

When to Buy Airline Tickets - thmzlt
http://dlo.me/when-to-buy-airline-tickets/

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joblessjunkie
This study is hopelessly naive. It's like trying to predict the motions of the
stock market.

I have worked on airline pricing software, and have seen the dirty bowels
where your airfare is cooked up.

The truth is that pricing rules are so complicated that occasionally even the
people who are supposedly in charge of these things are not entirely able to
predict or explain the prices.

Airline cabins are broken up into a dozen or more "fare classes", with a set
number of seats available in each class. As you move towards the back, things
get cheaper. As fare classes sell out, the prices for all fare classes on the
flight will be moved up.

Travel between a particular pair of airports does have a base underlying fare,
but so many special rules apply based on day of week, length of stay,
holidays, and more that prediction is a lost cause.

If the airline suspects you are a business traveler, you will be charged much
more. Round trips within a business week are tip-offs. Saturday night stays
mark you as a leisure traveler.

If you are traveling on routes that the airline is trying to promote, or on
which they are competing on fares with another airline, you may pay less.

If you wait until the last minute to purchase, you will almost certainly pay
much more -- unless the flight is nearly empty (and the airline can figure
this out), in which case you will not.

If part of your journey connects you through another airline, special rates
apply.

If you are military, special rates apply.

All of these rules and many more go into a soup and the "pricing engine" is
supposed to sort it all out. Afterwards, there may be significant debugging as
the engineers try to explain why some fares have been applied.

When a competing airline surprises everyone by having extra-low fares, a
sudden panic may set in, and new, "high priority" rules may be put into place
to override the pricing engine to be competitive. These new rules may or may
not stick around forever, where they complicate future pricing puzzles.

Then, of course, the actual tickets are sold through various online
intermediaries, where pricing enters a whole new realm of negotiation, bulk
sales, markdown and markup.

Hey, it's better than the 60's, when all this stuff happened on paper, and it
wasn't until an hour before departure that the airline even knew how many
people would show up at the door of the plane.

Southwest was one of the first to bust through this morass. One of the many
reasons that Southwest kicked everyone's ass was their ability to set prices
simply and predictably, and the fact that all of their tickets are sold direct
to the customer with no intermediaries.

~~~
smanek
Indeed. Because of the insanity of the rules, finding the cheapest fares is in
EXPSPACE and (at least) in NP-HARD.

[http://www.itasoftware.com/pdf/ComplexityofArlineTravelPlann...](http://www.itasoftware.com/pdf/ComplexityofArlineTravelPlanning_Carl_Sep%2003.pdf)
is a really cool read if anyone's interested

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tomkarlo
He's testing the wrong thing. It's not (just) the time of year, it's the time
to flight that determines fare (which is why he's seeing the highest fares for
flights in the upcoming week.

Airlines use complex loading systems to maximize both capacity utilization and
total revenue. So when a flight is far off, the fare is moderate (because they
still have a long time left until the flight). If there's extra capacity on a
flight, they'll start lower the price to use up capacity as its date
approaches. When you're in the last week or two before the flight, the fare
may go way up (because there are only a few seats left and they are looking to
maximize their price) or go down (because they have a lot of seats left and
they're looking to fill them.)

Generally, if an airline is doing things right then a lot of flights will be
fairly full, so you'll most often see prices rising in the last week or two
before the flight date.

(An additional factor is that if you're looking for a ticket next week, you
probably have less date flexibility than someone booking a month in advance.)

(Conversely someone once told me that the actual marginal cost of an empty
seat on a commercial flight is around $35. In theory, if a flight is about to
leave the gate and a seat is empty, the airline should be willing to sell a
ticket for any price over $35... )

There are some other factors as well, such as trying to segregate business
travelers from vacation travelers. Business travelers tend to book last-
minute, want refundable fare and don't want their trip to extend over a
weekend day. Hence the spike on traveling from LAX to the east on Thursdays -
many flights from LAX to JFK or MIA on a Friday won't arrive until late Friday
night at best.

~~~
dvvarf
Just curious, where did you acquire this knowledge? Is there somewhere that I
can read up on the industry, or did you learn all this from experience?

~~~
tomkarlo
I've spent time working with companies that do GDS systems (basically travel
ticketing back-end infrastructure) and talked with a few startups in the
affiliate/rewards space.

Load management is also used a lot in business schools as a case study of how
more complex pricing schemes can be used to extract a higher average price
than would be indicated by a traditional macro-economic demand curve approach.
Basically you're segmenting customers and also varying pricing based on
available inventory.

Airline seat inventory and hotel rooms as well are an interesting problem
because they're essentially wasting inventory - if you don't sell a hotel room
or airline seat before the day it's available, it becomes worthless. That's
why airlines and hotels love to have reward systems where you're compensated
with free travel/stays - it's a way to get value from something that might
otherwise go to waste. (This is also why Priceline works - they are a way for
hotels to get rid of excess inventory on a no-name basis.)

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ajays
I attended a talk by an economist, and he gave the following explanation of
how things worked. The assumption is: the value of a seat goes to 0 at the
instant a plane takes off.

For a given number of seats available, you can plot a price (Y axis) -vs- time
left (X axis) curve. This curve will gently slope down and hit 0 when t=0. Now
you can plot a whole series of such curves, one for each N (where N = number
of seats available). As N goes lower, the curves are higher.

If you're at a certain point in the curve for a particular N, if a seat gets
sold, then you can jump up to the curve for N-1 . Obviously, the airlines'
systems aren't fast enough to do this in realtime; so they do this adjustment
in batches (every Monday and Wednesday?).

Anyways: this was what he claimed was going on. I'm not sure how correct the
above is.

~~~
prodigal_erik
This gets into iterated game theory: even though the value of an empty seat is
basically zero at takeoff (marginal fuel and cabin crew labor don't add up to
a lot), the airline has a long-term incentive not to reduce the price so that
the market for that one flight clears, because in the future it doesn't want
people waiting for cheap last-minute tickets they expect will again be
available.

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tptacek
I'm not surprised SWA doesn't show up in a study like this. The point of SWA
isn't that they're always the cheapest, only that they're _consistently and
predictably_ cheap.

~~~
wtn
Yes--plus, you don't pay an extra 20-30 for checked bags.

~~~
aneth
Or $50-100 change fees.

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alanh
“Southwest didn’t appear once”

Southwest flights don’t show up in online airfare searches — just their own
website.

~~~
jrockway
I think he is paying Mechanical Turkers to look up the prices.

But it's suspicious that AA is missing, who is also not listed on many search
sites.

(But in general, Southwest is often not the cheapest fare. They do have cheap
fares, but if some other airline wants its market, it can use its high-profit
routes where Southwest does not fly to subsidize its low-profit routes where
Southwest does fly. Southwest is 50% advertising and 50% good customer
service, where the other airlines are 100% "revenue management". Both models
seem to be working.)

~~~
smackfu
Another difference is that Southwest won't try to compete with a non-stop that
they don't have. NYC to LAX round-trip is $500+ on SWA, with a stop. Other
airlines it is $300, non-stop.

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powera
There's a follow-up already posted: <http://dlo.me/flying-on-the-cheap/>

That said, I'm not quite sure what he's trying to show. Is it what days are
cheapest to travel on, or what days are cheapest to purchase the tickets?

And as has been noted, this approach is going to ignore Southwest and other
airlines that don't show up on the aggregators, as the people doing this
aren't going to go to every website.

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lachyg
He should contact Adioso, I'd imagine they would have all sorts of data on
this!

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rgejman
I wonder how these prices change over time. e.g. are tickets for travel in
February cheapest if bought in July?

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memoryfault
I would like to see / hear more about the script he wrote!

~~~
bryanh
It seems he used Mechanical Turks (<https://www.mturk.com/mturk/welcome>).

