Posted by Sarah Simonovich on September 26, 2016

Understanding the Dynamic Nature of Airline Prices

Booking a trip can be incredibly fun-but it can also be really frustrating, especially when it comes to searching for a good deal on air fare. It happens all the time: you search for fights online, find a good deal, but by the time you eventually go to book your seats, the price has skyrocketed overnight.

No, it's not the world conspiring against you and your vacation plans. It's simply the dynamic nature or airfare.

Why does the cost of airline tickets fluctuate?

The cost of an airline ticket, no matter how reasonable or unreasonable it seems, is always more than just the price of the -seat- itself.

Price consists of a number of possible factors:

Base fare
Taxes and airport fees
Fuel surcharge
Service fee
Seat selection
Baggage
Food

Some of these are optional, depending on the flight and airline, but can be considered some of the factors that go into play when you're comparing prices online. But these don't really explain the fluctuation from day-to-day fares.

Is it true that airlines have several fares per seat? The short answer is yes.

Ticket prices change because of a number of variables:

Booking classes
Early vs. last minute booking
Popularity/demand

Airlines use a variable pricing strategy called yield management, which means that they intentionally charge different prices to different passengers to maximize their total revenue for each flight.

Flying economy is travel class, and refers to the quality of class. But within this travel class is booking class, which refers to the type of ticket. These booking classes (also known as fare class or fare bucket) have different rules and restrictions, as well as different prices based on these factors. If a flight has 100 seats available in economy, those seats are divided into different classes (say 10 per class). These varying classes have different costs and different restrictions.

The lower fare classes have the greatest number of restrictions and are eligible for fewer flights. Restrictions can include specific days of travel and less convenient arrival/departure times. There are also a very limited number of these seats, so when more seats are booked, and the -buckets- are filled, the more fare levels -close- and tickets get costlier. This is how someone can book the same flight from A to B on a Tuesday at 5 am and pay $300, whereas someone else can buy the same seat on a flight from A to B on a Monday at 9 am and pay $700.

Timing is everything

In the airline industry, there are two types of travelers: leisure and business. The lower fare classes are typically directed more at leisurely travelers: vacationers typically plan in advance, have more flexibility with booking dates/times, and can ultimately change plans if prices are too high. Business travelers, on the other hand, often book flights with much less notice and have fewer options regarding when they're travelling. Booking early can get you into the cheaper fare class if you meet the restrictions for it (and can mean the difference between $350 and $900).

It is also typically cheaper to travel during industry lulls: Tuesdays, Wednesdays, and Saturdays are the least traveled days of the week, which can provide you a discount (compared to Monday, Friday, and Sunday, which are the most traveled days).

But if a destination is particularly popular, or it's during an especially busy time of the year (think holidays), prices will likely be higher anyway, no matter when you book it. Airlines can change the number of seats available in each class and will increase the prices on flights that are booking quickly.

Airlines use computer programs to change the available seats per level in real-time, which is part of the reason why prices go up the next day-or sometimes within the span of hours.

When it comes to booking a flight, the best rule of thumb to follow is if you see a good price for a ticket, buy it then, don't wait for a better deal-because while the airline might provide a better deal after you book, the chances are that prices will likely just go up.

And something to keep in mind is this: online travel agencies do not set prices; airlines are responsible. If searching for the best price for airfare seems too much of a bother, you're not alone: there are plenty of websites dedicated to helping you find the best deal on your next trip.