Airfares rise and fall in ways that are impossible to forecast. But by selling options to "lock in" cheap fares," new website Bitbend aims to let consumers crack the fare guessing game. [UPDATE: Since publication, the startup was renamed Options Away.]
The Chicago startup launches November 1, selling price and availability guarantees for domestic flights out of Chicago and expanding as warranted.
This week it plans to starts user testing by inviting users to check out its beta version.
The target customer is the type of traveler who has slapped her forehead after seeing ticket prices spike from $500 one day to $700 the next for the very same itinerary.
Now, when such a traveler sees a fare they're interested in, they can lock down the cheap price for "the price of a cup of a latte." While the final fee hasn't been revealed, $5 is a likely starting rate.
At launch, the site will cover Chicago to one of 15 destinations including Orlando, Miami, Fort Lauderdale, Denver, Las Vegas, San Francisco, Los Angeles, San Diego, New York, Washington D.C., Portland, Seattle, Austin, and Phoenix.
At first, it will offer domestic flights from Chicago on Alaskan, American, Delta, Jetblue, United, US Airways, and Virgin America.
Creating an options market for airfares
BitBend plans to market its price-and-availability guarantees for plane tickets for specific flights (date/time) by calling them "Bends."
If a consumer decides he does not want to take the flight then the option to buy will expire and the consumer loses the fee paid.
If a consumer decides to take the flight then he will receive a confirmed Passenger Record from BitBend as the agency of record.
A fresh twist on fare guarantees
In 2008, a startup called Farecast sold FareGuard options to consumers for $10 each. Consumers could lock in the option to buy a fare at a specified price for one week. If they saw a better deal elsewhere, they could buy the better deal. If fares rose, they could take advantage of the cheap fare.
The offering disappeared around the time that Bing purchased the company.
In 2009, Air France implemented an option to lock-in fares. Today, Air France and KLM let customers hold an online reservation for up to 14 days before payment for varied fees of 10 euro for European flights and 15 euro for intercontinental ones.
In 2010 Continental became the first US airline to offer FareLock, the option to do the same thing as FareGuard. Now, after the merger with United, United offers the same service. The fee is variable. A right-to-book option for 72 hours started at $5, while the week-long version cost $9.
In either case, there is no commitment to buy. Yet customers may choose to have their reservations automatically purchased at the end of the FareLock hold period. The option may most benefit customers buying high-end tickets or business travelers who need flexibility in scheduling.
Earlier this year, Estonian Air debuted a similar service.
Unlike the other services, BitBend's offers price guarantees for the broadest range of dates: 3 days, one week, two weeks, or three weeks.
The Bitbend difference
The company says it will offer the option to buy, called Bends, while running completely autonomous of airline partners. Says spokesperson Jill Salzman:
Since we act as an agency and connect via a GDS, there is no need for airlines to offer us special features like ticket changes etc.
That said, we are currently engaged in discussions with several airlines (I cannot disclose names publicly) and anticipate offering a combination of Bends from our airline partners and directly from BitBend.
With the enormous push for ancillary revenues from the airline industry ($22.6B in 2011) we are a natural fit for our airline partners.
The site is created by financial market veterans Heidi and Rob Brown. CEO Rob Brown will at PhoCusWright Conference November 13-15th. Other members of their team include a former airline employee, a developer, and a designer.
They point out that they're site is not offering any secondary market. Once ticketed, the ticket is not transferable just like any regular ticket.
[UPDATE: Since publication, the startup was renamed Options Away.]