Anyone who has ever shopped for air travel is acutely aware that when you buy an airline ticket, you may pay hundreds of dollars more – or less – than someone purchasing a ticket for the very same trip.
Like Shopping at Macy’s – Kind Of
Does this make sense? Well, think of it this way: you’re shopping for a sweater, and you happen to make your purchase at Macy’s during a big sale. You choose the same sweater your Uncle Mike bought the week before, only he paid twice the price you did. Same with airfare, right?
Not exactly. Nothing is simple when it comes to airline tickets.
In fact, airlines hire armies (well, at least squads) of computer geeks to work with complex software with one goal in mind: to maximize the profit on every seat – on every plane – on every route.
Like Selling Lemonade in the Dog Days of Summer
We shouldn’t begrudge airlines for this behavior; I mean, it just makes sense from a business perspective. Even the kids in my neighborhood know this: during those scorchers in August, they charge twice the price for lemonade on our cul-de-sac in Dallas as they charge in March.
My theory is, the more you know about how the airfare system works, the more you can make that system work for you. Call it “gaming the system” if you will, but to me it’s a matter of good quality research – plus using simple tools – that leads to great airline ticket buying decisions.
Breaking it Down: How Airlines Price Each Seat
So let’s break down a typical Boeing 737 – let’s say there are 137 seats in the cabin – and let’s take a look at the airline pricing for a relatively full plane.
A typical domestic flight has about 10 price points (or ticket prices) for its economy class. The top end of this price point “ladder” is relatively uniform across domestic routes (international flights are completely different), and the top price point is typically between $500 and $800 one-way for legacy airlines, and between $400 and $500 for low cost carriers.
Now, the bottom end of the airfare price range depends dramatically on the following variables, and they are listed in order of importance:
- Competition on Route
- Seat Demand
- Distance of Route
- Seat Supply
- Fuel Prices
These prices points are typically split in half – with the lower portion known as “leisure” ticket prices and the upper portion are the “business” tickets.
The thinking is pretty simple here: business travelers typically are far less price conscious and more prone to buy expensive, last minute tickets than leisure travelers would, since leisure travelers are the ones who are ultra-price conscious and more flexible on travel dates and destinations.
Fences and Hurdles
Airlines use what some call “fences” to rope passengers into these two groups – I like to call them “hurdles”.
Let me explain. Airfares are the unit of measure for these price points and they have rules (or hurdles) associated with them, that if adhered to, will help you move down from a high price point to a lower level. These are some of the hurdles you must clear in order to be in that elite group that pays the cheapest amount for airfare:
- Advance Purchase – the cheapest airfare typically requires you to purchase your ticket at least 14 days before departure (on some low cost airline routes, it is reduced to 7 days)
- Minimum Stay – the cheapest prices often require you to stay as least 2 nights, while other cheap tickets require a Saturday night stay (something business travelers hate to do)
- Departure Day Requirements – increasingly, cheap airfare requires you to depart or return on Tuesday, Wednesday or Saturday – the slowest air travel days.
- Flight Time Requirements – in some cases, the cheapest airfares restrict departure times to the least popular times to travel, including first flights out in the morning, after lunch and after dinner.
- Maximum Stay – this is typically only an issue on international travel where a stay of 30 days or less is required to get the cheapest seats
- Travel Window – often airfare sale prices “set” a travel departure window – so that you can’t buy cheap tickets in winter for the popular summertime vacation season (the window is usually two to four months from the date you purchase the tickets)
- Purchase Date – recent airfare sales have been good for three days only, and we’ve also been seeing a smattering of one-day sales
- Flight Restrictions – sometimes, the cheapest airfares are forbidden on nonstop routes (a common technique used in legacy airline hub cities)
- Blackouts – high passenger traffic times of the year such as Christmas and the summer vacation season are typically “blacked out” – meaning, the cheapest airfares are not available for these periods
- Surcharges – on the flip side, peak travel days (popular days to fly) are often slapped with an extra fee called a surcharge – anywhere from $10 to $30 each way; and historically, we have also seen fuel surcharges tacked on when oil prices jump up
Revenge of the “Yield Management” Nerds
So now you know the airlines’ airfare “hurdles”, but it doesn’t stop there: airlines have a few other arrows in their quiver that help them erect barriers between you and the cheapest airline tickets – based on supply, demand, predicted trends, historical trends and convenience.
You see, when you ask for a quote for trip (with a defined departure and return date) – a trip whose dates and times clear all the airfare hurdles – also gets a final once over by the airlines who look at that cheapest seat price you are eligible for and may decide “No thanks, right now I think someone else is more likely to pay more before departure, here is a higher price I can live with right now.”
This is where the crazy science of “yield” management comes into play (remember those computer geeks). Computers using sophisticated computer models — tweaked by human analysts — makes a final decision, right now, on your seat price. These models can and do change their minds at any time which is one reason why you may get a different quote for the same flight at different times during the day (the other is price changes in airfare).
Our goal at FareCompare is to demystify this craziness with simple tools that help you make great airline ticket buying decisions. We have been working on it for years and are just now starting to roll out new tools that are fast, simple and effective – to help you find a deal, every time you shop.
To button up this discussion, I expect that the next time you’re on a plane, each and everyone one of you will brag to your seatmate that you know exactly why they paid more (or less) than you did, for the same exact seat.
Better yet, just go ahead and brag that the folks at FareCompare have got your back.