The airline industry is very competitive, more so by the increasing purchasing power of the people. The demand for flight tickets is always increasing and everybody has noticed that the airfare is not uniform. Even the same exact seat of the same sector is priced differently at two different times. The ticket price is not necessarily governed by the distance covered by the flight. So why are airplane ticket price so random?
Why are airplane tickets so random? What governs the price, why does it fluctuate so much?
Let’s think of one single flight from London to Dubai. That’s 3400 miles and takes about 7 hours on an average. How the airline company sees it is there are two kinds of flyers.
- Business Flyers
- Leisure Flyers
The Business Flyers are the ones who are not much bothered about the price of the flight they will be boarding, neither do they book tickets in advance. They are less price sensitive thus not hesitant in paying the premium price.
Leisure Flyers, on the other hand, are the ones who are always looking for cheaper alternatives and book their tickets months in advance to get the early bird discount.
Are the prices fixed looking at these categories of flyers?
Its all done by a computer system. They have a huge amount of data on customers flying habit and purchase behaviour. There is a dynamic algorithm that runs those data and predicts what ticket price are the customers willing to pay. The system, on the basis of mined data, predicts the spending pattern and manages the price accordingly.
If you are flying from London to Bali or Bankok and because it’s a tourist destination and most of the flyers fall in the “Leisure” category, the price will be relatively cheaper because the prospective buyers are more price sensitive.
If you are travelling from London to New York, irrespective of the distance travelled you are more likely to be charged much higher just because it falls in the “Business” category where people usually travel for business conferences and meetings for instance.
Air tickets are categorised into buckets based on the features like refundability, luggage weight and early bookings. The cheapest tickets are those that need to be booked in advance and do not have the features like refund/cancellations and carry-on luggage.
Airlines first sell the cheaper tickets and if they fill fast they can take those tickets to a more expensive bucket even if the cheaper buckets are empty. Also if they find the demands for the expensive bucket slowing down, they reopen the cheaper buckets back again. That is why for the buyers, the ticket price seems to be fluctuating for no reasons.
Another reason is the algorithm of calculating ticket price also considers the days in a week. Business travellers normally fly out on Mondays and return on Thursdays or Fridays. So if you have a closer look at the trend of the price on each day of a week, you’ll find that Mondays, Thursdays and Fridays are the days when the prices are maximum.
So the people who are travelling for holidays or vacation can be smart and book their tickets accordingly.
It’s apparent that airlines will fly empty seated than give away the last hour discount. This will certainly make the customers wait until the last hour which no airlines would want. So, even if the flight is not fully booked the price will keep increasing as it gets closer to the departure date.
Even the airlines themselves are not certain of what exactly the prices will be in the next two hours or two days before the departure date. Its all dynamic and the calculations happen all the time.
You might want to check this video on how the algorithm that sets ticket price works.