REVIEW: The Options Exchange for Airline Tickets

Our Rating











Options Away has all the pieces in place: a unique idea with the potential to transform the airline and travel industry; pending partnerships with all the major stakeholders, and abundant interest from top VC’s. The only question remaining is whether the company can validate market demand and explode revenue after completing a Series A round for $5MM or more in early 2014.

Founded in 2011, Options Away is a fully accredited online travel agency that aims to transform the way that consumers book flights. They provide the same low fares as the leading online flight search and travel booking companies but, in addition, offer consumers the option of holding flights for days or weeks before purchasing a ticket. They expect to become the centralized exchange for travel options.

PRODUCT/SERVICE: Options Away has created a dynamic option pricing engine with patented technology that allows airplane travelers to buy an option on an airline ticket and lock in the price for a specified period of time while finalizing their travel plans. Their proprietary algorithms combine trading models in financial markets with strategies in airline revenue management to calculate the fair price of an option to purchase a flight ticket. Customers have the flexibility to buy one or more options which expire in 1, 3, 7, 14 or 21 days. Option prices are determined by more than 50 different criteria including length of holding period, ticket price, volatility of the ticket price, time remaining to the flight, number of seats available, and seasonality. There is no secondary market for the options. If the price of the ticket rises, consumers can exercise their option and buy the ticket at the predetermined fixed price. If the price of the ticket drops, they can purchase the ticket at the lower price and let their option expire worthless. And if they decide not to travel, the option will expire worthless and cost them just a tiny fraction of a full fare.

VALUE PROPOSITION: Options Away offers the following value propositions: 1. Locks in price and trip availability for airplane travelers who gain the freedom, flexibility, and “peace of mind” to take more time to plan their trip before purchasing high-priced flight tickets. 2. Saves consumers the time and frustration of constantly checking Expedia to see if ticket prices are rising. 3. Facilitates planning of trips for groups of travelers. 4. Engages airplane travelers at the very early stages of the travel planning process with the opportunity to sell ancillary services such as car rentals and hotel rooms. 5. All major stakeholders (airlines, GDS’s, and online travel agencies) can benefit financially. They can make money without selling an airline ticket. 6. Options Away increases the size of the “pie” by generating a new source of revenue for the airline and travel industry. 6. Eventually, options will become a leading indicator of demand in the travel industry.

MARKET SIZE: There are approximately two billion airplane travelers and $300 billion in travel bookings per year in the U.S. and Europe. Options Away estimates the TAM (total addressable market) to range between $100MM and $1 billion. Assuming two of every 1000 airplane passengers (.2%) purchase options and an exercise rate of 25%, the company estimates annual revenue at $175MM.

REVENUE MODEL: Options Away charges travelers a small fee to reserve airline tickets at a fixed price for a specified period of time. The price of an option for a round-trip ticket typically ranges between $4 for one day and $36 for 21 days but may increase based on certain criteria. The average price of an option ranges between $10 and $14 for the popular seven-day holding period. If the price of the ticket rises and the consumer exercises his option, Options Away is obligated to cover the price differential and may suffer a loss. However, options are not always exercised which provides Options Away with an additional margin of safety to guarantee the price of an airline ticket. Customers frequently buy multiple options but obviously can only use one option at a time and thus the other options expire worthless. The customer receives discounts for buying multiple options. To date, the most options any customer has bought are four. Options Away only sells options on select flights and limits the number to ten per flight. When a flight is close to full and/or ticket prices begin to rise, Options Away ceases selling options. In addition, Options Away earns ancillary revenue from commissions on car rentals and hotel rooms and eventually plans to sell options on them. Currently, their service is available for flights between 25 U.S. airports with plans to expand to 50, and to Canada and Mexico by the end of 2013. Flights to Europe will be added in 2014.

MANAGEMENT TEAM: Robert Brown, co-founder/CEO, is a serial entrepreneur with over 20 years of experience developing technology for trading financial markets. He is a frequent flyer and passionate about travel. He received his degree in computer science from the U. of Western Ontario. Heidi Brown, co-founder/CMO, has more than 10 years of experience as a foreign currency trader and relationship specialist at a European bank. She has traveled extensively. Mike Harbin, COO, has more than 25 years of experience architecting, developing, and integrating travel solutions for domestic and international airlines and leading travel management companies.  He was a founding team member of Orbitz, co-founder of G2 SwitchWorks, and built the agency terminal solution for AMEX. Don Bodnar, CTO, has over 20 years of experience in software development and leading technical teams. He’s worked for Fortune 500 companies including Microsoft and JP Morgan. He designed the technology for BitBend which is the predecessor to Options Away. Tom Bacon, industry strategist, has over 25 years of commercial airline experience including executive roles at American Airlines, American Eagle Airlines, Frontier Airlines, and Sabre.

COMPETITIVE ADVANTAGEOptions Away has the following competitive advantages: 1. Their algorithmic option pricing engine is protected by 7 patents. 2. They are creating a brand new source of revenue which will benefit all the major stakeholders in the airline and travel industry. 3. Airlines and online travel agencies can engage customers at the very beginning of the travel planning process and sell them ancillary services such as rental cars and hotel rooms. 4. Their management team has extensive experience in both the financial markets and the airline industry. 5. They have already created significant buzz by winning the prestigious EyeforTravel Innovation Competition, winning the annual Lightbank competition, and receiving media coverage from the Chicago Tribune, Chicago Sun-Times, Crain’s, NBC, Skift, and CBC Canada hosted by Shark Tank investor Kevin O’Leary. Major competitors include United Airlines with “Farelock,” KLM with “Time to Think,” and Air France.

PROOF OF CONCEPT: They launched their B2C model on a limited basis to validate their technology and market demand, and have generated revenue. They plan to switch to a revenue-sharing B2B model where ideally there is an option purchase button on the site of every major airlines and online travel agency.

CUSTOMERS/USERS: Options Away has generated an undisclosed amount of revenue. They launched a pilot program on September 1, 2013 to collect sufficient data on consumer behavior for three to six months and tweak their pricing models. They plan to shift to a B2B model in the first or second quarter of 2014 and share revenue with the airlines, global distributions services (GDS’s) and online travel agencies (OTA’s). Currently, they’re in serious negotiations with several major airlines and online travel agencies to execute revenue-sharing agreements.

STRATEGIC PARTNERS: Options Away is talking to all the major airlines and many smaller airlines and are in deep discussions with the global distribution services (Amadeus, Saber, Travelport) who are the technology providers for the airlines and online travel agencies. They have multiple letters of intent to integrate their technology into their systems.

FUNDING: Options Away raised $600K in a seed round from individual angels and expects to close a $1MM bridge round by the end of 2013. They are already in discussions to raise approximately $5MM in a Series A round for the 2nd quarter of 2014. ❒                  

[Photo of Robert Brown, co-founder/CEO and Heidi Brown, co-founder/CMO of Options Away by David Carman. © Blackline Review]                                                                                                                                                                                                             

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