US airlines take their passengers for a ride

AN American sitting next to you on a flight over the States is more likely to engage you in conversation than a European. That's the way Americans tend to be. Amiable and open.

Your chatty new friend may confide all sorts of intimacies about his boss, children, mother and wife. But if you want to shut him up - or at least make him feel uncomfortable - ask him how much he paid for his flight.

Americans hate missing out on a deal. For your friend to reveal the price of his ticket will confront him with the mortifying possibility that you might have a better bargain. He could be in the middle seat, you on the aisle, yet he may have coughed up four times - perhaps $1,000 (pounds 610) - more.

The US Public Interest Research Group (PIRG), a non-aligned body based in Washington, recently released the results of a survey confirming the impression most regular flyers in America have that in the air fares market, anarchy rules.

The major US airlines are doing very nicely, having enjoyed four consecutive years of strong profits, according to a report last week by the Federal Aviation Administration (FAA). Last year US airlines filled more than 70 per cent of their seats, the highest level in half a century. In 1998 they expect to carry 616 million passengers, up 3.5 per cent from 1997.

The PIRG study concludes, however, that passengers are not receiving a fair deal, and that airlines are making big money out of "deceptive" pricing practices.

"A wide variety of different airfares were obtained from different travel agents and airlines even though the lowest price was always requested," the study said. "When requesting a full fare ticket for a flight six days in advance, we received 580 different price quotes from calls to 910 travel agents and airlines. Similarly, we received 504 different price quotes from 891 calls requesting a three-week advance purchase fare."

In so far as a pattern was discernible, it was this: travel agents consistently offered lower fares than the airlines themselves. The opposite should be true, the PIRG said, because "when travellers purchase tickets directly from airlines the commission paid by the airline to the travel agent is eliminated".

Among a host of examples, the study found one travel agent who priced a flight from Washington to Salt Lake City at $315, while two airlines quoted $1,649 and $1,642 dollars for the same trip on the same dates with the same advance notice.

A similar logic, or lack of it, is to be found in the pricing of transatlantic flights. Through the Internet it is now possible for an individual to track the fluctuations of air fares on-line. Tap, for example, into the agile and comprehensive travel reservations system at http://www.travelocity.com.

An inquiry at 2.20 pm on Wednesday for low fares on the New York JFK to Heathrow route, departing on the evening of 24 March and returning at around noon on 29 March, yielded a price of $717.80 from a major airline. Forty minutes later the same airline was asking $1,398.76 dollars for the very same flights. At 11.30 the next morning, Thursday, the fare had gone down to $678.00. Half an hour later it had dropped to $551.80.

The clear conclusion is that the general rule about buying early to buy cheap does not always hold good. What is going on?

Computers have taken over, that is what is going on. To maximise their returns the major airlines use powerful computers programmed to factor in the finer points of econometrics and the laws of mathematical probability. No individual human, no collection of humans, could possibly react as quickly and efficiently as a computer (United Airlines uses a cousin of IBM's chess-playing Deep Blue) to the enormous volume of information a major airline must process in order to squeeze maximum revenue out of one million or so yearly flights and 180 million or so available seats.

The airlines continually adjust fares in response to constantly shifting levels of supply and demand. Prices are adjusted up or down depending on how quickly seats are selling and how empty or full, according to the computer's calculations, a particular flight is likely to be. Air fares change thousands of times a day, and the results are relayed instantly to the computer systems used by sales agents or individual Internet users. A difference of five minutes in the booking time can change everything.

As the PIRG study discovered, it's "a bazaar" out there; the free market run riot. "There's no rhyme or reason," said James Ashurst, a spokesman for the American Society of Travel Agents. Unsurprisingly, Mr Ashurst recommends finding a good and trustworthy travel agent, one who can be relied on continually to monitor the computer screens and strike when fares are at their lowest. "We would like to see changes made," he said. "There is talk that the government will look into the pricing practices of the major carriers. Meanwhile, the one thing you can say with confidence is 'buyer beware'."