How Airfare Pricing Works

Airline ticket pricing can be a head-scratcher. Hands up if you’ve ever seen an excellent airfare rate advertised, but as soon as you enquired about it, the price had gone up by hundreds – if not thousands – of rands. Frustrating much?

Airfares seem to change arbitrarily every week, day or even hour. But there’s some real science behind it. It’s a system known as airline revenue management: the decisions are made by an algorithm that adjusts fares by using information such as past bookings, remaining capacity, demand for specific routes and the likelihood of selling more seats later. This rather complex science is also influenced by base fares, taxes and airport fees, fuel surcharge, food, seat selection and baggage.

Basically, airlines are trying harder than ever to ensure they maximise revenue while also appearing to offer the best value. Here’s how they go about it:

Business or leisure?

Airlines profile their customers to help them adjust prices. There are mainly two types of travellers: leisure travellers and business travellers. They both need flights but their buying behaviour is different, and so is the way each group is priced.

Leisure passengers will typically book months in advance, so airlines tend to start the prices for these seats relatively high before adjusting the rates according to market response. For typical business routes, airlines will start with low rates to fill a minimum capacity, then increase prices steeply as business travellers tend to book last minute.

Here’s an example: a plane with 100 seats is flying from A to B. Most travellers on the flight have booked in advance (leisure). A smaller group have booked at the last minute (business travellers – or people with emergencies). If the airline sets the price per seat at the maximum “last-minute” fares, they would be flying planes with empty seats (a wasted opportunity for revenue). On the other hand, if they fill the plane by charging fares low enough to attract all the “booked in advance” travellers, they will be giving seats away to the “last-minute” crowd for much less (even more lost revenue).

So, why do prices change?

Prices change according to supply and demand. There are some dates of the year when the demand is higher, such as over Christmas and school holidays. During these periods, airlines will raise their prices.

Airline competition is another important factor to consider. If many airlines are flying a specific route, to a region or destination, competition is higher, so airlines will compete with each other by lowering their airfares.

However, if there’s a lot of airline competition, there’s also a lot of passenger competition to book the cheaper tickets.

Of course, the only way to secure your airfare price is to book and pay for it once quoted. We can help with that. Get in touch with Pentravel today.

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