Airfares Explained

Have you ever compared the fare you paid for an airline ticket with the passenger sitting next to you on a flight? Many of you have no doubt done this at one time or another. Chances are the person seated next to you may have paid more than you, for the same flight. Or maybe you were the poor sucker and paid more! Worse still, some people seated in first class may have paid less for their seats than you did for your uncomfortable middle seat way at the very back of the aircraft. Is this fair?

Welcome to the crazy, illogical world of airline pricing. This week we attempt to explain why the airfare you paid may differ from someone else … and how two people from the same company travelling to the same meeting may pay different fares.

Unlike paint or other consumer products, pricing airline seats is a complex process. The number of published airfares between any two cities is based on a system of yield management which is itself based on a number of factors which include historical demand patterns, available supply, competitive factors, guesstimates about future need and numerous other variables. The result: the baffling array of prices for the same product – an airline seat!

Airline Issues & Concerns:

For every flight airline yield managers or revenue controllers constantly monitor seat availability and adjust prices as customers purchase … or don’t purchase … as competitive factors intrude and as the flight date and time approaches.

Seats on any flight are a highly perishable commodity. Once the plane has taken off, empty seats signify lost unrecoverable revenue. The closer to departure for each flight, the more critical it is for the airline to sell seats that remain unsold.

Airlines continually struggle with the contradiction that the more they sell cheap tickets, the more they also want and need to sell expensive tickets! There is also the concern that the seat they sell at a discount might have been able to be sold at a higher price.

People fly for different reasons. Some people fly because they have to; some fly because it is more convenient, others fly because it is cheaper, and others fly for indulgence (for a vacation) or because they want to.

A person that needs to travel urgently today for tomorrow is probably willing to pay a premium for the seat because he/she must travel. Airlines prefer to sell these 'last minute' tickets for high prices but would be satisfied to accept a lower fare for people that would only travel if it is a bargain fare! The closer to departure it gets, the less valuable the tickets are to the airline, but hopefully the more valuable the tickets are to you the potential traveler. It all depends on the status of the individual flight.

Some flights are simply more popular than others, maybe because of time or day, day of week, time of year, non-stop vs intermediate stops. A flight at 2am is not as popular as a flight at 8am. And a flight on Wednesday is probably not as popular as a flight on Friday.

And so, airlines have to confront these challenges (and many more!) and somehow come up with an airfare structure that enables them to sell as many tickets as possible per flight, and at as high an average fare as possible.

Seat Inventory & Availability:

Seats on any flight are priced at different prices to appeal to the different types of travelers. For example, a flight between Miami and Orlando could be priced at $100 roundtrip to appeal to a bargain hunter looking for a cheap vacation, maybe $150 for people that will then fly because it is cheaper than driving, maybe $225 for people that will fly because it is more convenient than driving, and $300 (or more) to people that absolutely urgently have to get to Orlando as quickly as possible.

Each fare level is given a fare code (V,M,B etc) and a number of seats allocated at that fare. These are commonly known as ‘buckets’. Each fare is subject to a number of booking and ticketing conditions such as dates of travel, length of stay and such. This inventory of seats is loaded into computerized reservation systems (CRS) such as Sabre and Amadeus.

The seats are available for sale on-line and in real time to thousands of travel agents and airline offices worldwide as well as through consumer internet sites such as Travelocity and Expedia. Seat availability for any flight can be viewed and reservations made and/or cancelled at any time anywhere in the world. Small wonder that the availability of seats for a particular flight varies from one minute to another!

Say you have two people traveling together. Your travel agent will check for availability on a particular flight. If there is high demand for that flight it is likely that there may be only one seat available at the lowest fare. In such instances one passenger is booked at the lowest fare, and the second passenger is booked at a higher fare because that is what is available. Travel agents can only sell what is available. This is the primary reason for differences in fare quotations from one person to another.

Another reason is when the ticket is issued. Remember that each fare has governing rules … one being the ticketing time limit (TTL) – the deadline date for issuing the ticket. If this deadline passes and the ticket is not issued, there is no guarantee of seat availability at the originally quoted price.

Consumer Issues – Timing is Critical

The Trinidad & Tobago market is price-driven and everyone wants the cheapest fare, not withstanding the fact that these fares are usually the most restrictive. The airfare you pay is primarily a function of timing and availability: when did you make the reservation, what fares were available and when was your ticket issued?

Was it three months in advance when the cheap (lowest fare) inventory was available? Or was it two days before your planned travel date …. at the height of the busy summer season … with only the most expensive ‘bucket’ was available? Was your ticket purchased and issued at the time of reservation or did your ticketing time limit lapse resulting in cancellation and re-booking of your reservation at which time the cheap seats were no longer available?

Airfares are obtained on a ‘first come, first booked, first ticketed’ basis. Advertised fares are not the same as available fares… And yes, cheap fares simply do sell first! The mechanics of airline seat pricing is irrational to the average human being, however until a simpler system is developed by the airlines we work with the system we have.

The secret to obtaining the lowest available airfare is to plan your travel, make your reservations and purchase your ticket well in advance of your proposed travel dates. Yes … there are instances when you may ‘luck out’ and get a bargain a few days before your date of travel … But that is the exception rather than the rule! Tickets purchased in advance are usually cheaper than tickets purchased at the last minute.