CheapAir.com has been called every name in the book by customers who do a flight search, see a fare, and come back later to find that the fare has gone up by $50 or $100. “This is bait and switch!” they say. And it’s hard to blame them for being frustrated.
Yet, we also get e-mails that heap lavish praise on us after we contact a customer to tell them that between when they paid for their flight and we went to process it, the fare went down by $25 or $125.
The reality is we don’t deserve the criticism or the credit. It’s the airlines who set the prices—we just seek out and present the best ones. And as many of you have noticed, airlines change fares often.
Why is that? Why is checking a fare like playing the stock market – up one day, down the next, with seemingly no rhyme or reason? Here’s a little lesson on airfare pricing that will attempt to give you a better understanding of what’s going on behind the scenes as you shop for fares.
The Airline’s Dilemma
The airlines want to be able to have their cake and eat it, too, and they go to great lengths to make that possible. They employ a very high-tech strategy called yield management which intentionally aims to charge different prices to different passengers in order to maximize the total revenue collected for each departing flight.
Here’s what we mean: Let’s say you’re an airline. You have a plane with 100 seats on it that you’re going to fly from Point A to Point B. There will be a group of people — business travelers, travelers with family emergencies, people who just don’t care about the price — that are willing to pay a ton of money for a seat on that plane. We’ll call this the “go-at-any-price” group. Additionally, there will be a much larger group consisting of price conscious individuals who would love to travel but don’t necessarily need to. This second group may be willing to buy a ticket on this flight, but only if the price is affordable. We’ll call this the “go-if-the-price-is-right” group.
The airline’s dilemma is that if they set the price per seat at the maximum price they can get from the “go-at-any-price” group, they would generate a lot of revenue from those passengers but they would be flying planes with a lot of empty seats (a wasted opportunity for even more revenue). On the other hand, if they fill the plane by charging fares low enough to attract all the “go-if-the-price-is-right” travelers, they will be giving seats to the “go-at-any-price” crowd for far less than they would have been willing to pay. The thought of that makes the airlines cringe.
An airline’s goal is to get as much as they possibly can for each seat on the plane. If 10 people are willing to pay $1000, they would love to sell 10 of the 100 seats for that price; if there are another 20 people willing to pay $500, then they’d sell 20 more seats at the $500 rate; and so on until the plane is full.
But how can they do that?
Same Seat, Different Fares
Airlines never just have one fare – they have several, even dozens, of fares for each seat and they employ sophisticated techniques to maximize the number of people who get stuck paying the higher of those fares.
Here’s a real-life example. United Airlines currently publishes 43 different one way economy class fares for flights between Los Angeles and Chicago. These fares start at $109 one way, but there are also fares of $139, $149, $159, $189, etc. all the way up to $1765! The highest fare is more than 16 times more expensive than the lowest fare even though, no matter which price you pay, you’ll end up with the exact same seat, the exact same food (or lack thereof), and the exact same service. (To be the fair, the very highest fares do usually include a few extra, but relatively minimal, perks like being refundable, easier/cheaper to change, first dibs at the best seats on the plane, etc. but nothing that substantially changes what you get for the fare that you pay.)
Knowing that a given seat on a United Airlines flight to Chicago may cost anywhere from $109 to $1765, you would naturally say “I’ll take the $109 option” but, of course, the airlines don’t make it that easy. Their goal is to funnel every would-be traveler into the highest “fare bucket” that they can. They do that, first, by adding restrictions to the lowest fares that limit how many people can take advantage of them. For example, the $109 fare to Chicago requires you to purchase it 21 days in advance and to fly on Tuesdays, Wednesdays, and Saturdays (the least popular travel days, where it’s harder to sell seats at higher fares). Other fares have 14 day advance purchase requirements and, still others, 7 day. Some fares are blacked out around holiday and other peak travel times. Generally speaking, the lower the fare, the more restrictions there will be on it, and the fewer flights that that fare will be offered on.
But just as important is the fact that, even if a fare is offered on a certain flight, the airlines will limit the number of seats available at that fare level. For example, United may say that on a given flight they will only sell up to 10 seats at the $109 fare, 15 seats at the $139 fare, 20 seats at the $149 rate, etc. From a practical standpoint, this is the probably the most important point to understand about airline pricing. As more and more seats are booked on a flight, more and more fare levels will be “closed out” so the end result is that additional passengers will be stuck paying higher fares.
It’s actually even more complicated in practice. Airlines actually have computer programs that are constantly monitoring flights, analyzing booking patterns, and in real-time changing the number of seats available at each fare level. If a flight is booking up faster than expected, an airline may decrease the number of seats available at some of their lowest fare levels, or wipe them all out altogether. If a flight is not selling well, suddenly more seats may appear at fare levels that were previously “sold out”.
Why Fares Change all the Time
This is why fares change all the time. If you see a different fare today than you saw yesterday, the issue is probably not that the airline made a conscious decision to raise or lower their prices — at least not directly. Instead, it’s likely that seats in the lowest fare categories sold out or were closed out. For instance, if there are 3 $109 seats left on our example flight to Chicago and someone grabs them, the lowest fare available will change to $139. If United’s yield management system looks at the flight and says “Wow, bookings are strong”, it may choose to close the $139 level, too. Then the fare will appear to “jump” to $149. But what if two days later 2 families of 4 booked on the flight decide to cancel? The same system might say “Uh-oh, we have way too many empty seats” and decide to open the $109 and $139 fare levels back up. This process happens continuously until hours before departure. Generally, over time fares on a particular flight will get higher and higher as more and more seats gets booked and more and more fare levels get closed. But there are short term blips all the time and, if you look at it hour to hour or day to day, there will be moments when fares temporarily dip before heading back up once new bookings come in. This entire process is extremely dynamic as at any given time there are hundreds of thousands of shoppers looking for flights and making reservations — and each reservation may have repercussions on the fares paid by subsequent travelers on the same flights.
Fare Sales
What about fare sales? Airlines are constantly promoting one sale or another and you may be wondering how fare sales play into all of this. In fact, if you subscribe to our fare alerts, you probably are constantly hearing about a brand new fare sale – often more than one a week.
The real news would be if there were no sales going on. To the airlines, almost everything is a “sale”. Returning to our United Airlines Los Angeles to Chicago example, of those 43 fares, about two thirds of them are considered to be “sale” fares. A “sale” fare really just means that it requires booking or traveling between a specified time period . Some sale fares are really good deals; others are worthwhile only because they provide decent fares on dates or times that previously weren’t eligible for the lowest fares; and still others are just plain meaningless because they are no better than one or more other fares already in the market.
What’s important to remember about sale fares is that, if they are really lower than the other fares in the market, they will be even more limited from an inventory standpoint. So, for example, if United introduces a 3 day sale fare to Chicago for $99, it will almost definitely not be offered on flights where the existing $109 fare has already been sold out. In practical terms, this means that when sales hit the market, they will usually only be obtainable on flights that are pretty wide open.
Confused Yet?
We apologize if you’re more confused than when we started. Air fare pricing will do that to you. The bottom line is this:
- It is not uncommon for fares on a particular flight to change on a daily, sometimes even hourly, basis
- If you see a fare, know that it may not be there the next time you search –it could be higher, it could be lower
- Neither CheapAir.com, nor any other on-line travel agency, has the ability to set prices; we aim to do a really good job at sorting through tens of thousands of options to find the best deals, but it is the airlines and their pricing teams who are actually responsible for those deals
- Fares on a particular flight will generally increase as the flight becomes more heavily booked but at certain points, fares may fall dramatically if a fare sale is launched or an airline computer determines that booking levels are below where they should be for a given departure date
Got questions? Leave a comment and we’ll be sure to get back to you or join our Facebook community to share your thoughts.
April 20, 2011
Great article. Good for you for publishing it. I am not sure United will be happy that they were used as an example. But giving an actual example was an excellent way to make your point.
April 20, 2011
Good information! Thanks for explaining!
April 20, 2011
Thank you for this valuable information, i always had questions about how this all works and to be honest it does become very frustrating. Thanks so mush for clarity, it all makes sense now. Thanks again!
April 20, 2011
This process of managing bulk and market-driven fares is also why I’ve found it much cheaper to use a Canadian or American agency on-line (like Cheap Air) than a local airline or agency here in Moscow, where I’m staying.
Great article; most enlightening! Thanks!
April 20, 2011
Is it true that the yield management software is sensitive to the number of fare searches and requests too? And that by making lots of requests to find out the fare on a route – perhaps on different dates or with different websites – one person can cause the fares to rise by making it look like a sudden strong demand from lots of different people?
April 20, 2011
Alec: good question. While each airline has its own yield management algorithm and practices, we have never heard of an airline adjusting fares based on inquiries (as opposed to bookings). Even if they were to do so, given the enormous number of inquiries being made across all of the travel sites every second of the day, it would be highly unlikely that any one person’s searches could have a meaningful impact on those numbers.
April 20, 2011
I’ve heard from others that say booking a flight on certain days of the week or late at night/very early morning yield cheaper fares. It would seem that with the above explanation this would not be necessarily true and not necessarily a systematic way to always get the lowest fares?
April 20, 2011
Angelo: we have never found time of day to be a big factor in fare levels, but day of the week definitely can make a difference, at least for domestic flights. This is because the airlines have gotten into the habit of frequently launching one, two, or three day fare sales on Monday night or Tuesday. There are a million exceptions to this and no perfect patterns, but if we absolutely had to rank the best days of the week to buy flights we would say Tuesday, first, then Wednesday, Thursday, and Monday in that order.
April 20, 2011
I’ve been selling travel for almost 25 years, and this is one of the best explanations on price flucuations I’ve ever seen. Thank you, Cheapair.com! And pretty much everything you’ve described re: airfares applies to cruise fares as well. Prices change at the speed of light, and as a travel agent, I have no control over those changes! When you see a flight or a cruise fare that you are comfortable paying, book it right then, don’t wait! It may be lower before you travel, but the chances are far greater that if you wait, you’ll end up paying more!
April 20, 2011
Thank you so much for this information on price flucuations. I learned so much and I also appreciated Kay S. suggestions. Thank you again for setting all of us straight. I think your company does a wonderful service for all of us that are on a limited income.
April 20, 2011
I have had the experience of being quoted one fare on an inquiry and then several minutes or hours later being quoted a higher fare for the identical trip. (I don’t ever recall being quoted a lower fare.) I have also experimented with deleting my browser history and cookies and immediately thereafter being quoted the original fare which had, curiously, disappeared on my second inquiry. Are the airline web sites tracking individuals who use their sites and using yield management on an individual basis?
April 22, 2011
I have also had that same experience…deleted cookies and history, then initiated my query again, to find the fare went back to the previous, lower quoted fare. Otherwise, it seemed the fare kept rising, as if trying to prompt me to “purchase now, while the price is lower”. Is it possible, in light of the above explanation by CheapAir, that this is merely coincidence? Stranger things have happened, I suppose.
April 23, 2011
That’s weird! Why didn’t Cheapair answer your “cookie deleting” question? Hmmmmm…..
April 23, 2011
Terry: we answered Rob, another user who also posed the question (see below). Here is our reply:
Rob: I cannot speak for other sites, but I can categorically say that CheapAir.com never has and never will adjust price quotes based on what may or may not be in your cache or cookies. It is true that if you were to do a search for fares and leave your browser window open for a few days and then come back to it, you may still see the original fare you were quoted — even if it has since changed. But as soon you continue to the next page, it would be corrected. We double check all fares just before asking for your credit card to make sure they are still current.
As for our revenue model, we collect a flat fee per ticket sold. So we actually benefit when fares are low — we sell more tickets
April 25, 2011
I’m with Rob on this one. The fares only seem to go up. It’s horrible, you search for a flight, and then you try some more variables (different dates, different airports) and then go back to the first search and prices are higher, ALWAYS higher. I have never in my life, and I travel by air at least 3 times a year, seen the prices go back down. Only after deleting browsing history and cookies do I ever get back to the original lower price. It is even worse if you and your spouse and/or other family members are all searching for the same flight at the same time. All that activity must trigger the “quick someone really wants to fly so lets jack up the price” response. I build web pages and web based applications for living so I know how easy it would be for a site to do this. It really does appear that the trick is to appear as new a customer as possible. For when I look on one computer and the prices goes up, If I try again at any time later on a 2nd computer, or smartphone, the price is back to the original query.
And no matter what CheapAir.com says I want an explanation as to why, when every time I delete my cookies do I get the original lower fair again? This has happened to me far too many time to be coincidence.
April 26, 2011
N8: Are you seeing this on our site, or somebody else’s? With CheapAir.com, the fare data that we show after each request comes straight from the airlines. All searches are done anonymously. The airline knows only that CheapAir.com is requesting the data, but they have no way of knowing who its for or whether or not that customer has done the same search before, or has anything specific in his browser history. If you are seeing this behavior on our site, send us the details (search parameters, exact times of searches) and I’ll have our tech team have a look. If there’s a discrepancy, we’ll provide an explanation.
April 20, 2011
Very well written. Thank you.
April 20, 2011
This in amazing article and very considerate of you to send this out to your customers. Bottom line. Great customer service on your part. Keep it up! Now, if only the airlines would think to do the same with customer service, wouldn’t that be something?
April 20, 2011
Excellent article.
In off peak periods when flight prices are low and there are a number of empty seats would prices normally drop say 4 or 6 weeks before travel?
April 20, 2011
Good information. I have always wondered about the changes in ticket pricing. Thank you for explaining
April 20, 2011
Thanks so much for a very well written article on airline pricing. I’ve had this happen before–even on an airline’s site (Southwest)–and was really frustrated. Buying an airline ticket these days is like playing a video computer game–what a challenge! It helps at least to understand this. Wonder what would happen if grocery stores tried this tactic? Looks like oil companies already do. Thanks again.
April 20, 2011
I agree with RonA – By clearing your browser history and deleting cookies, you can sometimes get the original quote. I wonder how many sites use this tactic to fool us into buying the higher fare?
April 20, 2011
Whoever wrote this article should be commended for having exceptional writing skills. I have never seen a more clearly written explanation of a technical topic than this piece provides, and I have worked in the computer field for over 40 years. Great job!
April 20, 2011
Thanks so much for this information. It explains a great deal that I wondered about.
April 20, 2011
Thanks for the great info ! Explained al last!
April 20, 2011
It woudl seem I have been not so lucky…the several times I looked at fares…and by the time I actually decided to buy them the price/s jumped upwards…not once did I get to enjoy the downward pricing…cestlavie.
April 20, 2011
Such a great, informative article, thanks! It definitely takes away a lot of the mystery surrounding flight search results.
April 20, 2011
Transferable tickets would be the “bomb”. Being in a foreign country with a non-transferable ticket $#cks!
April 20, 2011
Simply amazing… downright good information to know. Indeed, thanks for sharing this. Airfares 404 — one of the best.
April 20, 2011
Thanks for the info. It was very easy to undersstand and to the point and explained with examples.
April 21, 2011
Excellent explanation. Never underestimate the airlines.
April 21, 2011
Very informative article. Thanks!!!
April 21, 2011
Just echoing the thoughts of others here; great article and clears it up for me, This was something that had frustrated me for years, but now I understand it much better!
April 21, 2011
Admirably clear and very helpful; many thanks!
April 21, 2011
Yes, … well explained article. I have been frustrated with the constant changes in ticket prices, when first seen the low advertised sale price.
I’m curious?….does it also hold true for business class and first class as well? I have seen some advertising of business class fares as 60 -70% off!
Thank you for the well explained article.
April 21, 2011
Until a few years ago, business and first class fares were a lot simpler. Usually there was just one price per route, and it didn’t change very often. Since the recession, though, airlines have tried to get more creative and some of the same principles do apply now. Although business and first class fares aren’t nearly as dynamic as economy class fares, there are still a fair amount of sales fares that can be had if you book far enough in advance. For example, for travel to Europe the current lowest business class fares in many markets require you to book 50 days in advance.
April 21, 2011
Can’t speak to all air line policies; but I know if Southwest lowers a fare after you’ve purchased the ticket, they will give the difference as a credit on your next flight. But, you must discover the change yourself by frequently checking back… then calling and requesting the credit. I’ve done this.
April 22, 2011
Wow, I didn’t know Southwest would do that. I love that airline and have been flying with them for years. I’ll keep this in mind for future flights.
May 19, 2011
Is your B’day 7/14?
April 21, 2011
Great article, Thank you so much. Though I am one of the people who have seen price drops between the time I viewed a ticket and the time I purchased it, I would definitely agree that you should buy when you feel a price is reasonable because when it happened to me the price drop was not really huge; however, the price increase always seems high.
I bought an international ticket (on cheapair.com) for a family emergency one day prior to my departure and the price was at least 40% cheaper than the cheapest price I found on other websites – I am not sure, even after reading this article, how that was possible, but I am definitely thankful.
April 21, 2011
Great article, thanks for writing! I actually have once had the luxury of getting a downward quote. Got one price to London and was all ready to book, computer literally froze/crashed. When I was able to get back online, the price had gone down over $100 – this was several years ago and has NEVER happened again.
April 21, 2011
I knew all this from my Econ classes at the university. There is no surprise people, just book your tix when you feel that the price is right! However, I must admit that I was burned once. I booked a ticket from LAX to FRA for about $1300 and several weeks later, the price dropped to $1150 for the same exact dates and time… But overall, the price always go up when the less seats are available for the flight.
CheapAir, thanks for the heads up on what days to book tickets. I’ll try it next time I book domestic flight.
April 21, 2011
I used to work for a number of scheduled airlines as a dispatcher and would see the booking levels on a flight as a matter of course. I automatically knew how the booking levels and fares related, but this is the best explanation of how it works that I have heard. I imagine that the software is much more sophisticated now than in my airline days.
April 21, 2011
Thanks, now I understand why the changes. I recently missed out on tix to go to Europe. Didn’t book it right away for the three of us. Came back the next day and the prices went up. Frustrated, but have to keep looking. Still need three tix for us. Traveling with two children is not easy to find the seats. Thanks.
April 21, 2011
How can I learn what the lowest of the many fares is? Can I authorize you to buy a ticket for me at that lowest price if/when it becomes available? I am retired and can travel at my leisure and would do so more often if I could fly for lower prices.
April 22, 2011
Don: You may want to try our flexible date search for something like this. From our home page, enter your cities and instead of entering dates click “My dates are flexible.” Then you will get back a list of the lowest possible fares that are currently offered. From there, you can search for dates on which each fare is available.
April 22, 2011
Decided to take the time to read your whole article–it was well worth it. Thanks. My experience was that I booked tix for my hubby and me from our home city to visit relatives in Boston. I booked them separately (but at the same sitting) because we each had our own code numbers. I did his first, then mine. His flight to and from Boston were at the advertised special rate, as was my flight to Logan. But when I clicked on (seconds later) for my return flight, the price had gone up 20% for that seat! I followed through as far as I could with the airline but they said they had no control over price jumps like that, even in the middle of a transaction.
April 22, 2011
So, how does cheapair make money. Do you never change your commission, and is it a flat rate? Why do the fares change when I empty my cache and delete cookies? I think there’s more to the story here.
April 23, 2011
Rob: I cannot speak for other sites, but I can categorically say that CheapAir.com never has and never will adjust price quotes based on what may or may not be in your cache or cookies. It is true that if you were to do a search for fares and leave your browser window open for a few days and then come back to it, you may still see the original fare you were quoted — even if it has since changed. But as soon you continue to the next page, it would be corrected. We double check all fares just before asking for your credit card to make sure they are still current.
As for our revenue model, we collect a flat fee per ticket sold. So we actually benefit when fares are low — we sell more tickets.
April 22, 2011
I recently learned about a wonderful site called http://www.yapta.com. It only works for certain airlines, but some airlines do offer refunds/travel vouchers if your fare drops. I recently purchased a ticket through Delta and 2 weeks later the fare dropped $100! I called to see if they offered refunds for the difference and was told no. But Yapta actually says that Delta DOES offer travel vouchers for anything over $150 difference. So I signed up and Yapta keeps track of the current fare and if it ever goes down $150 they will let me know so I can apply for my voucher!
(though with Delta, they actually charge $150 for changing your ticket to the new price, so it would have to be more than $150 in order for me to actually get any money lol)
April 23, 2011
Excellent information, clearly written. Thanks so much for helping out this poor befuddled traveller!
April 23, 2011
Thanks for giving this ‘enlightening’ article. It does explain some of the airlines gimicks!
April 25, 2011
Fantastic, now if I could only convince my partner that the closer to my planned departure the cheaper the ticket. I might luck out Like I did once in Miami four years ago in the summer. I found a 99 dollar one way back to Portland from Ft Lauderdale.
April 26, 2011
Can you by a ticket too far in advance. Is there an optimum time period befor the flight to book?
April 26, 2011
Ken: Great question, and an important one. Yes, you definitely can buy a ticket too far in advance. When airlines have sales, they typically only include flights over the next few months. So if you book too early, you might end up missing the best deals. While there is no hard and fast rule, the sweep spot is generally about 4-8 weeks in advance for domestic tickets, and 6-12 weeks in advance for international. One caveat: if you are travelling somewhere where you know flights are going to be heavily booked (i.e. holiday travel, Super Bowl, Mardi Gras, summer in Europe) you may want to book a little earlier than you otherwise would, because once a flight gets too heavily booked you can be sure the rate will go through the roof.
May 19, 2011
Thanx for asking this. I find the answer very helpful!
April 27, 2011
Thanks for providing a very detailed explanation into air travel rates fluctuating. As a travel enthusiest, I have discovered some of these points on my own however, sometimes find it difficult to convey to potential clients for them to gain the proper understanding, good job!!
May 2, 2011
while booking online, how they distinguish the different passengers like “go-at-any-price” or “g0-if–the-price-is-right”group
May 3, 2011
This is a great article. I have another question: do the airlines’ computer programs that monitor bookings and change prices in real-time assess searches for flights as well? I have a suspicion that fares have sometimes been raised when I checked the price too many times before buying. Is one person’s constant checking of a fare enough for these computer programs to “notice”?
I’ve heard about airlines tracking cookies to price discriminate, and I used private browsing to avoid that, but the fares are still higher than they were hours ago when I checked. Should I wait a week and check again?
May 4, 2011
Wonderful article! I agree, it was written very well and covered lots of information thoroughly and clearly. THANKS!
I do have a question: If a flight requires a 14-day advanced booking, for example, does a person have to wait until 14 days before the desired departure date to book the flight? If that’s true, then according to your article, the offer could have changed at any time and the flight/price be unavailable when it came time to book. How does that work?
May 4, 2011
Jill: A 14 day advance purchase requirement means that you can book that fare 14 days or more prior to departure. So, no, you wouldn’t have to wait until exactly 14 days in advance.
June 8, 2011
Good job explaining why fares go up and down
June 30, 2011
In agreement, excellent, well executed, well explained article. However still, if I find out that the guy next to me bought the ticket at $109, while I bought it at $149, on the same day, I’d be pretty upset.