OnDemand WTP Pricing Research

Air freight – today’s rate won’t be tomorrow’s | FreightWaves

Dynamic pricing is coming to an airline near you, but the only question is whether or not shippers will embrace the fluctuating levels that appear on their invoices. In the 1990s and 2000s when I was calling in bookings and typing air waybills, I had a three-ring binder filled with airline rate sheets whose validity ranged in duration from a month to a year. Of course, there was always the chance to call my friend on the desk and ask for a spot rate, which more often than not was offered.

Shippers are somewhat accustomed to stability in rates. It’s how they budget and how they calculate landed costs. Sure, there is an expectation that surcharges for fuel, tied to indices and the price of oil, will move as the commodity moves. But movement in the basic rate? This concept was virtually unheard of until Freightos announced that Air France-KLM-Martinair are piloting dynamic pricing with their platform.

Shippers’ willingness to expect a different rate with each shipment requires crossing the boundary between what is expected in the business (stability) and what is expected as a private consumer. Anyone who owns an automobile never expects to pay the same price for gasoline two days in a row. The same can be said for purchasing an airline ticket or booking a hotel room.

Increasingly, pricing decisions are based on complex algorithms that incorporate frequency of searches, booking windows (how far in advance), high demand times or events (spring break or South by Southwest), competitor pricing and previous purchase data to arrive at an offered rate.

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Air freight – today’s rate won’t be tomorrow’s — FreightWaves.