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Why Fares Differ How Airlines Price Seats Pricing Hurdles Finding Elusive Deals

You may think you bought the cheapest airline tickets but the guy sitting next to you on the plane might have paid a lot less. Or maybe more. What’s going on?  The crazy world of airfare pricing, that’s what, and understanding how it works can save you money.

Why Airfare Prices Differ

Airlines price each and every ticket to maximize profits – on every seat on every plane on every route. One way to do this is by pricing according to seasonal demand. The tactic is not limited to the airline industry, either.

  • Department store: Buy a sweater right before Christmas and you may pay $100; purchase the same sweater in July and it may cost only $30.
  • Lemonade stand: An ambitious kid might charge $3 for a tall cool glass in August; if the stand is still open in October, the kid might only get takers by offering it for a dollar.

And the same is true for airfare; it’s just a little more complicated.

How Airlines Price Seats

A typical domestic flight has about 10 different ticket price points per plane, with first or business class tickets being highest price points and the cheapest economy seats at the low end. The most expensive fares are typically purchased by business travelers who tend to buy at the last minute, and last-minute prices are almost always expensive. Leisure or vacation fares are generally cheaper because, for one thing, they’re usually purchased well in advance.

So to get the cheapest tickets, you need to know when to buy and when to fly but there are some other important pricing variables.

  • Route competition: Prices to smaller cities with little airline competition are typically more expensive than hub-to-hub routes because there’s little incentive to drop fares.
  • Route distance: Fly further, pay more (this is true for many routes).
  • Seat demand: Airlines know when people want to fly and raise their prices accordingly.
  • Seat supply: Airlines don’t want to fly with empty seats because empty seats means zero revenue, so they’ve become extremely efficient in calculating how many want to fly and making only that many seats available, and no more.
  • Fuel prices: Oil prices have been down for the past few years which is good news for passengers; high jet fuel prices can mean additional and expensive surcharges added to tickets.

Other Fare Variables

There are other variables that affect ticket prices but flexible travelers can overcome these hurdles.

  • Advance purchase: The cheapest airfare typically requires an advance purchase of at least 14 days before departure (though some low cost carriers have cheaper fares up until a week before departure).
  • Minimum stay: Some airlines require a minimum stay or a Saturday night stay for the best deal; this is less common than it used to be but still in force on some routes.
  • Departure day restrictions: Increasingly, the cheapest airline tickets require departures and/or returns on the least popular days to fly which are usually Tuesday, Wednesday or Saturday.
  • Flight time restrictions: In some cases, the best deals require departure during unpopular times to fly which means taking off at dawn, during meal times or overnight flights.
  • Route restrictions: Sometimes, a connecting flight can be a lot cheaper than a nonstop. Price out both to see if that’s true for your trip and if the price difference is worth the inconvenience.
  • Purchase restrictions: Many airfare sales expire after only three days; other may last only a day or so. If you see a deal you like, hurry.
  • Maximum stay: This is usually only an issue for international travel where a stay of 30 days or less is sometimes required for cheaper seats.
  • Blackouts dates: Airline sales typically black out the most popular days of the year to fly, which includes most-sought after dates around Christmas, New Year’s, Thanksgiving in the U.S. and popular times to fly in summer.

Best Way to Find Deals

Let’s demystify all this craziness over prices with a few simple rules and a few simple tools so travelers can make the best airfare shopping decisions.

  • Always compare airfares: Go to an airfare comparison search site like FareCompare and compare the prices offered by most airlines. Then, go to the Southwest Airlines’ site and look at those prices, too (you have to do this because it’s the only airline that doesn’t share fare data). Now you know which airline has the cheapest price for your trip. You must compare fares every time you shop, though, because no single airline always has the best deal.
  • Be flexible on dates and routes: Try the Getaway Map; simply enter departure city and then set a month or season you’d like to fly. Now sit back and watch deals around the world pop up.
  • Set airfare alerts: If you know where you want to go, set a real-time airfare alert and let the deals come to you. If you like what you see, hurry; you’re not the only one setting an airfare alert!

Happy travels.