BidFlyer, an Israeli startup that is a white-label platform for airlines, has raised $1 million in funding for its business model, which involves putting small batches of airline tickets up for auction online, eBay-style.
Fliers can save by bidding less than the going rate for comparable flights through ordinary travel websites.
The investment seed round was led by entrepreneur Moshe Hogeg. The money will be used for continued development of the startup's analytics, and for launching the platform on airlines sites by the end of the year. EL AL Airlines CEO is a fan, the company says.
Tell us how you founded the company, why and what made you decide to jump in and create the business.
From our painful personal experience, we’ve found that travellers miss out on the opportunity to bid for the airlines last minute, unsold inventory. We’ve decided to develop a large scale solution which will benefit both the airlines and travellers worldwide.
A year later, BidFlyer platform uses real-time auctions to offer the excess capacity of airlines to travellers looking for flight tickets in attractive prices. The auctions appear as an integral part of the airlines and OTA’s sites.
Size of the team, names of founders, management roles and key personnel?
Developing BidFlyer was a major technological challenge, from both complexity and scale perspective. We’ve assembled a team of 7 big data scientists, behavioural engineering and aviation experts, who are working together from our Tel Aviv office as a small, passionate team.
- Asaf Gendler, CEO and co-founder; Asaf has more than 15 years of experience creating popular B2B and B2C applications.
- Guy Kaplan, CTO and co-founder; Guy has over 14 years of experience providing enterprise software solutions for companies such as booking.com, ThomasCook, General Motors and many others.
- Prof. Izzy Borovich, Senior advisor; Former chairman of the board at EL AL Airlines and a professor of information systems, Izzy brings BidFlyer over 20 years of knowledge in the Aviation industry.
- Eduardo Schilman (PhD), Director of behavioural engineering; Edi helps BidFlyer to translate complex issues into applicable solutions.
We have just closed a $1M round from Singulariteam VC, led by entrepreneur Moshe Hogeg and backed by LPs that include co-founders of China’s Tencent and Renren. The new funding will be used for continued development of our enterprise software, and for launching the platform on airlines sites by the end of the year.
Estimation of market size?
According to “IATA annual review”, in 2014, 1,568 Airlines served 3.3 billion passengers, generating $596 billion dollars each year. Distressed Seats accounted for an industry loss of 20.3% of overall seats in 2014 ($120B per year), making this a leading concern for all airlines.
BidFlyer provides a practical strategy to increase Passenger Load Factor (PLF). According to BidFlyer projections, the platform is expected to increase airlines PLF by 3%. For a medium size airline (15K passengers per day), BidFlyer technology can equate to a revenue gain of over $70M / year.
While several airlines (i.e. Iberia) have experimented lately with putting small batches of tickets up for auction online, BidFlyer uses big data analytics to automate this process, identify and offer “distressed seats” inventory in a large scale – offering thousands of auctions simultaneously.
BidFlyer algorithms manage the auctions in real time, and make sure the auctions results are optimized and in line with the airline strategy.
The fact that BidFlyer solution is scalable and integrated with the airline inventory, allows for the first time maximum flexibility to the traveler; Travelers can search and bid for flights with the exact dates and destinations they are looking for.
Revenue model and strategy for profitability?
BidFlyer receives payment from the airline for the “distressed seats” sold using its auctions platform on the airline digital assets. If the flight ticket was sold on a travel site, BidFlyer shares that payment with the site using its distribution and affiliation program.
What problem does the business solve?
“Distressed seats” are a problem for everyone: Both for the airlines, who lose on a global average approximately 20% of their potential revenues, and both for travellers who lose the opportunity to bid for this seats and fly in a more attractive pricing.
How did the initial idea evolve and were there changes/any pivots along the way in the early stages?
The idea for BidFlyer came up when we understood airlines avoid reducing their airfares in the last minute in order to prevent price cannibalization; identifying their distressed seats and selling them in real time auctions seemed like a great solution to the problem. Since then we’ve been working closely with airlines revenue management departments, adding capabilities to the way the RM teams can manage and control the platform with minimum effort.
Why should people or companies use the business?
BidFlyer proposes a win-win solution: Travelers snag unsold seats at lower prices, while airlines gain a new source of revenue.
What is the strategy for raising awareness and the customer/user acquisition (apart from PR)?
BidFlyer is working with innovative airlines who are open to use a new generation of technologies to increase their sales and revenues. We are approaching these airlines directly, through personal connections, conferences and internal innovation programs.
For example, EL AL airlines “Cockpit” innovation program has provided us with a great support in integrating our new technology to the airline.
Where do you see the company in three years time and what specific challenges do you anticipate having to overcome?
Our vision is to enable real time auctions for flight tickets everywhere; whenever travellers will visit an airline site or an OTA, they will have the additional opportunity to bid for the airlines distressed, unsold inventory.
We anticipate a challenge in supporting large airlines in multiple countries and continents, as we will need to grow the team quickly and set up local teams in different countries. We expect to announce the opening of additional BidFlyer offices soon.
What is wrong with the travel, tourism and hospitality industry that it requires a startup like yours to help it out?
Big data analytics provide the travel industry with opportunities that weren’t available before. For example, the ability to catch gaps in inventory that happen in real time and offer them to travellers, can open new sales channel to airlines, hotels, cruises and more.
What other technology company (in or outside of travel) would you consider yourselves most closely aligned to in terms of culture and style... and why?
As a relatively small and dedicated team, we inspire to create a collaborative environment, in which the management hierarchy is “flat” as possible, and everyone has an equal opportunity to contribute to the future of the product.
We feel closely aligned to the culture of another fast growing Israeli Start-up Company, called Similar Web. Or Offer, Similar Web CEO, instilled in the company a culture were the employees feel a part of the family, and know that the company cares about them. It’s the kind of atmosphere we would like to preserve at BidFlyer in the future.
Which company would be the best fit to buy your startup?
BidFlyer seats high in the value chain, providing huge value to airlines and OTA’s. This position leads to various possible candidates including IT, GDS’s and big data software companies. However, we truly believe BidFlyer has a unique product with a big opportunity to build a lasting company that is here to stay and improve the travel industry. We are excited about that journey.
Describe your startup in three words?
Flights auctions platform.
Here's the BidFlyer Vine:
Auctioning flights isn't new. In 2001, China’s Hainan Airlines pioneered flight auctions, something it still touts on some flights today. Cathay Pacific, Etihad, Lufthansa, and Qantas have all experimented with auctions at various times -- but more as a marketing gimmick than as an ongoing offer.
Last May, for instance, Iberia created a Spanish-language auction webpage for auctioning off some of its domestic flights.
So it's not clear if BidFlyer is just a novelty act, or if it's the next Cirque du Soleil.
Earlier this month, BidFlyer presented its product at the Visa Europe Innovation Exchange, a one day conference to connect European corporate executives with Israeli startups. By the accounts of an attendee, it received a promising response.
To be sure, the site's technology enables thousands of flight ticket auctions simultaneously. But the company needs to step up its game in the business development and sales side to match the technical prowess and get the inventory it needs.
Given the added pressure on airlines to keep travelers on their "brand.com" sites and to push travelers to upgrade through merchandising and retail offers, one might worry that BidFlyer is going in the opposite direction of industry trends. But despite the headwinds, BidFlyer has the technical prowess and funding it needs to take flight. A deeper involvement with El Al, which is imaginable, might kick things into higher gear.
The company responds that: "We are bringing additional visitors to the airline site, by adding to these sites a real time auctions channel, with the airline own design. We do not have a competing B2C site."
Fair enough. We wish BidFlyer the best, and we're eager to see what its team does next.