Yesterday I wrote about the chaos at Amsterdam Schiphol International Airport leading KLM to suspend ticket sales this weekend for all AMS departures. Turns out KLM has adopted a “surge pricing” model instead. Flights are not full, but if you want to get on one it is going to cost you.
KLM “Surge Pricing” Marks A Unique Experiment
Surge pricing is the practice of charging more for a product or service during periods when it is in high demand. This often is computed by an algorithm measuring supply versus demand, but it can go beyond that to factor in others issues (here, issues unrelated to flights themselves). In the case of KLM, that includes the meltdown at Schiphol Airport caused by a shortage of security screeners.
How is this different than the dynamic pricing models airlines already use? Isn’t it logical that the lower fare buckets are just sold out? For KLM, we see a slightly different case. Rather than use traditional algorithms to price seats according to supply, KLM has zeroed out all lower fare buckets. As a spokesperson explained, KLM does not want you to fly this weekend from AMS, but if you really need to, it will sell you a pricey ticket. This applies across all routes, regardless of flight load.
And you want to know the interesting thing? Check out fares on Lufthansa. Or British Airways. Or Alitalia. Or SWISS. They have matched! Fares are sky-high right now.
This creates a fascinating experiment this weekend. Airfare is already up, but will people pay exorbitant surge pricing if they want to get on a plane this weekend?
Imagine the implications of KLM (and its competitors) finding out it can double fares…and people will still buy tickets. With a strike threatened, we may see disarray at AMS for weeks to come. Should that be the case, this will give KLM a unique opportunity to test what could be a revolutionary new pricing model–how elastic is consumer demand during this unique period of travel?
CONCLUSION
KLM’s move to zero out all cheaper fare buckets in an attempt to lessen congestion at AMS is an interesting experiment. Will a “surge pricing” model actually work, or will fares be sufficiently high to turn would-be travelers away? We will soon find out!
Are you buying a pricey ticket from AMS this weekend? What is your limit?
> Read More: Chaos At Amsterdam Schiphol Airport, With KLM Suspending Ticket Sales
image: Cjh1452000 / Wikimedia Commons
European trains are convenient and fast, so I imagine that many passengers will shift to airports in other cities.
Actually, trains from Amsterdam to the nearest airports aren’t exactly fast or convenient. And taking the train to Paris is usually more expensive than flying…
At AMS, the train station is IN the airport. Into town is perhaps 20 minutes?
So what? It’s not like intra-Europe pax want to go to CDG or MUC, they want to go to Paris or Munich.
I thought it was Sunday for a second.
This could be a dangerous test for consumers. KLM and others might just find that lo and behold enough people will actually pay $900 to fly from Paris to Amsterdam and, even though the planes are less full, they are making more overall. Call it the Hawaii Effect. Properties there quickly realized that they could charge $2K a night and people would actually pay.
Yeah it can be explained by the basic concept of demand and supply. Welcome to Capitalism!
The Yotel is charging 500 euros a night at the airport now too.
This isn’t on purpose. Airlines need to leave some availability open to allow rebookings. So they leave J and Y open- puts off 99% of people buying a new ticket whilst allowing people to take advantage of the free rebooking policies or to get rebooked if their flights are disrupted. Their systems aren’t sophisticated enough to allow rebooking whilst closing to new sales
Please nobody buy these tickets unless it is absolutely necessary. I hope with all my heart that this model isn’t going to work. Take the train to a different airport instead, please, if it is at all possible. This experiment succeeding would be a true travesty for those who really need to fly last minute and needing to pay fares in the 4 digits or worse because of demand. If a loved one dies, do you want to be that person who needs to pay exorbitant prices, or worse, who can’t afford to go home to the funeral because of the surge model? The only way to make sure this fails is if we as customers and consumers make it fail. Anyone reading this, please spread the word, no flying from AMS right now, just don’t, don’t pay the prices, don’t encourage the airlines, make sure this experiment fails. All of us together, united as one, let’s make the surge model backfire.
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ALL mere men and women Liars!
FAITH IN OUR FATHER JESUS IS PERFECTED AS WE ALL TRUST ONLY OUR FATHER JESUS ALL WE CAN!!!!!!!!!!!!!!!!!
Brother J, just to clarify, Jesus is the Son and Lord, whereas God is the Father. Some readers might be confused by your terminology. Now, back to KLM . . .
Might this be the start of a transition to dynamic award pricing?
I didn’t buy a pricey ticket from AMS this weekend, in fact, I canceled it. The reason why… on 4/22 I flew JFK > AMS and my final destination was ZRH… while waiting to board my AMS > ZRH KLM leg, the baggage handlers decided to go on strike. It was a mess all around. Everything was rebooked. No way out, so I wound up taking the train from AMS > ZRH, it only took 10 1/2 hours and 5 trains but I made it! at 2:45am on 4/23… Given KLM and AMS are continuing to have these issues, I reluctantly decided to cancel my Delta One JFK > AMS > GDN flight because I don’t have confidence these issues will be resolved in my time for my flight in June. For m, the only way to avoid AMS is to go through Germany, so I booked LH business… I did read your review and comments on LH business and as average as it sounds (especially compared to Delta One), it sure beats getting stuck in AMS due to continuous KLM flight cancelations and dealing with all the stress, frustration and hours of train travel all over again.
It is NOT a unique experiment or something. This has too much of a positive vibe . People are not guinea pigs.
So literally they find a name ‘surge pricing’ to justify what? Even higher prices? Already prices are mucher higher since last year. Everybody traveling has noticed that.
In such an oligopolistic market like this if all main players do it, there is no ‘experiment’ . It is just the average joe paying again, by brute force.
What comes after Klm? Fighting bare fist for a ticket?
The thing is that corporations can go away with such ridiculous and unethical decisions cause still (quite some) people can absorb the after effects and wont complain.