Fetcherr Secures $90 Million in Funding to Implement Dynamic Pricing for Airlines

The airline industry is set to reach record revenue this year, with a projected $996 billion in sales. However, margins remain razor-thin, with total expenses projected to reach $936 billion and earnings of around $6.14 per passenger (about the price of a latte in NYC). In an effort to boost profits, more airlines are turning to dynamic pricing technology.

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What is Dynamic Pricing?

Dynamic pricing is a pricing strategy that adjusts prices based on demand and supply in real-time. It’s also known as yield management or revenue management. This technology uses artificial intelligence (AI) and machine learning algorithms to analyze data from various sources, including customer behavior, flight schedules, availability, and market conditions.

The Rise of Dynamic Pricing

Despite the less-than-stellar reception from consumers, 258 carriers have deployed some form of dynamic pricing today, up from 220 in 2022. One of the vendors providing infrastructure for dynamic pricing systems is Fetcherr, which launched in 2019.

Fetcherr: The AI-Powered Dynamic Pricing Platform

Fetcherr’s CEO, Roy Cohen, told TechCrunch that the airline industry faces significant challenges in adopting continuous pricing due to traditional, outdated infrastructure and rule-based systems. Fetcherr employs AI to generate optimal market moves, dynamically optimizing pricing and automating real-time publishing of prices.

How Does Fetcherr Work?

Fetcherr calculates prices using AI models tailored to a company’s customer demographics. The models are trained on several years of bookings, flight schedules, availability, and fares data, as well as variables like weather and microeconomic/macroeconomic market conditions.

"Our models are based on public data and our customer private data, all stored on a private cloud for each of our customers," Cohen said.

The Controversy Surrounding Dynamic Pricing

While carriers see dynamic pricing as a revenue-boosting potential (e.g., JetBlue’s recently introduced dynamic baggage fees), one wonders if the tech has staying power, given consumers’ aversion to it. Dynamic pricing can lead to:

Implicit Collusion: As airlines relying on dynamic pricing tend to instantly match their rivals’ price cuts, this can lead to a vicious cycle of price competition.
Unfair Pricing Practices: Some critics argue that dynamic pricing can result in unfair pricing practices, where prices are manipulated to maximize profits without regard for consumer welfare.

The Future of Dynamic Pricing

Despite the controversy surrounding dynamic pricing, its adoption is likely to continue. Airlines will need to balance their desire for revenue maximization with consumer concerns about fairness and transparency.

" We don’t have a burn rate; we have a run rate — the company is growing each year," Cohen said in an interview.

Conclusion

The airline industry’s shift towards dynamic pricing is a complex issue, driven by the need to maximize revenue while balancing consumer concerns. As the industry continues to evolve, it will be interesting to see how airlines navigate these competing interests and whether dynamic pricing ultimately proves to be a game-changer for the industry.