Amenities of over-segmentation.

Sometimes “push comes to shove” but still “better becomes best":-) I’ve met this paradox planning my last round-trip. Actually it’s not a round-trip but an all-around-trip but let me tell the story in order.

I had a need to get to our Israeli offices when was asked to fly to a customer in Sydney (Australia). Looking at a globe from Atlanta one may assume that the destination points are diametrically opposite. That’s true, unless you decide to join them into one trip! So I called my Australia partner asking how we would pay for one trip consisting of two targets. We agreed that the Australia office would pay just the same sum as if they’d have paid had I flown only to Sydney and back to Atlanta. The rest of the trip (to Tel-Aviv and back to Atlanta) is on our shoulders. Now it becomes interesting - pay attention to the numbers!

A round-trip Atlanta/San-Francisco-Sydney-San-Francisco-Atlanta (all together around 19,5K miles) on United and its partners’ lines costs $7500 USD in business. That’s the sum the Australians were ready to pay.

I had to spend two days in our branch in Palo Alto before flying to Sydney. I thought to take a Delta flight from Atlanta to San-Francisco because there is only one direct United flight and I had to wake up at 4.30AM to catch it. So I asked for a modified long trip starting from San-Francisco. Here was the route: San-Francisco/Sydney/Singapore/Frankfurt/Tel-Aviv and then 5 days later back: Tel-Aviv/Frankfurt/Atlanta. All together 29K miles and $11500 USD. Big difference in miles and even bigger difference in price. Then I called again the travel agency and asked to replace the Delta flight Atlanta/San-Francisco to a United’s one. Guess how much it cost! I wouldn’t believe it if somebody told me. Only $6500 USD! Now we see that Atlanta/Sydney/Atlanta route is a thousand bucks more expencive than Atlanta/Sydney/Singapore/Frankfurt/TelAviv/Atlanta though 10K miles shorter. The most absurd situation is to compare the same huge all-over-the-globe trip starting from Atlanta with almost the same trip but starting from San-Francisco. It costs $5.000 USD more though it is 2K miles shorter.

Now what is the explanation? How is it possible and what are the reasons?

The airlines companies to calculate trip prices use the methodology called Yield or Revenue Management. It takes many hundreds of parameters and various statistical data to calculate the price. The algorithms it uses serve to load the planes more efficiently and sale the tickets on the highest possible prices. But then such challenging issues as overbooking and underselling appear. The algorithms try to figure out the type or the sector of a flyer: whether she’s a tourist that may cancel or change the flight if the price is 100$ more or a businessman who will pay other 500$ because she must fly this time. Depending on the class and the type of the ticket (full-fare, discounted or restricted) the final price may vary dramatically. Demand pattern and cargo load affect the final result too. The algorithms use their statistical data very intensively to make decisions. They have to use empirical approaches to produce any feasible results. The number of all parameters influencing final decision is estimated as 250 millions making it impractical (if not impossible) using all of them in every ticket request. The problem is very challenging, indeed, and I point interested readers to read more about it in this introductory and very informative article: http://www.luc.edu/faculty/eventa/archive/su483we/yield.htm. 

All in all, in my case the algorithm apparently decided that I’m a tourist and somehow the over-segmentation of my trip led to the significant decrease of the price. I guess the algorithm’s authors would be surprised by my case were it shown to them and I think it’s a bug in the algorithm. But as any empirical algorithm this one may run bad on certain cases. Anyway, that fact that the entire trip is cheaper is very pleasant for my Australian partner and my boss:-)  So when you plan a long trip don’t be afraid to improvise and add some crazy, at first sight, routes to your trip. Your total price may be cheaper.

At the end a cool link to a site helping to get cheap tickets: http://really-cheap-airline-tickets.blogspot.com/