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Airlines have been good at what the industry calls dynamic pricing. At a moment's notice, they can drop a fare to fill up an otherwise empty plane or raise a fare for a flight predicted to be packed. (The mystery, of course, is why so few airlines ever make any money when they can do what booksellers, movie theaters and soft drink vending machines don't do.)
Now the tables have turned. Farecast computers try to outthink the airlines' computers. Farecast buys data on the availability of seats and their prices from ITA Software, a firm in Cambridge, Mass., that sells the same data to travel agents, travel Web sites, computer reservation services and the airlines themselves. Farecast has information on nearly all the carriers except Jet Blue and Southwest.
With 50 billion prices in its five-terabyte database, the computer uses an algorithm that focuses on the volatility of airline prices and how that relates to airline inventory. Farecast says it monitors 115 indicators that are reweighed every day for every market, about 2,000 city pairs when the system covers the entire United States. Not only does it follow supply and demand, but also other factors that will shift traffic patterns, like the weather and who wins the National League pennant.
How useful is it if Southwest and JetBlue aren't included? Mr. Crean concedes the result would be better if he had that data, but the company's algorithm does pick up the impact of those airlines when the other airlines react to price changes.
The airlines won't mind his service, Mr. Crean says, because he channels Farecast users right to the airlines' own sites to buy the ticket. (The company gets a cut for every referral and it will make money from ads on the site.) He also doesn't think airlines will try to fool Farecast's computers. They want to maximize the revenue from each seat and won't jeopardize that.
If Farecast tells you that fares are going to go down, it would be smart to check everyday until Farecast changes its advice to buy. Farecast offers a number of other handy tools. It displays a map that shows you the cheapest tickets from your city, useful to people who want to fly on a whim to wherever. A more practical tool is a chart based on historical data that shows the best dates to travel on a particular route.
Once you've settled on a trip, Farecast presents a grid that shows you which departure and arrival time gives you the cheapest fare. Leaving in the mid-afternoon is generally cheaper than early morning or late-evening flights, something budget travelers know.
Once it covers the United States, the company wants to start adding foreign routes. It also has plans, according to patent filings, to do the same price predictions with hotels and rental cars.
As for guessing the price of everything else from gasoline, big-screen TV's or hamburger, it intends to leave that to someone else's computers.