New website Farely lets users calculate the cost to an airline of flying a passenger between two airports.
Type in your departure and arrival airports, and the site will estimate what it calls the FairFare -- the average amount per ticket that airlines need to charge to cover their costs (plus a "reasonable" profit of about 3%) between any two major international airports nonstop.
It's the first site to make this cost available online in an easy-to-digest, free format.
New kid on the block
Farely isn't the typical Silicon Valley startup launch.
It's a project by two industry experts, looking to shake up the data that's currently used to negotiate air contracts and buy air online. Depending on feedback for how customers want to use the data, they will invest in refining data tools or consumer search enhancements to make it even more actionable and invest in growing the business accordingly.
Farely is a joint-project by Scott Gillespie, who has worked as a strategic sourcing consultant specializing in travel for more than 15 years, and Evan Konwiser, who founded FlightCaster (acquired by NextJump), and who worked for about six years as a consultant with Bain & Company, and who is a Tnooz node.
Farely has a deal with a business intelligence company to have its product included on that company's platform, and it is seeking other partnerships.
Previously unpublicized information
Farely is reporting the fully loaded, or break-even, cost to the airline of any given market between two airports.
It isn't using the revenue data that travel management consultants (TMCs) have traditionally relied on.
It's also different from the fare forecasts issued by Bing and Kayak, which are based on revenue data and historical patterns. Farely focuses on pure fixed costs, regardless of time of day or day of the week or yield management on any given flight code.
Since 2008, FareCompare has had an unpublicised flight cost estimator. This fare per mile estimator represents the cost to the consumer, not cost to the airline -- and only goes by the airlines' published fares.
Posted online as unstructured data, experts have periodically cited the cost per available seat mile (CASM) data provided by the major airlines, multiplying the system-wide average figures by the number of miles on any particular route to make a rough estimate of any given flight's typical cost.
CASM is "calculated by taking all of an airline’s operating expenses and dividing it by the total number of available seat miles produced", according to MIT. For instance, it may cost US Airways 11 cents a mile to transport a passenger from Philadelphia to Las Vegas, while it might only cost Southwest 8 cents mile to make the same trip (to use hypothetical numbers).
Farely says it adds precision to the CASM + miles flown estimates by accounting for a variety of additional factors, such as equipment type and airport characteristics, plus soon-to-be-added proprietary airline data. It aims to present this information in a simple and intuitive user experience.
Seeking customers
Aiming to be an unbised metric for benchmarking fares, this US-based startup has two target customers globally.
On the corporate side (B2B), travel buyers can use Farely to assess for themselves if an airline is making a wild profit on any given route, helping to strengthen their hands when haggling over price.
On the consumer side, travelers can use Farely to benchmark what a reasonable plane ticket price might be.
Says Konwiser in a phone interview:
We would like to be the first place to go online when you want to take a trip.
After producing a price quote, Farely offers a link to Kayak so that a shopper can compare the benchmark price with actual pricing through a metasearch tool.
I've often referred to this as "the Blue Book of airfares."
There is a difference, though, and it's not a literal translation or perfect analogy. Kelley Blue Book is about the market value of an automobile.
Unlike the Blue Book, Farely is making a cost calculation -- not a market value calculation. We're ballparking the airline's cost to fly a passenger.
For anyone who travels a lot, you win some and you lose some when it comes to getting plane tickets you think are priced reasonably. Farely will help you quantify the winning and the losing more accurately, potentially helping reduce frustration in the shopping game.
Some imperfections, at launch
Farely provides data on coach, nonstop fares. It doesn't offer cabin-specific cost data for premium cabins, even though a core target market will be business travelers presumably interested in that information.
The startup faces the obstacle of obtaining comprehensive cabin-specific data on premium cabin paid load factors. In the meantime, it has made estimates of the paid load factors in the premium cabins, and allocated costs accordingly. This leaves a cabin-adjusted breakeven cost for the coach seats.
Farely's estimates aren't precise to the dollar, but have a margin of error to them.
Farely says it offers quotes for every origin-and-destination (OND) fare in the world. But at launch it's using data provided by US airlines. The company is in the process of obtaining data from European airlines which will help it refine its estimates and fill in some coverage gaps.
In its initial days as an "Alpha" version, I found occasional hiccups in my test searches for fares on non-US routes (Hong Kong to Beijing, Manila to Singapore), where the site failed to return results.
At launch, it's all publicly available data that we're using from airlines that are publicly held and report their financials. We're not vulnerable to any provider cutting us off from data.
That being said, we are having conversations with major airlines to receive proprietary data to refine our cost calculations. We will try to do that in the coming months for additional precision.
Farely is also providing a new type of information and the product may need a bit of salesmanship to catch fire. Konwiser acknowledges this:
We need to work really hard to educate people on what our cost estimates mean and how they can be used....
Airlines as customers?
From the viewpoint of airlines, Farely could also prove useful.
A key purpose of recent airline mergers has been to allow carriers to push up their prices. But selling these price hikes to TMCs isn't easy.
Third-party benchmark pricing could be used by airlines as a negotiating tool when working with corporate TMCs to demonstrate that their margins are still razor-thin on many major business routes and that volume discounts can't be generous.
For competitive insights, Farely will also offer carriers airline-specific FairFares as a paid product.