Is there solid justification? It’s annoying that it can’t be a solid rate unless some kind of natural disaster or surge in location specific travel happens. And why does booking months/weeks seem reasonable prices but within a few days it’s astronomical?
In: Economics
Welcome to the “Yield Curve”.
An airline wants to sell every seat on the plane for the most it can get for each seat. But if it prices the seat too high then it will get zero when the plane takes off with the seat unsold. But if they slash prices in the final days before departure, they will train customers to only book at the last minute, decreasing total revenue.
By analysing thousands of flights and considering dozens of variables, the airline determines an idealised forecast of when the seats should be sold.
If a seat goes on sale 52weeks out, then by 40 weeks out they might expect/plan to have sold 5% of seats. And by 20 weeks out, 20% of seats. In the final days and weeks, this will tend towards 100%. This is the yield curve. Each flight and route will have a different yield curve.
If bookings are above the yield curve, the price will jump. If below, they will drop. By changing the price in this way they hope to either fill seats that would go empty or to get more revenue from a seat they think could be sold several times over.
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