of SkyMiles for award travel — especially as members of the SkyMiles frequent flier loyalty program are eventually weaned off of the mentality pertaining to fixed award charts after being conditioned to them for decades.

Moreover, a current sale from Delta Air Lines prices the redemption for select awards to be as low as 5,000 SkyMiles for travel one way. This sale is still active through Thursday, August 6, 2015.

With such a wide variation of the pricing of award travel with the redemption of SkyMiles — and no definitive reference to which to refer — what happens when there is a mistake fare on award travel?

Suppose you are searching for award travel between New York and Paris; and you found an award which costs only 15,000 SkyMiles each way for economy class travel. You book that award, thinking that it is a great deal and that there must be a sale.

What would you do if a representative from Delta Air Lines claims to you that it is an error and will not honor it?

Airlines long been engaged in dynamic pricing to the point where jokes regarding their absurdity have become classics — such as the one which is approximately 20 years old and pertains to what if airlines sold paint, as one of many examples…

…and airlines have not abated on keeping the consumer puzzled as to what airfare is valid and when. While there may be some obvious examples, how can consumers tell the difference between incorrect pricing and mistake fares — and differentiate those from airfares which were correctly published?

Now that the dynamic pricing model has officially been extended to pervade award travel as well — as Delta Air Lines no longer has award charts available to members of its SkyMiles frequent flier loyalty program — customers are left to “roll the dice” and take a chance as to how many SkyMiles need to be redeemed for a certain award; and again with myriad factors to determine the final price.

With dynamic pricing comes uncertainty by the consumer; and with that uncertainty comes the questioning of the validity of an airfare. Is it really fair for a consumer to be burdened with proving that an airfare is indeed a sale upon which they unknowingly stumbled; or that the airfare is an actual mistake? I do not think so, because if an airline cannot ensure that the quality of information it distributes is as accurate as possible, why should the consumer bear the inconvenience or responsibility of the mistake?

Although airlines have been given more breathing room by an official statement issued from the Department of Justice of the United States pertaining to reneging on mistake airfares, where is the threshold as to what constitutes a mistake fare? Equally important is this question: does any protection to the airline pertaining to mistake fares also apply to mistakes in the redemption of frequent flier loyalty program miles? If so, is this an example of airlines “having their cake and eating it, too”?

What are your thoughts?

13 thoughts on “Dynamic Pricing of Award Tickets: Can it Bite the Airlines as Well as Benefit Them?”

  1. Captain Kirk says:

    I certainly think the path Delta has taken is a lousy one. The notion that you have absolutely no idea what the miles in your account are “worth” is ridiculous. Sure I can understand policy changes and updating mileage needed for awards but a totally secretive program where you have no idea what your “currency” will ultimately get you is pretty unfair.

    One thought that came to mind is the fact that maybe airlines are hoping you never use your miles. Now, in the case of Delta their miles (from what I understand) don’t expire. Now if they did, or if one of the other major US airlines adopted the Delta model, and you always seemed to be short of the required amount to book the trip you want, they could ultimately expire before you use them because you just simply get frustrated and stop trying. So lets say you fly 2 times a year total. You aren’t an elite (obviously), and you don’t have the airline credit card. You have after a few years maybe 25k miles in your account. For whatever reason you decide to fly another airline a few times and you forget about those miles. Now its been 18 months and bam! They expired. Miles are a liability on the BS for an airline so if they can build a program that makes it difficult for consumers to really get what they want with their miles, there will always be at least some that will go unused. Maybe that is a silly thought but I honestly don’t think so. What do you think?

    1. Brian Cohen says:

      It is funny that you should mention the expiration of miles, Captain Kirk, as I have an article lined up pertaining to that based on an article previously written by me.

      Forget about forgetting about miles. I endured a major experience which lasted greater than a year where — during that time — some miles had expired; and representatives of the airline refused to listen to my tale of woe. It certainly soured my view of that airline, as there were enough miles for a domestic ticket.

      I have no idea if there are some people who have enormous mileage balances who forget about them; nor do I have any idea as to how many people have orphaned mileage balances in their accounts that would amount to miles being a significant liability for airlines; but I would surmise that with the push for revenue-based earnings of miles, the majority of members of frequent flier loyalty programs will earn fewer miles than when earning miles was based on distance…

      …and that would naturally lead for me to assume that the liability — if any — of miles will not be as great for airlines.

      I would also think that the value of the liability of miles on the books would pale in comparison to the billions of dollars in record quarterly profits the airlines are currently earning; so I cannot believe that it is as much of a priority as it may have been in the past.

      I, of course, could be wrong…

      1. Captain Kirk says:

        That makes sense! I am curious how the airline business would be different had frequent flier programs never been born. What if no airline had elites? Imagine that!

        1. Brian Cohen says:

          To an extent, that already exists amongst a number of airlines worldwide — especially those which are designated as ultra-low-cost carriers — which do not have frequent flier loyalty programs, Captain Kirk.

          Another answer to your question is that airlines already had customer recognition programs in place long before frequent flier loyalty programs existed. One example is the designation of Flying Colonel, which was once offered by Delta Air Lines as far back as 1953 — 28 years before American Airlines founded the first frequent flier loyalty program — and that was inherited from its merger with Chicago and Southern Air Lines:

          https://www.deltamuseum.org/exhibits/delta-history/timeline/decades/1950

          Of course, the Flying Colonel customer recognition program has been defunct for years.

  2. NYY says:

    I’m actually in exactly the situation you posit with Delta at the moment. I booked a US->Europe RT business class award ticket that priced out on delta.com at less than the 125K miles that used to be the floor back in the days of the award charts. My confirmation says business both ways, but the system ticketed me in coach in one direction. The position of the front-line phone rep supervisors is that whatever the cause for the error, if I want to travel in business both directions, they need to deduct the difference between what I was charged and 125K.

    1. Brian Cohen says:

      Interesting, NYY.

      Do you have proof of your confirmation? If so, you might be able to “hang up and call again” and perhaps have the error granted in your favor.

      It never hurts to try — and if you do, please report your experience here.

      Thank you, NYY.

      1. NYY says:

        I did have proof and I did try to HUCA a few times with no success. I submitted the confirmation through the Delta.com contact us page, which allows you to submit an attachment, and eventually received a call saying they researched the issue, were able to confirm the validity of my “proof” and would honor the quoted price. So ultimately a good outcome, but it took a fair bit of patience to get there.

        1. Brian Cohen says:

          Unfortunately, it takes more work for outcomes to be resolved in your favor, NYY; but as you have related, it can still happen — and I am glad to learn that the issue was resolved in your favor.

  3. Ryan says:

    Interesting perspective. It does seem pretty hard for an airline to argue mistake if there is no published standard against which to judge the award fare. I’m betting we will see this tested sooner or later.

    1. Brian Cohen says:

      It was apparently already tested by NYY to some degree, Ryan — but I would not bet against you on that one.

      This should be pretty interesting…

  4. Mike says:

    So if delta has a 4 mile award sale guess just boo as many tickets I can find

    1. Brian Cohen says:

      I purposely avoided using an obvious example such as that in the article, Mike.

      Of course, we can all debate endlessly as to exactly where the threshold of “obvious” lies.

      Ah…remnants of the United Airlines debacle…

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