Question about airfares - why do they fluctuate so much?

[TheCowsCameHome]

I've been watching a specific round-trip flight to Denver on United for about three weeks now. Every day the fare for the same flights changes almost daily - up and down, exact same flight numbers, same travel dates. The fare began at $319 RT, and has danced as high as $429, then down to $379, $359, $409, etc....

Why does this happen? I realize different days and times of day can affect prices, but the same dates, time of day, everything the same and yet prices change almost daily.

As you've probably guessed I don't fly much. Is there an answer to this seemingly senseless practice?

It makes me want to forget about the whole trip.

[BlueCollar]

1. The folks over at UAL "yield-management"

are trying to fill that airplane before it leaves.

Airplane seats are a perishable commodity. Once the plane takes off the seat has no value so every attempt is made to fill the seats.

Let's say that the flight costs $10,000.00 to operate. (Fuel/landing fees/crew labor costs/Ground support labor costs etc.), and let's pretend that there are exactly 100 seats on the plane.

Theoretically, if UAL sold every seat for $100.00 they'd break even...however if they only sold 99 seats they'd lose money. As a result, they're constantly adjusting fares in order to maximise the number of seats sold.

If the flight has a historical seat-sold rate of 90 seats, the boys over at yield calculate the fare at over $100.00 to make up the difference. Anything sold over 90 seats is profit...but if they only sell 67 seats they take a loss on that flight on that day.

Clear as mud?

Airline ticket pricing is one of the most dynamic and complex business processes I have ever witnessed.

Hope that helps.

[MajorChode]

5. Not only that, they are trying to maximize the profits by squeezing those who don't plan ahead

The prices start out high because there might be a high demand for a particular flight on a particular day. When and if such demand doesn't pan out, they lower prices to sell more seats. If that doesn't work they will lower prices more, but if most seats sell out they might raise prices to maximize the profits on the few remaining seats which will likely be in high demand at the last minute. So it's very easy to find out the guy sitting next to you paid twice or half as much as you did.

Their operating expenses are not dynamic at all. Fuel costs are often under contract for the entire year and labor costs are pretty static as well.

Personally I think that just because of the wide variances between prices it's a scam. The airlines (at least some of them) are milking some customers simply because they know they will pay more under certain circumstances.

I'm glad I don't have to play those games.

[BlueCollar]

9. I carefully stated that "ticket pricing" was a dynamic process

I never said operating expenses were.

You might want to read:

ISBN: 0-9606874-9-1

Airline Management: Strategies for the 21st Century

Chapter 2 - Airline Economics

Chapter 6 - Revenue and Inventory Management

[MajorChode]

10. I'm wasn't trying to contradict you

[SacredCow]

2. I hear that the online prices can be affected...

by how many people are searching for a particular flight at a specific time.

When I was shopping for my New Orleans to Los Angeles flights, the fares started at about 350-ish (round trip) and were trickling down. I searched every day until they hit about 230, and then made the purchase- I just couldn't imagine that they'd go much lower than that- especially on Saturday flights into AND out of Los Angeles.

[fizzgig]

3. a few things

look for airfares in the wee hours if you can, fares can be a lot lower then because it's not a common time for people to be shopping for plane tickets. also, iirc, most airlines release their sales on monday or tuesday, so that's another factor. how far in advance you are buying the ticket can also make a difference. the sweet spot, at least for me, seems to be five to six weeks out.

once you've booked the trip, still keep an eye on the fare. if you find a lower price than what you paid, some airlines will refund you the difference if you catch it and call them.

i don't know where you're flying in from, but have you checked out frontier? denver is their hub and i've found that their fares are usually lower.

[TheCowsCameHome]

4. I'm about six weeks out now, and

Boston is my origin, not my favorite but Providence RI doesn't offer any non-stops to Denver.

I'll try he wee-hours tactic.

Thanks.

[bicentennial_baby]

6. Did you check Manchester NH?

My friend gets cheap red-eye flights to LA from there all the time.

[TheCowsCameHome]

7. I've heard Manchester is good, but it's over 100 miles away.

I'm equal distance between BOS and PVD.

[Haole Girl]

8. It's a hidden plot to drive the masses insane

It appears to be working. ;-)

[Wapsie B]

11. Kinda like Hulu huh?

You know, the commercial where they suck out your brains? ;-)