Why do Flight Prices Fluctuate- Understanding Flight Prices

Why do flight prices fluctuate?

There’s likely been a time when you booked a flight that others got cheaper. Flight prices can be volatile. The same ticket can double even half in price, seemingly in moments.

This can seem counter-intuitive. If you liked a shirt at the mall, the price of that shirt isn’t expected to spike or plummet in a matter of hours. Similarly, if you went to a restaurant, your food cost wouldn’t drastically change in a few minutes. So why are airlines different?

What drives this constant fluctuation in airline prices? There are actually many answers, including demand, time, competition, season, and the day of the week. Put this all together, and you get something called revenue management.

Airlines use revenue management to sell the right ticket to the right person at the right time and at the right price. Many rights have to be in place, but they want things to be perfect!

It’s a delicate balance between selling as many seats as possible and making the highest revenue. Airlines use different revenue management techniques, such as dynamic pricing, yield management, price matching, etc., to maximize revenue. This will ultimately decide the fare you receive for a particular route at a specific time – and yes, time is critical in flight pricing.

At Alternative Airlines, we help you book your perfect flight. With 600+ airlines to choose from, we make sure your trip runs as smoothly as possible. We’re experienced in understanding all things flights, and we want you to have that same knowledge. We’ll use our expertise to help you understand airline prices and get the best value for money.

Demand (yield management):

One of the crucial determining factors in flight pricing is demand. Supply and demand are a vital part of the airline industry.

As demand increases, supply decreases, and the airline revenue management algorithm automatically increases the ticket prices of the remaining seats.

Airlines use a variable pricing strategy to maximise revenue by selling the same seat at different prices to different customers and at various times. 

Airlines pre-define different fare segments, even for the same fare class. Tickets tend to be cheapest right when flights are made available. As more tickets start to sell, prices automatically begin to increase. This optimises revenue. As each fare segment gets fully booked, flight prices will continue to rise.

However, this isn’t always the case. Not all fare segments will be booked within a reasonable time. As it gets closer to the departure date, the more desperate airlines will be to get all their seats full up. This is where the revenue management algorithm rolls back the prices to stimulate demand. Airlines don’t want their flights to leave with empty seats because every empty chair is lost money.

Next time you get a flight, if you notice lots of empty seats, it’s likely that if you looked online earlier that day/week, those seats would have been selling for a fraction of the price.

Time of the booking (dynamic pricing)

In the weeks and months before a trip, prices might fluctuate drastically. Airlines use historical data to forecast their pricing strategy. This helps them determine the optimal balance of sales and earnings at any particular time.

Because of this, last-minute bookings could be more expensive than you'd think. While an airline might offer their final few seats at a discount to fill their planes, this is rarely the case for popular destinations. So, don't rely on last-minute bookings to get cheaper prices. More often than not, airlines charge more for those last-moment tickets because there will always be situations where people desperately need them. Therefore, they're willing to pay more.

The general rule of thumb is that flight prices are cheapest 3-4 months before departure.

Competition (price matching)

Competition is one of the biggest factors behind the fluctuation of plane prices.

Airlines keep their friends close and their enemies closer. They do so by closely monitoring the fare prices of their competitors on similar routes. If one airline drops its price, its competitors will do the same. This practice is called price matching.

Because of price matching, airlines won’t drop their fares below a certain level because they know that if they do, other companies will follow, meaning they all lose out on money.

Competitors are looking to grab market share and are willing to shed profits for it. That’s why flights into small airports are so expensive – they lack competition, and some regional carriers tend to capitalize on this.

Season (base pricing):

The season of departure can also make a big difference in pricing.

Peak travel dates such as Christmas, the summer holidays, Chinese New Year, etc., will always have a higher fare price than normal. Airlines often increase their base fares for these busy seasons.

On the other hand, off-season tickets are always sold at a lower price as airlines try to stimulate demand.

But that doesn’t mean you won’t get reasonable fares for your next holiday trip. Travel management companies and flight booking sites like Alternative Airlines are always looking to get cheaper fares for their customers.

We offer 40+ payment methods, including Buy Now Pay Later and special promo codes. Spend less now so that you can spend more on your holiday.

Day of the week (cheapest day to book flights):

The day of the week can also cause flights to fluctuate. You may have heard that Tuesdays are the cheapest days to fly. It might surprise you to know that's actually true!

Business travellers tend to make up a large portion of weekly demand. They usually fly out on Monday and return on Thursday or Friday. Therefore, these weekdays are the most expensive, making Tuesdays and Wednesdays often the cheapest.

Advanced purchase & minimum stay requirements 

Many fares have advanced purchase requirements. This means that even if a flight isn't full, the price will increase closer to departure.

A one-way ticket will cost you more than a round-trip on many long-haul flights. Odd right? The reason behind this is called minimum stay requirements. These requirements dictate how soon your return flight can be to get a particular fare.

The idea is to price discriminate — business travellers should pay more because they can pay more. Meanwhile, airlines try to give the lowest prices to leisure travellers since they’re the ones who are paying for their own tickets. Therefore, they’re the ones who are the most price-sensitive. Business travellers often want to be home for the weekend, so airlines add a considerable premium on fares with no minimum stay requirements.

At Alternative Airlines, we offer cheap round-trip flights. Get all your bookings done at once and for a more affordable price.

External factors:

Everything we've discussed so far has been on a micro level, but there can be macroeconomic factors that cause flight prices to fluctuate.

On average, 30-40 % of the cost to operate a flight comes from fuel expenses. Therefore, a sudden change in fuel prices can significantly impact ticket pricing. Airlines tend to carry over these charges on the passengers as a fuel surcharge.

A sudden spike in demand can also change flight prices. For instance, if a country's previously been on the red list for travel and this gets removed, there will be a boost in people visiting.

Final words 

Revenue management and airline flight pricing consider many factors when selling tickets, even for the same flight. From the time and season to the reason for travel, all of these contribute to why flight prices fluctuate.

With all this considered, now might be the perfect time to book your flight. Book now with Alternative Airlines. And if this blog has taught you to wait a few more days/ weeks, then you know where to find us.