Chatham, the Routehappy of Derivatives

Spring is here and it’s time for a vacation. Now that you’ve committed to take some time off and indulge in the fruits of your labor, it’s also time to secure among the most important of vacation details, your travel. And if you’re travelling by air, the search for airfare isn’t necessarily easy. Navigating the throngs of websites, special offers, flash sales and frequent flyer pricing can initially be invigorating, almost euphoric as you get that much closer to a beach chair. But once payment is confirmed and the fine print is read, the vision of palm trees and blue skies is quickly clouded, leaving you to ask, “Did I really get a good deal? Was now the best time to buy?”

Airlines are constantly engaging in all kinds of sales practices based on dynamic pricing, where fares are advertised by at-the-moment pricing off of immediate market conditions. Prices literally change within seconds to match or beat competitors, to capitalize on consumers’ specific characteristics — location, shopping history and income brackets — or to reach consumers at times when they are most vulnerable, especially when daydreaming about time off.

With the increased utilization of big data, more companies embrace these sales practices all the time, but airlines tend to be among the most active as their prices are constantly compared with competitors via fare aggregators. This trend can not only tend to drive down prices, with airlines fighting for the lowest bid, but can also sacrifice value by failing to clarify more nuanced details that may be just as important, such as available amenities, leg room, Wi-Fi, beverages, flight times, etc.

Spotting this evident lack of transparency on all other flight details, Routehappy.com created a platform that brings all the details of the “deal” to the forefront, giving consumers a clear, comprehensive overview of what they’re truly buying. “Routehappy.com researches and verifies flight amenities by aircraft, cabin, schedule, and route on a constant basis from hundreds of disparate sources.” (PRNewswire.com)

Utilizing data from two proprietary Routehappy systems, Flightpad and Flightmatch, Routehappy is able to pull the most up-to-date information on flights worldwide. And by calculating a variety of algorithms and ratings from past flight scores, the platform is able to mathematically create a Flight Score that incorporates legroom, seat width, wifi quality, flight duration against a comparison set, and even tastiness of food across the flights currently offered. With the ability to share amenity data dynamically, consumers are now armed with more information than ever before, giving them confidence and comfort in making an airline purchase decision that is best for them.

One might even say that the online market for flights has caused two distinct market paradigms to emerge – one that uses increased consumer intelligence to extract each flyer’s maximal willingness to pay, and one that uses aggregated transparent information to promote each flyer’s optimized experience. Routehappy saw that in the dominant market paradigm (the first), key details were missing that were critically important to accurately comparing travel alternatives, and it moved to change the market by bringing transparency to those other vitally important variables. Consumers who use Routehappy can feel that they made the most informed decision possible about how good the food would really taste, how thin the seat cushions really were, and how reliable the wifi would really be – thereby promoting route-happiness.

Naturally, as we read the Routehappy story, we couldn’t resist wanting to make our clients a little more Hedgehappy. As we’ve built strong relationships with thousands of clients over the years, it’s always intriguing to find out specifically what pieces of transparency are the most valuable to each one. What should the borrowing spread be on a fully-leased AAA retail asset in a large Southeastern city? How significant are the derivatives reporting obligations for U.S. versus European entities within a single multinational? Is good hedge accounting achievable for this specific cross-border transaction? What type of ISDA terms, legal and economic, should an industrial REIT expect when setting up FX lines to hedge its operational cashflows? How much more costly is 3-year forward hedging than 2-year in USD-BRL?

Sound risk management depends not just on getting sharp execution, but also on having transparency into and appropriately optimizing a whole host of other economic, accounting, legal, and regulatory constraints. If you have any questions about your particular situation, please give us a call – we’ll do our best to ensure you are Hedgehappy.