Fetcherr Secures $90M Investment to Propel Airlines Toward Adaptive Pricing Strategies

This year, the airline sector is on track to reach a historic milestone with projected revenues of $996 billion, fueled by a surge in travel demand. Despite this, profit margins remain slim. The International Air Transport Association (IATA) reveals that airline expenditures could hit $936 billion, resulting in an average profit of just $6.14 per passenger, approximately the cost of a latte in New York City.

To enhance their profitability, an increasing number of airlines are adopting the controversial method of dynamic pricing, which adjusts ticket and service prices based on how much a customer is willing to pay. Despite receiving a lukewarm response from the public, 258 airlines have now implemented some level of dynamic pricing, an increase from 220 in the previous year, according to reports from the travel sector organization ATPCO.

Fetcherr, which made its debut in 2019, is among the service providers that support airlines with dynamic pricing technology. Founded by Uri Yerushalmy, Roy Cohen, and Robby Nissan, Fetcherr utilizes artificial intelligence to predict demand for specific flight paths and adjust prices accordingly, which are then displayed to customers browsing an airline’s site.

Roy Cohen, CEO of Fetcherr, expressed to TechCrunch that the aviation sector struggles with the adoption of continuous pricing due to archaic infrastructure and rule-based systems that hinder immediate market response. Fetcherr leverages AI to create optimal pricing strategies and automate the immediate update of prices,” he elaborated.

Fetcherr uses AI algorithms that are customized to a brand’s customer base, drawing on extensive data from past bookings, flight schedules, and other variables like weather conditions and economic trends to determine pricing.

“Our algorithms are founded on both publicly available data and proprietary customer data, all securely hosted on a private cloud for each client,” Cohen stated.

While airlines see dynamic pricing as a vehicle to drive revenue growth – exemplified by JetBlue’s recent introduction of dynamic baggage fees – it remains to be seen whether consumer opposition will impact its longevity in the industry.

For travelers with inflexible schedules who need to fly during peak times, dynamic pricing can significantly inflate costs. Forbes reported instances where fares for a direct flight from NYC to Chicago could increase more than fivefold around Thanksgiving, a high-demand period, under dynamic pricing models.

Moreover, dynamic pricing can inadvertently lead to a form of “implicit collusion” as noted by John Thornhill in the Financial Times, where airlines quickly match each other’s fare reductions, reducing the incentive for non-participating carriers to offer lower prices.

The long-term benefits of dynamic pricing for airlines are also under debate. A study from Yale suggested that accounting for competitors’ pricing behavior in dynamic models could lead to premature ticket sales. Additionally, regulatory challenges could arise, with potential for these practices to be restricted or banned in certain jurisdictions based on interpretations of tariff laws.

Nonetheless, Fetcherr continues to gain traction, boasting partnerships with airlines like WestJet and Virgin Atlantic. After securing a $90 million Series B funding led by Battery Ventures, the company’s total funding has reached $114.5 million.

Scott Tobin, a senior partner at Battery Ventures, views Fetcherr as a pioneering force capable of modernizing legacy airlines through dynamic pricing technologies.

With the fresh capital, Cohen plans to invest in developing a new AI-based “offer engine” to package and price multiple airline services, aiming to expand the team to 150 by the end of the year. Fetcherr also looks to venture beyond the airline sector into new markets, steering clear of industries like fast food.

“From the outset, our business aimed to achieve profitability swiftly, maintaining efficiency across all operations,” Cohen added. “We focus not on a burn rate, but on a grow rate, as our company continues to expand annually.”