Tuesday, April 4, 2017

British Airways Pricing Dynamics Deconstructed

Last month, I flew on British Airways to Brussels for a conference. It was a good flight as flights to Europe go and, as we're expecting to make several trips to Europe this year, it had me expecting that we would be flying British Airways frequently this year.

Here are a few of the reasons why I liked the flight:
  • It departed and returned to San Jose. It's hard to underestimate how awesome this is. Besides the smaller airport, saving on the hour drive on each end of the trip... priceless.
  • The flight was on a new 787. The 787 really is much nicer to fly on.
  • British Airways offered "Premium Economy" tickets for a lower price than "Economy". (Their "Premium Economy" class is essentially what Business Class was 15 years ago). 
Anyway, no complaints. Until we got ready to book another flight. Essentially, my wife has a business trip, I'm going to travel with her, and so we need to coordinate our flight while purchasing from two different systems -- her corporate purchasing and me directly. While it should be reasonably easy, you have to remember two important factors when considering a corporate travel portal.
  1. It's going to price compare and force you to take either the lowest price -- or something within say $100 of the lowest price it sees. Otherwise, it's out of policy.
  2. You may face other limitations and limited choices, so you may not be able to easily mix and match as you might do with a third party tool.
Naturally, the first place that I went to check pricing was the British Airways site. We were playing around with dates, because we still hadn't determined how long we'd stay or the parameters of what we'd do. For a simple search, I tried flying out on Sunday May 14 (for her to arrive in time for her meetings on Tuesday), and flying back on Saturday, May 20. This is what the results looked like:

$366 for Premium Economy?!? Sweet! This is looking promising. So then, I went to look at the return flight.

$2182 for Premium Economy on the return? That seems a bit steep, but it is cheaper than economy. At the same time, you can see in the date tab above that, returning on Sunday looks like it's only $746. So I decided to try changing the return date to Sunday. FYI, you'll notice the check box about changing outbound dates. I'm not exactly sure what functionality that's supposed to provide, but it had no effect on the pricing changes that happened.

When I selected the return date on Sunday, not only did the return date change, but the Outbound pricing changed. Here's the new outbound pricing.

What happened to my $366 Premium Economy seat outbound? Now my options are $366 for regular economy or $648 for Premium Economy? WTF? When I first saw this, I was enraged. Just so you know, here's the return on Sunday.

Now, the return in Economy is $765 and Premium Economy is $963. So, while the total cost of the fare on a Premium Economy seat is lower than it was, it's been undercut by the regular economy seat price. Of course, if you're purchasing through a business portal, you're probably not going to be about to get that lower priced Premium Economy seat because your pricing system will have been undercut by the economy seat.

Just to explore some more dates and pricing dynamics, I decided to try changing the outbound date to Saturday, May 13 (using the interface and keeping the return date on Sunday, the 21st).  Here's the outbound result of that.

And here's the return.

Note the outbound $391 and $698 the return $765 and $963 for economy and premium economy respectively. Now, for the final piece of the experiment with the British Airways interface, I changed the return date back to May 20 (while leaving the outbound date as the 14th). Here's that screen, first with the outbound.

And then with the return.

With these dates, the return on May the 20th is priced at $765 and $963. In other words, while the day you're traveling affect British Airways pricing partially, a more significant factor is how many days you're staying there. It's sort of like the old "Saturday Stay" rate, where if you stayed through Saturday, your fare would be lower. Except, in this case, if you stay long enough for British Airways to consider it not business, your fare may be lower, but you need to fly economy.

So what's the strategy behind this? Why do they price their economy seats artificially high if you choose a short set of dates? Why do they lead with a super-low price on the outbound Premium Economy seat on that business length stay fare? Since I don't work for British Airways marketing or pricing groups, I can't say. However, from our black box testing, I think we can put forth a few theories.
  1. Overall, they are anxious to win some business traveler flyers. By offering somewhat competitive rates for a Premium Economy seat versus say, an Economy seat on another international carrier, they hope to win some of those premium seats. As you can see, when you pick fly on their short schedule, you'll end up paying $937 more than what they value the seat for on either end of the extended date range. 
  2. Why lead with the $366? I think this works as a loss leader to entice you into the rest of their pricing web. If I had to guess, I'd expect that it's sort of like a prime to trick your brain into thinking, "this is not that expensive... and I get Premium Economy."

Based on running our numbers though, I don't think we're going to book on British Airways. Despite my overall positive experience on my previous flight, we can't escape the feeling of "Shenanigans". Besides, as noted, there's no way my wife could select Premium Economy in the her corporate business travel portal when the economy prices are lower. Instead, we're now looking for an airline with a more predictable pricing practice.

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