The airline industry is on track to achieve record revenue this year, reaching an impressive $996 billion, thanks to a surge in travel demand. However, profit margins remain extremely tight. According to the International Air Transport Association (IATA), total expenses for airlines are anticipated to hit $936 billion, which translates to earnings of around $6.14 per passenger — approximately the cost of a latte in New York City.
In an effort to increase profits, an increasing number of airlines are adopting dynamic pricing technologies, which adjust fares and services based on customers' perceived willingness to pay. Despite mixed consumer reactions, 258 airlines have implemented some form of dynamic pricing this year, up from 220 in 2022, according to the travel industry group ATPCO.
One key player in the dynamic pricing arena is Fetcherr, a company founded in 2019 by entrepreneurs Uri Yerushalmy, Roy Cohen, and Robby Nissan. Fetcherr harnesses artificial intelligence to predict demand for specific airline routes and establish dynamic pricing, displaying these prices to customers as they browse a carrier’s website.
"The airline industry encounters significant obstacles in the transition to continuous pricing," said Fetcherr’s CEO, Roy Cohen. "Outdated infrastructure and rule-based systems hinder real-time adjustments and fast market responsiveness. Fetcherr uses AI technologies to generate the best market strategies, allowing for dynamic pricing optimization and the automation of real-time price updates."
Fetcherr’s technology utilizes AI models designed to reflect customer demographics, generating prices seen by buyers based on extensive data analyses of previous bookings, flight schedules, availability, pricing data, and influencing factors such as weather and economic conditions.
"Our models are developed from both public data and private customer information, with all data securely stored in a dedicated private cloud for each client," Cohen explained.
While airlines appreciate dynamic pricing for its revenue-boosting potential—exemplified by JetBlue’s newly introduced dynamic baggage fees—the long-term viability of this technology remains uncertain, particularly given consumer resistance.
Dynamic pricing poses significant challenges for travelers with urgent scheduling needs, especially during peak travel times. For example, a direct flight from New York City to Chicago that might cost less than $100 in the fall can see fares surge to five times that amount near Thanksgiving under a dynamic pricing structure.
Additionally, dynamic pricing can result in what the Financial Times’ John Thornhill labels "implicit collusion" among airlines, leading to overall increases in ticket prices. Airlines using dynamic pricing often adjust their rates instantaneously in response to competitors, leaving those that do not employ this technology with little incentive to lower their fares.
Moreover, evidence suggests that dynamic pricing may not serve the best interests of airlines either. A study from Yale indicated that such systems, when considering competitor behavior, could lead airlines to sell too many tickets too quickly. In some regions, regulatory frameworks may even restrict or ban dynamic pricing, contingent on legal interpretations.
Despite these concerns, Fetcherr continues to thrive, with notable customers including WestJet, Viva Aerobus, Virgin Atlantic, Royal Air Maroc, and Azul Airlines. The company recently secured $90 million in a Series B funding round led by Battery Ventures, raising its total investments to $114.5 million.
Scott Tobin, a senior partner at Battery Ventures, believes Fetcherr is well-positioned to onboard more “legacy” airlines to dynamic pricing technologies. "Our past experiences with technology investments in the airline sector, including ITA Software and Sabre, have highlighted the complexities of fare-setting processes," Tobin stated in an email. "The potential of AI to create substantial improvements in this field is evident, and Fetcherr has already made significant progress in enhancing its clients' revenues."
Cohen noted that the proceeds from the Series B funding will be dedicated to developing a new AI-powered "offer engine" designed to bundle and price various carrier services together, as well as expanding Fetcherr’s workforce from 110 to approximately 150 by the year’s end. To stay competitive against rivals like PROS, Fetcherr aims to broaden its scope beyond the airline sector into additional markets.
"Our business model was established to achieve cash-positive status rapidly, which includes planning for lean operational practices," Cohen said. "We focus on a sustainable growth model; instead of a burn rate, we emphasize a run rate—ensuring the company expands each year."
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