"Do I hear $300? No? All right, going once, going twice … sold! One roundtrip ticket from LA to New York for $290, sold to the lucky bidder in the yellow tie!"
Sound farfetched? Then you haven't been paying attention.
Surely you heard about a certain governor who put the state's private jet up for sale -- on eBay. And more to the point, JetBlue announced last week that it was putting up a few hundred seats for auction -- where else? -- on eBay.
This got me to thinking -- maybe, just maybe, a new path to airline profits (and consumer nirvana) is to toss out the current "yield management" model for ticket sales -- and try the "auction" model.
Yield management? Even if you're not familiar with the term, you know the concept -- at least you should, if you've ever discovered that a fellow airline passenger shelled out less than half of what you paid for his ticket. Ouch. Yes, yield management: otherwise known as how to confuse customers and force them to shop four to six Web sites, several times a day, before they think they've found the lowest possible price.
Still confused? Don't worry, you're not alone. Here's a quick review: airline tickets have about 10 price points per seat on a plane and the price point you are quoted is based on dozens of variables, including how well seats on a particular route are selling now and how they sold in the past couple of years. What the airline tries to do is sell as many tickets as possible in the highest price points and then top off the rest of the plane by selling the cheapest price point.
What this means to you -- in theory -- is that every time you ask for a price quote, you might get a different price -- for no apparent rhyme or reason. Oh, and did I mention that all these price points can change along the way, as an airline experiments with sales and/or hikes? Confusing doesn't begin to cover it.
So are auctions the answer?
Well, if there were ever two entities that were made for each other, it would be auctions and the Internet.
Face it, both eBay and Google have been wildly successful in this Age of Internet by providing a new marketplace for both consumers and advertisers. Now, toss in the fact that airlines have been struggling to make ends meet since the late '80s; the survivors endured by trying to extract as much money as possible from business travelers and then, again, by topping off their planes with leisure travelers.
That mold developed some cracks, though, in the late '80s. By then, Southwest Airlines was consistently making a profit thanks to short haul routes for business travelers along with a much larger mix of leisure travelers who were taking advantage of the carrier's lower priced tickets (and corresponding lower operating costs).
And more recently, European rivals EasyJet and Ryanair have taken that model to a new level by virtually giving away tickets to those that book early, charging more for last minute purchases, and using the Internet to sell non-airline goods and services (insurance, hotel rooms and more).
Then in the '90s, during the great Internet bubble, there were several business plans in development for airline ticket auctions sites, most of which never saw the light of day.