Even the same flight going up and down confuses me. I can understand the price raising as demand for that particular flight goes up, (even though that’s a dumb system) but why would it go back down?
In: 5
An airline seat only has value before the plane takes off. An empty seat is a concrete loss, so airlines will do anything in their power to get a butt in that seat. So prices will go significantly down as the time of the flight approaches and the seat is still empty.
This is a tough one to EL5, but I’ll give it a shot as I was a travel agent and worked for several airlines in the late 90’s/early 2000’s.
The total # of seats on the plane are divided into “fare basis codes”. That’s a code that dictates what the requirement is to qualify for a specific price and there are a certain number of tickets sold at each price. There are lots of different details, like 7/14/21 day advanced purchase, but also some really obscure things like making sure you stay at your destination over a Saturday night rather returning on Or before Saturday (this is called an excursion fare).
At the end of the day, there are limited seats on the plane. The airlines need to sell $X worth to make money on that flight, so it’s a mix of incentivizing the customer, being affordable, and making sure they are expensive enough to pay for fuel and crew.
Edit: to all the people saying the seat gets cheaper right up until the flight takes off, you’re 100% wrong. Perhaps in extremely rare cases this can happen, it usually doesn’t. There are a lot least a half dozen reasons why, but the gist is simple: an airline will optimize passengers across their schedule by cancelling/redirecting flights. That’s why “flight changes” occur all the time. Oh look, suddenly you’re connecting through DEN instead of a non-stop to your destination. That non-stop got cancelled and they used their hub city to fill the incoming and outgoing flights. Also, airlines utilize their open seats to move crew around and as a perk for being an employee. They can “jump seat” anywhere in the US for a minimal amount if there is an open seat.
The fuel price fluctuates too.
They ideally want all seats filled as thats the most fuel efficient… so they will raise or lower prices accordingly.
Which is why the last few tickets to flights.. can either be absolutely nuts expensive… or basically nothing.
So whenever you have a fuel crisis too. Prices just skyrocket because now its not just seating being accounted for but also the fuel itself.
My recent flight cost 35€ initially. At the end tickets were 700€.
Idk how much Ukraine crisis had to do with it but it was about the last few tickets that were so ludicrous.
I bought three round trip tickets to/from the same places. Feb: 425$. April: 597$. May: 893$.
I doubt their costs went up that much.
Grrrrr.
In a very simplified way, it’s down to profits/money.
They have lots of costs that have to be covered, but at the end of the day, they are a business trying to make the most money possible.
They obviously want to charge the most they can but an empty seat is lost income. So they pick the highest price they think will fill a flight and then adjust as they see the speed they are selling tickets at. Of course it depends what the business model is, some make more money from the extras or being the least expensive, but in general they are adjusting the price to make sure they sell all the tickets. Might as well make £10 if you’re about the take off and you have an empty seat.
Ultimately, there’s a drop dead point for sale of seats on a flight — when the flight takes off.
Before then, demand may shift and the airline can raise or lower fares to try and maximize seats sold prior to takeoff. They could go down if the plan is undersold as the flight day approaches and the airline would rather get less money for a seat than no money for a seat.
You described the basic economics of the entire industry as “dumb” so not sure how else to explain it other than what you appear to already know.
Price discrimination. https://en.wikipedia.org/wiki/Price_discrimination
The value of a ticket is different to every person, so the airlines want each person to pay as close to their maximum value as possible.
A business traveller has to go no matter what, usually on short notice and they aren’t personally paying for the ticket, so they don’t really care what it costs.
A holiday traveller is planning a long way out, and is very price sensitive.
So prices start low to get the holiday travellers. This gets enough passenger to ensure the flight will go. As the plane fills up, each seat gets more expensive, because each remaining seat is more valuable.
A few weeks before the flight, most expensive to get the business travellers and anybody who “needs” to be there.
A few days before the flight, drop the price to get anybody into the seat. An empty seat is losing money, better to get some money for the seat than none.
1. A business charging as much as people are willing to pay is “a dumb system”?
2. As for “why would it go back down” – because no one bought it at the higher price they were hoping to get, and now the flight is soon, and getting *any* money for it is better than flying with an empty seat so they lower the price again.
It’s better for an airline to sell a seat for $10 than to have an empty seat when the plane takes off, because $10 > $0 and the plane is going to fly regardless.
Imagine you have a flight that you’re selling tickets for at $200 a piece 2 months before the flight is set to take off. People who need to get on that flight will just buy the ticket. But now imagine it’s 2 days before the flight takes off and you still have 30 empty $200 seats. The airline can either keep those seats at $200, but it’s unlikely they sell because they already had two months to do so, or they can lower the price and hope people jump on a last minute flight for $100.
If they don’t change the price, the plane takes off with 30 empty seats that they got paid $0 for. If they lower the price, there’s a chance people buy up those seats. It’s better having someone in that seat for a lower price than not having anyone in that seat at all. An airline generally can’t just cancel a flight if they don’t get enough paying customers on it. So it’s always better to have someone in the seat regardless of the cost than no one at all.
It’s the same for any event where the value disappears as soon as the event ‘starts.’ If you’re putting on a concert and it’s not sold out, you’re better off selling the remaining tickets two hours before the event at a steep discount, because any amount of money you get for those tickets is better than getting no money and having empty seat.
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