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Once their algorithm can predict prices to a certain level of accuracy, they can effectively offer investment hedging to the public for free, and use the publicity to drive commissions on referrals. Unlike other commodities whose value is subject to numerous economic forces, the pricing is set directly (by the airlines), and it is likely that simply by observing their pricing over time a sophisticated Google algorithm has "learned" the airline's less sophisticated ones.

> it is likely that simply by observing their pricing over time a sophisticated Google algorithm has "learned" the airline's less sophisticated ones

Simple systems acting in concert are devilishly complex. (Former algorithmic trader.)

Counterparties' systems fail. They misfire. They get confused by the weather and interns punching in parameters wrong. Internal dynamics, like someone stretching to hit a goal or getting lucky on a hedging contract, are material and unpredictable.

And that's the least of it. The limits on the sorts of adversarial behaviors that manifest when counterparties know you have an algorithm watching are profound. It incentivises betting against the watchman. Google may have the data. But the airlines control the book.

Does anyone know enough about airline pricing to deconstruct the risk here? Are providers like Google required to disclose the underlying airline price, so Google is absorbing your risk of regret on that? If not, and Google has discretion in what to quote, isn't this guarantee really just a promise not to offer you a better price later?

I work with airline pricing but I'm no expert on that (this vertical is ridiculously complex. Half for necessary reasons and half because of 70 years of technical baggage), and I'm also no legal expert. So take everything here with a million grains of salt.

But I do not believe so. From my experience airlines are extremely strict about their partners displaying correct pricing. I've been told displaying a price lower than what is available is illegal / a liability and work under that assumption but I'm not the person who knows the specifics. However displaying a price higher than the lowest available will also get us in big trouble with the airlines. Maybe my work is biased since I deal with promotional campaigns and ads, but the general reason for a complaint will be something like (just making up fake examples) the airline having a 24-hour sale, and because we our systems didn't pick up on that for 2 hours so that's 1/12 their marketing budget thrown away.

Furthermore, many airlines don't directly manage their own booking and pricing and instead have it managed by a third party. So aside from legality and conditions from the airline, you can also be bound to conditions by your reservation system. There are plenty of them, but if you want one to Google for your curiosity Sabre Corporation is the largest.

It seems to me that Google probably expects to lose some money, but they've decided it's worth it to buy some market share for their new product.

I am so lost as to what you are trying to say. What is your point?

Google does have a tremendous advantage if it controls the _flow_( sending traffic/customers to airlines) versus the airline's having control of the book.

> What is your point?

It's not a simple problem. It's unlikely Google has it remotely solved.

> Google does have a tremendous advantage if it controls the _flow_( sending traffic/customers to airlines) versus the airline's having control of the book

Google is one of many online travel agents for airlines. It doesn't control the flow.

"Controlling the book" means airlines know who has booked how many tickets and at what price. They control how many tickets are left. They control whether and when a flight flies. They control prices.

Reselling tickets is a distribution problem. Guaranteeing prices is a trading problem. Google has a pitch with the former. It holds few cards with the latter. The only stick it holds to dissuade aggressive behavior from airlines is cutting them off from its distribution.

There have been hedging services for the public. One of them was bought and killed by M$:


But can't the airlines then introduce random price spikes into their own algorithm just to abuse Google?

Wouldn't it have to be a price drop for google to be out any money? It's a low price guarantee, so price spikes would only make them look good. Airlines aren't going to randomly drop prices to spite google...

It would cost them almost nothing to drop the price of their remaining economy seats 33 minutes before departure on a few select flights where Google sold many tickets.

That would be such a rookie mistake. Airlines don't do that, because 1) it creates bad habits with passengers 2) that's when the ticket has the highest value for customer who need to travel NOW 3) if they have remaining economy seats, a price drop 33 minutes before departure has little effect in stimulating demand for most destinations.

How many people are in a position to make a purchase decision, buy a ticket, and make the flight when the price drops 33 minutes before departure (13 minutes before boarding ends)?

In June, I was literally in CVG airport (inside of security) when my Delta flight was delayed. I decided not to book a ticket on United that was leaving in ~35 minutes because I wasn't sure that I could get over to the other terminal before boarding closed. (It also wasn't 100% clear that the United flight was going to make the connection in DC because of weather that was also screwing up Delta.)

Probably people that miss their flight and are either already in the terminal or past security would like to book it? That’s the only use case I can think of

> But can't the airlines then introduce random price spikes into their own algorithm just to abuse Google? reply

If they only guarantee the price of the same airline (which make sense considering that different airline offer different quality of service), then that would just hurt Google once without benefiting the airline and in fact, it would hurt the airline in Google.

The terms are clear: When we predict the price won’t decrease for select itinerarie

If airlines have unpredictable random price spikes, then they won't be able to qualify for the price guarantee. Having that guarantee seems like a good value add and may bring more customer toward theses offers. I don't know if Google would place theses airline higher in the result, but it would make sense because that's something that someone may prefer.

They do already. I once got a $260 AI round trip from Newark, NJ, USA to Cologne, Germany. There were only a few seats per flight available at that price and I got it at 3am.

It was part of their usual shady promotions where they say "flights from $199" and there are really only a couple of seats available at that price, and they go fast.

That's not a random price spike, that's a sale. Customers love sales and hate random price spikes.

I see, okay, that was my engineering brain considering spikes to be either negative or positive ...

This will abuse the airline's other customers as well. Nobody likes prices that jump around wildly for no reason.

Any algo that does this will know what noise is.

Exactly, noise can be removed or heavily in many problems and in this case you would then just upset regular customers.

That's not quite what this is.

The 'best price guarantee' guarantees the customer will receive the lowest price for their ticket. Google will refund them if anyone gets a lower price.

The airline can release, for 30 seconds only, a much lower price. Then Google has to refund all their customers, and the airline might only sell a handful of tickets at the lower price.

Remember airline tickets aren't fungible. They have names attached, and can't be resold, so nobody can buy up thousands of tickets in a price dip and resell.

This seems like something you could easily cover in the terms of service. Remember that law doesn't really work like programming does.

30 seconds seem to be at least somewhat covered by their ToS.

"Prices are measured between the purchase date and the departure date of your eligible itinerary." [1]

The key things to interpret there are "between" and "departure date". For example, I would interpret that as price changes on the day of the flight don't count. (i.e between is exclusive and date means the date, not date and time).

[1] https://travel.google.com/intl/ALL_us/booking/flights/guaran...

Then google would buy all those tickets at the reduced value and resell them at the normal price.

Tickets are generally non-transferable and cheap ones are non-refundable. So unless google can predict the name of the future buyer it’ll be out of luck.

I think they have deals with carriers to bulk buy tickets without giving a name. Carrier gets cash upfront (most are desperate for cash). Google gets to play marketmaker.

The airlines really are shooting themselves in the foot though... Google will end up with the biggest slice of the pie...

Except it might be 30 seconds before the plane departs...

Is this the same airline that likes appearing in Google Flight because lots of customers book tickets through it?

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