Welcome to the world of airfare pricing

Ever wondered why you pay more or less amount on your tickets on different occasions? Ever wondered that the person sitting beside you in the plane might have paid a less or more amount on his / her tickets as compared to you.

Well, welcome to the world of airfare pricing.

Almost a hundred years back, since the first flight, the pricing system was based on the distance traveled rather than passenger’s demand.

Earlier, lack of a choice due to less competition was a reason of higher flight prices.

It got changed after de-regulation. In 1990s, after liberalization, the prices became more competitive. Too much competition became dominant.

Initially due too much of competition, the industry changes from a regulated one to an unregulated cartel. It was basically based on pass bookings, remaining capacity, average demand, and the probability to sell more seats later.

Now with all this, on every seat, on every route, airlines price each ticket to maximize their profits. For less competitive cities, less competition leads to a higher pricing. Since the last decade, the number of travelers traveling by air has increased a lot, reaching nearly 2 billion.

Airlines use the tactic of airline revenue management to determine pricing of a flight seat. They see several factors, including their network’s status, and stay focussed on making as much money as is possible.

To understand it better, let us take an example of a connecting flight:

You want to go from Mumbai to Addis Ababa (Capital of Ethiopia) from a flight which also serves a connecting flight to Khartoum (Capital of Sudan).

For your distance from Mumbai to Addis Ababa (Airfare: ₹ 54916), you might end up paying even more money than passengers flying to Khartoum (Airfare: ₹ 27952) because the airlines tend to keep seats available for the full journey and rates tend to be higher for places the flight will land at before its last stop.

Thus, here, going from place Mumbai to place Khartoum gets cheaper even when its distance is more. You could save money with multi-trip option.

Airlines do not offer the same price on every ticket. They are always changing, sometimes dropping and rising frequently.

Like for example, you may not get different shirts on same the price. It depends on the quality and the season which will define the price of that shirt. Just like that, there are many factors which will define the price of the tickets:

Earlier there weren’t any classes in planes because travel itself was a luxury. As the air travel became common, the classification occurred. This wasn’t just introduced because of luxury but also to accommodate lower pricing and providing services to more people.

The most earnings of an airline comes from their premium class tickets. Cheap flights of economy class, whereas, are most in number to accommodate low income passengers to make travel available to all.

Jet Airways Seat Map of Boeing 777-300ER

This is how airlines cut prices allowing more and more passengers to fly. It’s an amazing example of economics where one product is being sold at different rates. The propose is the same, just the experience is different for the classes inside an airplane.

Sometimes the airlines prices seem to go high as the departure time comes close.

This is because in this airline world, there are two groups of passengers, business travelers and leisure passengers.

Being flexible on price as the company is paying, business travelers are flexible on dates. On the other hand, Leisure travelers are flexible on dates, and not on time.

Leisure routes

For places famous for holidays, this technique is used for pricing. Leisure travelers book their holiday flight tickets in advance, months before the journey date. So, pricing starts with a relatively high rate and the prices get adjusted according to market rates.

The rates are kept reasonable enough for travelers to buy their tickets but profitable enough too. Airlines understand that leisure travelers are more cost sensitive who pay for their own tickets.

Business routes

For routes, like to hongkong, where business travels occur more, the pricing is started with a low rate. The rates grow steeply before the journey date as business travelers tend to book last minute. Business travelers are even willing to pay more for.their confirmed seats.

The airlines are aware that some will buy far in advance and on the other hand, as the departure comes close, the business travelers who are buying tickets need to get where they’re going on time.

Business travelers mostly tend to fly on Mondays and return on Thursdays and Fridays, thus, making these three days of the week with highest price ranges. Tuesdays and Wednesdays are cheaper.

Price matched market

In places with too much competition, there occurs a time when all the airlines flying for that competitive route charge one price only. Because people tend to choose the cheaper ones, the airlines on such routes match their pricing for equalizing chances.

Now, in this case, travelers tend to make their choice based on the airline reputation rather than price.

Also, in such a case, if one airline drops their price, all others also do to match the pricing. This occurs usually two weeks prior to departure of flight. Earlier booking tends to be cheaper.

Airline prices tend to be higher in busy seasons.

Also, some believe that airlines look at browser cookies to check at the airline prices a person was looking at.

Targeted dynamic prices increase customer satisfaction and encourage more bookings. Like, airline loyalty program members get refined display as per their previous booking history.

Now, due to grown technology, there is introduces a basic economy fare, which has minimal amenities. These are low cost flights.

Apart from airlines using AI (Artificial Intelligence), consumers can now use it too as there are applications that compare fares and help you choose the most reasonable ticket.

Because of so much role of AI in airline pricing, its the complex algorithms that fight the airfare war basically. It’s a healthy idea for passengers now can book easily and smartly comparing prices.

There are many factors, but the most important of all are competition, supply, prices of oil and demand. A flight between places where one can also go by driving or taking trains will be cheaper that a flight between places where the only choice is air transport.

One Way Tickets

The one way tickets are more expensive than a round trip. It is based on the minimum stay requirements concept. A one way ticket is costly because the airline is unaware of the time the passenger will stay.

The return flight cost depends on how soon your return flight will be. The return tickets after, for example a week, are cheap. This is for leisure travelers who pay for their tickets and are price sensitive.

The no stay same day return tickets are costly. Business travelers can pay and they tend to return as quickly as possible.

Airlines fill their planes and maximise their profit by calculating plane’s load factor, i.e, the percentage of seats sold on a flight. The higher it is, the more profit they will get.

They do this by constantly changing price of the tickets to fill the seats along with balancing between these business travelers and leisure passengers to make more profit.

So, if the tickets are being sold more than in the past, the price rises. If a competitor raise the price , the airline will raise theirs too. Due to competition, airlines never disclose the number of discounted seats.

How to travel cheap

Economy basic class is the cheapest with no privileges, like of seat selection etc. Economy rates increase as the seats left are less.
Book early. The best time is to buy eight weeks before flying.
Buy the tickets in the midweek, as Fridays, the weekends and Mondays necessarily notice a rush.
Tuesday is the day on which you can buy the cheapest ticket as compared to any other day in a week.

Welcome to the world of airfare pricing

Vijaya Kumar Channalli

HOT! Goa to London one-way ₹8489 ($124)

Open-Jaw Ticket: Delhi-Moscow-Goa for ₹17183 ($249)

HOT! Delhi to Vancouver round-trip for ₹29653 ($416)

To understand it better, let us take an example of a connecting flight: