Air fare model rewards flexibility

By RICHARD WOOD

Home-grown technology is helping Freedom Air offer seats from Hamilton to Australia for as little as $300 return, so long as customers are flexible on travel dates, and on how much notice they need to pack their bags.

Sigma-Zen chief executive David Post, the brains behind the computational models of the web-based Fare Choice, said his system catered to a previously unexploited market - those who are prepared to be flexible with their travel times.

Unlike a normal booking system, where travellers are asked what date to leave and come back, and then offered a price, Post's system has the price of the fare decreasing as the "window" of possible dates a person can fly increases.

The less notice a person needs, the lower the price.

Post said whatever they chose, the flexibility a customer offered was rewarded, but "that might be $20 or it might be $200" depending on whether the travel was at peak times of the year.

Post, who has worked for German carrier Lufthansa, founded Sigma-Zen, originally as My Price, in 2000 and is based in Ohope. He said five full-time staff had been involved in its development. Funding has come from individual shareholders and venture capitalists.

The company contracted Christchurch web developers Bootstrap to implement the mathematical models for delivery over the internet.

Freedom Air revenue manager Darren McLean said the airline expected "hundreds" of bookings through Fare Choice over the next six months. The airline had established basic guidelines to measure the success of the software, which it regards as being under trial.

Post hopes to sell the patented technology to other airlines. He said airlines worked on profit margins of about 5 per cent, and his system could produce a 1 per cent revenue improvement.

This would be a 20 per cent improvement in profit for them, and handy in today's airline industry climate, he said.

He said a raft of mechanisms had been built into the system to prevent "dilutionary" impact.

The system could also be used with the hotel booking systems - possibly synchronising a combined variable hotel and airline booking.

Ultimately, Post envisages a real-time web interface for his system as having two dials - one for each parameter.

For now, Freedom Air's Fare Choice uses a more traditional method of entering parameters and pushing a button.

It works alongside, and does not displace, Freedom Air's existing reservation system, provided by US firm Open Skies.

www.freedomair.com