This Israeli Startup is Solving a $60 Billion Problem for Airlines Using AI and Game Theory

In 2017, nearly 4 billion people traveled by air, and global passenger revenues this year are expected to reach $606 billion. The pace of air travel as a mode of transport is growing globally, but for many, the flying experience can be far from smooth. Flight disruptions, like overbookings, cancellations, or delays can derail a traveler's entire trip. And since the resolution process of flight disruptions is still managed manually by airline employees, the cost of flight disruptions is estimated to be $60 billion per year to both airlines and travelers. RubiQ, a new Israeli startup, has embarked to streamline the process by which airlines manage flight disruptions and unutilized inventory for both passengers and cargo with their proprietary allocation engine based on Artificial Intelligence (AI) and Game Theory, removing the friction from flying.

[caption id="attachment_48298" align="aligncenter" width="1514"] RubiQ's co-founders in their Givatayim based office (left to right): Amos Bar Joseph, Niv Oppenhaim and Ben Gilat.[/caption]

While studying at Tel Aviv University, Game Theory student Amos Bar Joseph, CEO and co-founder of RubiQ, studied 2012’s Nobel Prize for Economics winners Alvin E. Roth’s and Lloyd Shapley’s theory of stable allocations and the practice of market design. He theorized its commercial application with close friends Ben Gilat (CTO) and Niv Oppenhaim (VP R&D) from the deferred acceptance algorithm used in matching problems as it relates to preferences, like an airplane passenger. The three joined to tackle the niche legacy passenger service systems (PSSs), forming RubiQ in mid 2018.

https://www.youtube.com/watch?v=4BqgPQd1mkA&feature=youtu.be

The startup’s mission is to help airlines efficiently manage flight disruptions and spillage - a situation wherein an airline flight is fully booked but there are still passengers in search of tickets, and resort to a competitor airline - to simplify the air travel experience. The current manual management of flight disruptions and spillage burdens airlines with costly accommodation fees and slow response times, forcing customers to find alternative flights with competitor airlines. Aircules, the company’s latest product, is an all-in-one platform which automates and optimizes the entire management of flight disruptions from end-to-end.

[caption id="attachment_48299" align="alignright" width="323"] RubiQ's virtual assistant. Photo: courtesy.[/caption]

Aircules uses AI to pre-emptively identify flights at risk of disruption and communicate with affected passengers through their virtual assistant to notify them accordingly and offer personalized flight alternatives, thus eliminating the need for passengers to check their flight status and interact with the airline representatives at the check-in counter. All passengers are automatically accommodated by the allocation engine, reducing unnecessary distribution of accommodation fees and accelerating the airline response times. More importantly, it empowers customers throughout their entire journey.

Aircules utilizes a similar process for spillage whereby flexible passengers of flights in high demand are pre-emptively identified and offered accommodations for volunteering to switch their flights with lower load factors. This enables airlines to resell high value tickets to last minute customers at higher prices, generating a new source of revenue and increasing passenger load factors.

[caption id="attachment_48300" align="alignnone" width="2876"] RubiQ's client dashboard. Photo: courtesy.[/caption]

Last year, the average passenger load percentage globally was 81.7%, meaning nearly 18 of 100 seats are empty up in the air, according to IATA. For the year of 2019, the US Bureau of Transportation Statistics tracked a total 352,000 passengers denied boarding to their booked flight, bumped - where 11,000 of them were denied boarding involuntarily. A notable mishap occurred in 2017 with United Airlines which trended virally on social media for their lousy approach to a bumped passenger and resulted in lost market cap of $1.4 billion for the airline, and the victim sued for an alleged $140 million in damages.

The startup developed a prediction model which allows for precise identification of flexible passengers willing to switch their flight, and advanced offerings of personalized alternatives and compensations, thereby optimizing compensation and operational costs for airlines. They leverage pattern recognition algorithms and supervised machine learning to profile flexible passengers by numerous variables, such as age, the duration of their journey, or the number of passengers they are traveling with.

Select airlines with in-house PSSs and revenue systems have begun to innovate by communicating the flight adjustments to passengers via mobile devices. But the remainder use the PSSs of legacy market leaders like Sabre, Amadeus and TravelPort. Accuracy in decision making coupled with rapid interaction with customers is paramount in those situations, and RubiQ is posturing with those facets to enhance existing PSSs.

The startup’s allocation technology was originally conceived for automated candidate selection in the Israeli army’s recruitment process (soon operational) to predict the highest chances of a successful placement given the candidate’s background information.

Since spillage and disruptions are acute problems present in the logistics industry in general, RubiQ plans on expanding and leveraging its innovative technology for freight transport by air, ship, rail and ground shipment modes as well.

RubiQ is currently bootstrapped but they’re gearing up to raise their first financing round. They’re in late negotiations with an Asian pacific airline for a pilot engagement and are in early negotiations with several European airlines.

Globally, air travel is trending upwards, with 125,000 flights per day carrying more than 12.5 million passengers, and yet the inconveniences of flight disruptions is still a major liability for airlines. In fact, just over 20% of all US-based flights were disrupted, cancelled or delayed, in 2018, and the trend won’t disappear as more travelers choose air travel. But it would seem less stressful and more empowering to deal with an innovative, friendly solution like RubiQ’s Aircules, rather than pleading for hours with an airline customer service hotline.