Another blogger, Tom Kyte, commented on his blog recently that he will never understand airline pricing. We can honestly say we don’t either. But we can shed some light on it to some degree. It is consistent in some ways, but ultimately inconsistent.
Ralph Hood, an AirportBusiness columnist, commented that he was shocked that on a ticket roundtrip from Huntsville, AL to Phoenix, which has no discount carrier service, cost only $258.19, and a ticket from there all the way to Boston for $296.60…both of which fit his schedule. Obviously, he didn’t read our post on the subject of USAirways lowering its fares out of Huntsville as part of an attempt to continue fare reductions.
Mr. Hood maintained that with no competition except other airlines…he wondered if the memory of airlines is “so short that they can’t remember where this downward spiral of ticket prices quickly lead them?” Essentially, back into bankruptcy, he and other analysts seem to agree. The summer had a reduction of capacity, a rise in prices, and now, despite its success in stabilizing things to some degree, they are reversing that policy.
Despite a reduction in domestic capacity by airlines as they focus on international routes, where there is less competition and demand for low fares, there is still a consistent reshuffling of domestic capacity. How many schedule changes have you experienced on itineraries for legacy carriers lately?
In most circumstances, certain rules of thumb apply.
- A legacy carrier will lower fares and often switch to one-way pricing if it is competing with a low-cost-carrier on the same route. This would also include multi-segment itineraries.
- For regional airports, the price from the airport to the nearest hub will often be more than the price from that airport through the hub into another airport.
- Revenue management…determining how many seats are sold at each fare, is the key to making money. Some airlines don’t see that. You can sell some seats at $60, but that means you have to sell some seats at $100, $200, etc…or if you aren’t Jetblue, sell more seats than the plane actually has and trust people not to show up.
There is a logical undercurrent to the illogic that is airline fares. Understanding this, and we aim to help you, can help you get the best value for your money. Until then…just remember…unlike casino gambling…even if you lose in gambling and waiting for airline fares to meet your desired target…you can still end up with an airline ticket.