irishguy28

In a recent interview in Zakenreis, Harm Kreulen says that KLM is only 2 or 3 quarters away from dropping the current fare structure, and moving to fluid pricing or continuous pricing, in which every seat on every flight can have a continuously variable flight, and not just the the gradation of prices available in the current RBD/Fare Basis Code system.

Remarkably, he states the following: "des te meer prijspunten, des te minder kans dat de consument ‘afhaakt’ – kortom, het verhoogt de kans dat een passagier voor KLM kiest." - The more pricepoints there are, the less the chance that a customer breaks off - in short, it increases the chance that a customer chooses KLM.

They will need to have more sales through their own NDC channel rather than via the traditional GDS in order to make the switch, but it seems a number of travel agents that were not subject to the €11 GDS fee til now will lose that exemption from next April.

speed.skater

"Dynamic prices" is a terrible buzz word.

The people who introduced the term (probably American bloggers with poor math skills) do not understand that the opposite of dynamic is static and the opposite of discrete is continuous.

The proposed changes have little to nothing to do with dynamics. KL's current fare system is dynamic, and a new one will be dynamic as well.

Instead, the proposed change is about moving closer to continuous pricing. It's about moving away from big, discrete jumps in the fare price as you move from fare bucket to fare bucket (which is what you have in the current structur).

Escape

I'd like to understand this better, does anyone have a good article that explains it in more detail with an example?

irishguy28

There is no article.

But think of it as analogous to what has happened in supermarkets.

In the old days, in order to communicate the price of each item, they had to apply an adhesive pricetag to each item, or at least affix a paper price label to the shelf. It required a good deal of effort in order to update the prices displayed to the customer (and it's always frustrating when the customer is charged a different price at the till than what they were advised at the shelf). But nowadays, there are electronic shelf labels that can be updated remotely and the price can be adjusted (upwards or downards) in moments and as often as the store wishes.

That's what KLM wants to do. Instead of tying itself to a structure where the GDS is loaded with a relatively (in comparison) limited number of G-class fares, an X-class fares, a V-class fares, etc etc, - meaning that there are only 20-30 (for example) different price levels on offer at any one time to any one customer - they will not be limited in any way, and can offer as many different price points for each seat as their greedy little hearts desire.

warakorn

How will rebookings be managed without traditional booking fare classes?

irishguy28

Same way as presently - change fee, plus fare difference, I expect?

Erwin10

This would, most likely, be a negative thing for schedule changes by the airline itself. Last two times I missed a connection at CDG, they rebooked me on another flight, but in Y class, which earned me much more miles in comparison for what I paid for the ticket.

tbaiyun

Didn't they accrual the miles based on how much you paid the ticket?

Or you have credited the miles to partner program?

irishguy28

Flying Blue has already moved away from RBD-based earning for flights on KL and AF.

In the new Flying Blue, your earning is dictated by the amount you paid for your ticket. If you are rebooked onto another AF/KL ticket, that makes no difference to your earning. For all AF and KL flights, it doesn't matter if you are in full-fare Y or in bargain-basement X - the earning is based solely on the price you paid, not on the revenue bucket you end up travelling in.

(I suspect you collect miles in a program other than Flying Blue. However, if you are an FB collector, and you can show that having been rebooked into Y somehow gave you additional miles for the notional "price" paid by AF when rebooking you, I'd really love to see it!)

(If they totally abandon fare basis codes, though, it will mean all Skyteam and other partner airlines that allow earning on KL flights will have to adapt their "earning table" quite drastically!!!)

Erwin10

This was accredited to FB. What basically happened is that my CDG - WAW part of the journey, which was rebooked, earned twice the amount of miles than my AMS-CDG, CDG-AMS, and WAW-CDG, which combined led to way more miles than what I paid for. It could be luck, but it earned me 250 more miles than what I roughly should have earned, based on €4/mile, excluding the taxes and surcharges.

johan rebel

Already exists. Commonly called turbulence.

Johan

speed.skater

I don't have an article but a quick illustration (which represents a simplification).

Currently, on AMS-JFK, you might have a base fare NLX3LRNL which costs EUR 107.50. The next higher booking class (given a particular itinerary) may be TLXLRNL which costs EUR 152.50.

Suppose KL offers 20 tickets in that N bucket. Once 20 pax have booked that NLX3LRNL fare, the inventory is gone. But (typically), when that happens there will still be inventory in the higher T bucket. So the 21st pax will have to pay a base fare of EUR 152.50. That is a price jump of EUR 45!

Instead, suppose the price increases more gradually.

Pax 1 pays 107.50, pax 2 pays 109.75, pax 3 pays 112.0, pax 4 pays 114.25, ..., pax 19 pays 148, pax 20 pays 150.25, and pax 21 pays 152.50.

Once again, this is just a illustration. It simplifies along multiple dimensions. Also, IDK how KL will interpolate (e.g., the price points KL chooses need not be equidistant).

speed.skater

By the way, there is another sense in which "dynamic" is sometimes used which is somewhat less of a misnoer. So traditional yield management is based on relatively few variables: Available seats, seasonal factors, public holidays, school vacation schedules and such. Airlines might work in major events like a soccer world cup or an olympics. But, the single most important factor is the seat inventory (which basically changes merely twice a year with the summer and winter schedules).

WIth all the new tools in the field of data analytics, other factors may play a larger role. KL expects a strike by BA? In the future, they might raises prices by more than what would result from the traditional, fare-bucket based yield management. Political crises, predictions of extreme weather events, a major festival or rock concert -> all that may drive the short-term pricing structure a few years into the future.

German aviation portal "airliners.de" has an interesting interview with somebody from Amedeus who says the tests they ran with SAS and Air Baltic of a more "dynamic" (i.e., more reactive) yield management have been a success.

I understood the article linked by irishguy28 to be mostly about KL introducing more continuous pricing. But more "dynamic"/reactive pricing might be the next big thing after continuous pricing.

beachmouse

Delta has had the ability to split fare class flown apart from fare class purchased for a while now (and applies fare class bonuses to ‘as purchased’) so don’t expect that FB loophole to remain indefinitely either

Lomapaseo

Basically the flight and times you want will now increase in price from before and the flights that your neighbor brags about will have decreased in price