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According to Red Star Capital Bureau on August 22, during this year's summer travel peak season, many consumers found that the prices of the same flight on different mobile phones varied, or even increased by hundreds of yuan within a few minutes.

Several civil aviation experts told Red Star Capital that the price of air tickets fluctuates because the platform caches the data when obtaining the ticket information, which is time-delayed from the data released by the airlines in real time. In addition, airlines will also dynamically adjust prices based on market demand.

There are two main factors that affect air ticket prices:

“Data Caching” and Dynamic Price Adjustment by Airlines

On social media, many consumers posted that they found that the price of air tickets changed frequently. One consumer said that it was 370 yuan two minutes ago and rose to 750 yuan two minutes later. Another consumer said that "buying air tickets in advance is like a 'gamble'."

Who decides the air ticket price? Civil aviation expert Han Tao told Red Star Capital that the air ticket price is determined by the airline, which is the source of the ticket price. Qi Qi, an expert at the China Civil Aviation High-quality Development Research Center, also said that air tickets are products provided by airlines, and the prices are determined by airlines. The OTA (online travel) platform is just an online virtual trading market and a matchmaking platform.

Han Tao pointed out that when users search for air tickets, OTA platforms and agents obtain air ticket information from the global distribution system GDS (such as China's TravelSky) and cache the data to reduce costs. The prices seen by different users may be data cached at different times, which may lead to inconsistencies in prices when users query and pay.

Qi Qi said that the civil aviation information is placed in CAAC to ensure the information security of passengers. When OTA platforms and agents obtain information from CAAC, they mostly use the system to automatically query, and then store the data on the server to form the so-called data pool. When consumers query, they see the data in the data pool, which is somewhat different from the real-time data released by the airline. "The final purchase must be made through CAAC, and the information is obtained from the airline's database, so the price will be different when purchasing and querying." Qi Qi said.

In addition to data caching, price changes are also related to dynamic pricing adjustments by airlines.

Qi Qi mentioned that in the past two years, airlines have changed their sales strategies and adjusted prices more frequently in the hope of stimulating consumption. In addition, as data becomes more transparent, airlines will follow suit when they find that competitors have adjusted their prices. Qi Qi also mentioned that many young consumers have become accustomed to price fluctuations, and airline price adjustments have also increased consumers' attention. "Many young consumers tend to 'go on a whim', perhaps because the air tickets are cheap enough."

Han Tao said that airlines will adjust ticket prices in real time based on factors such as passenger load factor, market demand, and competition. During peak travel seasons, such as the summer vacation, price changes will be more frequent. OTA platforms will refresh ticket prices and inventory at a certain frequency, but due to the delay in refreshing, the prices users see at different time points may be different.

Han Tao also mentioned that airlines will set up sub-cabins with different discounts. When the cheap low-priced cabins are sold out, only the more expensive cabins are left, which will also cause users to see price increases when searching. Red Star Capital Bureau noted that taking Air China (601111.SH) as an example, its official website shows that the economy class alone includes 15 cabins, and the discounts for each cabin are different.

Peng Han, chief analyst at Travel Daily News China, told Red Star Capital that airfares are determined by airlines, not ticket purchasing platforms. However, the platforms may conduct their own marketing activities, provide subsidies, or sell agents' tickets on the platforms, so ticket prices will fluctuate.

Is the platform considered to have the phenomenon of "killing old customers"?

Expert: It is due to the complexity of marketing rules

Due to the frequent changes in air ticket prices, some netizens believe that the platform may have a "big data killing familiarity" phenomenon. At the same time, many netizens also posted tutorials on social platforms on how to achieve price reduction after being "killed by familiarity", such as buying tickets in the middle of the night, or saying to the phone "I don't want to buy tickets anymore, I'll buy them in a few days."

Screenshot from Xiaohongshu

Regarding whether the platform will "kill the familiar", Han Tao believes that since 2016, the policy has stipulated that the handling fee of ticket agents has been changed from a certain percentage of rebates to a fixed agency fee, so the platform has no motivation to increase ticket prices through "big data killing the familiar".

The Red Star Capital Bureau noted that in February 2016, the Civil Aviation Administration of China issued the "Notice on Issues Concerning Domestic Air Passenger Transport Sales Agency Handling Fees" (hereinafter referred to as the "Notice"), requiring sales agencies not to charge passengers any additional service fees other than the ticket price, and the payment standard for passenger handling fees was changed from payment based on a proportion of sales to payment based on a fixed amount per ticket.

Screenshot from the Civil Aviation Administration of China’s official website

According to Xinhua News Agency, the ticket agency sales industry has long implemented a commission model of "front rebate + back rebate". Under this model, the rebate income of an agent for a ticket is generally maintained at 4.5% to 5%. In other words, for a ticket worth 1,000 yuan, the agent can earn 45 to 50 yuan in agency fees. After the above-mentioned "Notice" was fully implemented on July 1 of that year, the commission income of OTA platforms and ticket agents was significantly reduced compared with before, and the average agency fee for a ticket was less than 10 yuan.

In addition, Peng Han believes that the platform has no motivation to "kill the familiar". If the consumer is a familiar customer of the platform, they will lose their loyalty to the platform if they are "killed". In addition, the competition among the major ticket purchasing platforms is fierce, and deliberately "killing the familiar" will lose some customers. "The cost of attracting new customers is actually very high, and the platform will not easily let customers lose to other platforms." Peng Han said.

Peng Han also said that the reason why ticket purchasing platforms are mistakenly considered to be "killing the familiar" is that their marketing rules are relatively complicated, involving multiple departments and links, such as the department responsible for members and the department responsible for air tickets within the platform. In addition, they are also affected by cross-flow, such as booking air tickets and train tickets at the same time, or booking air tickets and hotels at the same time. "These rules are very complicated, so people will feel that tickets are more expensive or cheaper when they book at the same time."

Qi Qi said that some rules of the OTA platform may result in differentiated ticket price displays. The platform's algorithm is largely intended to facilitate consumers, but it may backfire and cause the so-called "killing the familiar" at certain points.

"As far as I know, the OAT platform itself has no motivation to use 'killing old customers' to obtain high returns. The main source of income for the OTA platform may come from hotels, and air tickets are just a point of entry for attracting traffic." Qi Qi said.

In recent years, the laws, regulations and standard systems regarding big data price discrimination have been continuously improved. For example, Article 9, Paragraph 2 of the "Regulations for the Implementation of the Consumer Protection Law of the People's Republic of China" which was officially implemented on July 1 this year stipulates that operators shall not set different prices or charging standards for the same product or service under the same transaction conditions without the knowledge of consumers.