The folks at FareCompare.com are an inventive bunch. I really like what they’re doing to lift the hood on the mechanics of airfares. I’ve previously posted about their fare alerts that tell you what the discounted fares will be hours before you can actually buy them, and how their fare search tools let you do flexible searches that the big booking sites have disabled.
So when FareCompare COO Neil Bainton started posting an index of airfares at his blog for airfare wonks, Airtravelchannel.com, I was interested.
What the index does is track the lowest fare (ignoring fare rules like minimum stay or advance purchase) between the 50 largest markets in the United States. That’s 1250 fares. (50 markets times 50 markets = 2500, but the fares are the same in each direction, so divide it by two to get 1250.)
Much like the Dow Jones Industrial Average doesn’t track all stocks, but only 30 blue chips, this index doesn’t cover all the bases. The index is a first cut at measuring the state of airfares as a whole. With tens of thousands of city pairs, and hundreds of fares between each airport, getting a glimpse of ALL the airfares in America isn’t going to happen anytime soon, and might not even be useful. (How many people really want to fly, say, from Grand Junction, Colorado to Pellston, Michigan? So I don’t think it’s not really necessary to include every fare.)
The index could have some interesting applications, especially for journalists or financial analysts who want to track the big-picture of fares in America. Just this past Tuesday, the index “crashed” 29 points, or 5.8%, with a Delta sale bringing the average down.
The index also comes with a one-to-four star label, to give the current reading historical context. Four stars obviously means that fares on the whole are generally good.
But the utility of this number isn’t immediate: No one buys “fares on the whole,” they buy specific tickets. This is all interesting stuff, and data hounds could eat this up. But individual travelers would probably benefit from a more localized index that targets their home airport. Neil tells me this is in the works.
An index just for your own city might be one extension. A rule-driven index might be another. Business travelers who can rarely take advantage of ultra-low advance purchase fares might instead benefit from an index of refundable fares, or 3-day advance purchase fares, possibly sorted by home airport as well.
Much like there is an industry-specific stock index for practically every sector of the economy, this could balloon into a huge number of indicators. Heck, this could be monetized by creating futures contracts based on an index like this. Go long the San Francisco fares and short the Dallas index! Don’t laugh, there are websites out there that already do this sort of thing, and Wall Street isn’t far behind.
In any case, it’ll be neat to see where this goes. Information like this increases the transparency of airfares and travel costs as a whole, which is good for consumers. Bring it on.