Can Airlines Use the Internet to Offer Discriminatory Pricing?

New York Sen. Chuck Schumer has asked the Federal Trade Commission (FTC) to investigate whether the airline industry is data mining consumer personal information in order to charge them airfares based on things like income and purchasing behaviors.

Schumer (D-N.Y.), the Senate minority leader, believes that “dynamic pricing” software under development could be used to more closely track consumer web surfing habits, and link those travelers to other personal information about them in order to determine what kind of fares to display to them.

As the airline industry moves closer to testing and launching the New Distribution Capability (NDC) — a communications standard from the International Air Transport Association (IATA) that links consumer airfare purchasing behaviors more directly to the airlines’ computer systems — some observers fear that passenger privacy can be easily undermined.

This past weekend, Schumer called the airlines’ ability to mine more data “Big Brother meets Big Business,” and said “it is a frightening combo for already-price-badgered airline travelers.”

“The airlines have already monetized every single inch of the plane: smaller seats, less food, charges for carry-ons, and so the thought that they or others within the travel industry are looking to nickel-and-dime consumers based on their mobile phone or computer’s browser history is a sad state of affairs that just might violate consumer protections,” Schumer said. “Your ticket price to fly shouldn’t take off because of who you are.”

Schumer asked FTC chairman Ajit Pai to investigate how airlines are implementing dynamic pricing and whether it violates privacy rules.

ASTA supports the investigation
In a statement, the American Society of Travel Agents said “we support Sen. Schumer’s efforts and think it is entirely appropriate that both the Federal Trade Commission and the Department of Transportation keep a close eye on airline ‘dynamic pricing’ initiatives and the potential for widespread price discrimination.”

ASTA noted how, in 2014, consumer advocates like ASTA addressed this issue with the Department of Transportation (DOT), seeking to protect “anonymous shopping” – preventing airlines from requiring personal information from consumers before presenting airfare quotes – as the DOT considered rules and regulations for the NDC in the U.S.

“While the connection between the NDC standard and the types of personalized dynamic pricing being contemplated today is unclear, we remain steadfast in our support to protect the traveler’s ability to purchase airline tickets fairly and with confidence,” ASTA said.

Experts wonder if someone demonstrates a fixed need through other web searches, like viewing an obituary on a funeral parlor website, that the airlines might use that knowledge to charge higher fares because the consumer’s travel dates are limited.

DOT included consumer safeguards
When IATA initially submitted its NDC proposal, a number of commenting parties raised privacy concerns, and as a result, the parties filed a joint motion with IATA asking DOT to approve the proposal subject to conditions addressing consumer privacy and various other concerns that had been raised. 

DOT added several consumer safeguards attempting to ensure travelers would not be required to disclose personal information and specifying that airlines and ticket agents would be obligated to follow their published privacy policies on the sharing and storing of personal information.

In a 2014 statement, DOT said “consumers’ ability to shop anonymously must not be undermined by new data transmission standards for communications and marketing practices.  Although an airline may request that consumers provide certain information voluntarily, consumers cannot be required to provide such information in order to receive an airfare or ancillary product quote. In addition, all of the Department’s regulations regarding carrier and ticket agents’ displays of fares and ancillary products would continue to apply.”