How much would you pay for a flight upgrade?

(CNN)Auctions already set prices in art, property and fresh produce.

So why not airline seats?

Real-time open auctions are coming to the aviation industry.

They’ve already been adopted by a handful of airlines for business class upgrades, but could also soon be available for all types of tickets.

These real-time auctions are online, not in a room crowded with people raising their hands — but the exhilaration of securing a bargain is just as intense.

A no-brainer?

At first glance the concept sounds like a no-brainer.

Let’s say you’re an airline. One of your flights is about to depart and you still have a few empty seats in business class.

You might advertise this fact to your economy class passengers and tell them you’re ready to accept offers from those willing to upgrade.

You’ll make some extra revenue from seats that otherwise will remain empty, while a few lucky clients get a significantly enhanced passenger experience.

But is it as simple as that?

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Delicate balance

The reality’s a bit more complex, as airlines need to consider the delicate balance between pricing and brand and the long-term business implications.

What happens to the perceived value of your product when you repeatedly give it away as a bargain?

What if regular business class passengers stop paying full-fare because they know they’ve a good chance of getting a last-minute upgrade on the cheap?

Transparency trade-off

Usually this dilemma is solved by trading off transparency for lower prices.

U.S. company Priceline.com’s Name Your Own Price system has users submit a bid for a specific travel itinerary, which may then be accepted or rejected.

The travel operators and exact schedules aren’t disclosed until the booking’s been confirmed, and once the offer is accepted you can’t change or cancel it.

Stuart Barwood, managing director of UK-based airline consultancy Travercial, points out that airlines must be very careful about how they dispose of “distressed seats” — the term for seats at risk of remaining empty.

He says auctions can work if the airline manages to target the right passenger segments in an elegant way, without cannibalizing the existing business.

Want

Gamification

At Israeli start-up Bidflyer, this sense of engagement and fun is central to its proposal.

In addition to helping airlines identify and sell distressed inventory, this technology company — a graduate of Israeli flag-carrier El Al’ Airlines’ start-up incubator — aims to extend the auction mechanism to all types of seat, while adding a gamification layer.

Skift reports the company has already raised $1 million in funding from an unknown investor.

Asaf Gedler, Bidflyer’s founder and CEO, says it built its software with the social aspect in mind.

It means people can connect and share their bids via Facebook, see who the other bidders are, and compete with them in real time.

Every time someone outbids you, the system would be able to send you a notification, allowing you to counterbid immediately.

This set-up could act as a powerful marketing tool in itself.

Think of how Ryanair’s free flights kept people talking about the airline and strengthened its credentials as a price leader.

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Auctions for all

While passengers might love the novelty of participating in a live bidding process, it’s really just an extension of what already goes on every day at airline revenue management departments.

There, with the support of specialized software, prices are constantly updated in response to market conditions.

Travercial’s Barwood explains that the roll-out of auctions is part of the general trend of airlines using technology in order to provide their customers with an increasingly personalized experience.

Auctions, whether to sell upgrades or unsold seats, are a powerful addition to the toolbox of customer-centric airlines.