
Air Fares 101 – Why do fares change all the time? - ZeljkoS
http://www.cheapair.com/blog/travel-tips/air-fares-101-why-do-fares-change-all-the-time/
======
saosebastiao
There is a big problem with trying to game the system with the airlines: The
pricing is done using control theory. In fact, they have the most mature
application of control theory to pricing out there, probably by virtue of
being to first to apply it in that way.

Practically, that means that you can only game the system if nobody else knows
how. If you are the only one that knows how, the algorithms probably can't
detect and compensate for the error. As soon as news breaks out, the algorithm
starts compensating. We saw this about 10 years ago when there were a few
companies that started promoting the ability to search for Y-class fares...it
was all but a year or so before the pricing stabilized. The same problem is
currently happening for the hidden-city ticketing trick [1](the algorithms are
compensating, although the airlines put in some manual systems when it first
broke news).

The same goes for these ideas of "the best time to buy". Not only is
historical data not good enough, but the more well known the data becomes, the
worse the predictions become. This has already happened to some degree with
the "buy as early as possible" crowd. Now it is _more_ expensive to buy early
than it is to buy late...something that wasn't previously true.

The lesson? If you figure out a way to game the system, don't tell anyone
else.

[1]
[http://www.wsj.com/articles/SB100014241278873235398045782597...](http://www.wsj.com/articles/SB10001424127887323539804578259740155116054)

~~~
mattsh
Or, create a system where the airline benefits from you gaming the system.

For example, imagine you 'game' the system in such a way that you will
definitely be in an otherwise-empty seat, and you would only buy a ticket if
you successfully got your intended discount. Then, airlines wouldn't be
incentivized to 'adjust' and you could keep getting discounts.

We are playing with a few prototypes to do exactly this at
[http://www.projectcaspini.com](http://www.projectcaspini.com). Sign up for
the mailing list if you are interested.

------
DanielBMarkham
In the states, the more I deal with cellular companies and airlines, the more
I hate them.

It's not just me: it's a common opinion. One prominent business magazine had a
cover a few years back titled something like "The companies we all hate"

Consumers like to purchase things in atomic units and simple terms. If I go to
the grocery store, there's a bushel of apples. The sign says "Granny Smith
apples: $1"

I can confidently pick up an apple, walk to the register, and expect to pay a
dollar. The grocery store can advertise their wares and prices in the paper or
online and I can plan on going to the store and making the same exchange.
People like being able to predict how much of one thing they have to trade for
an amount of something else. When lots of competitors do this in a market that
anybody can participate in, it's good for everybody.

But when I buy an airline ticket? The rules are many times so byzantine that
entire cottage industries have sprung up in an effort to capitalize on them.
How much does it cost to fly coast-to-coast? Beats the heck out of me. There
is no answer. Could I pick up a job where I had to fly ten times from point A
to point B with a few day's notice and be able to include travel costs in the
price? No, not unless I were to charge up to 17 times the cheapest rate.

Complex pricing systems may be great for the airline, but they're damaging to
the free and open market. Instead of using rapidly-changing yield management
systems, we'd all be better off if they just used an cross-carrier auction
with transferable tickets. Let downstream providers handle liquidity.

I doubt this will happen, and instead there will be more penny-pinching, crazy
rates, and unhappy customers.

~~~
markdown
This doesn't take away from your point at all, but I just wanted to point out
that:

> I can confidently pick up an apple, walk to the register, and expect to pay
> a dollar.

This is true in most of the world, but not in the US, where you don't know
what you're paying until you reach the checkout counter.

~~~
thaumasiotes
Well, you can weigh the apple yourself on the scales that occur all throughout
the produce section... but yeah, I'd be surprised to see a flat rate for fruit
by species no matter the size.

Fruit is sold by weight, not count, in China too.

~~~
Someone1234
That wasn't their point.

In most of the world if a product's price tag says X then you pay exactly X at
the register (e.g. £2 sandwich costs exactly £2 in cash, you hand then exactly
£2 and leave).

In the US that is not the case. Almost everything has a "hidden fee." You go
buy a $2 sandwich but pay $2 + 6% ($2.12), if you get food in a restaurant you
pay $price + 15-20%, an advertised $30/month cell phone plan is actually $45
after "taxes and fees," and so on...

Within Europe/EU in particular these types of hidden fees are actively
combatted. Just within the last few years a few airlines (e.g. Easyjet) got
into trouble for charging both a credit card or debit card fee (approx. £3-5)
which wasn't reasonably avoidable and wasn't mentioned in their adverts.

The US in general is rather consumer hostile on the grounds of "business
freedom."

~~~
HeyLaughingBoy
It's far from "a hidden fee." You simply have to know the rules.

In some states, there is sales tax. In others, none. Sales tax may or may not
be applied to clothing depending on state. Sales tax may or may not be applied
to food, or only some kinds of food (e.g., alcohol always taxed), or only to
food above a certain threshold.

All in all there's nothing hidden about sales tax. It shouldn't be a surprise
that people are expected to know how the sales tax system in their state works
when they are interacting with it every day.

~~~
gizzlon
> _It 's far from "a hidden fee." You simply have to know the rules_

But that's the same thing! If people don't know or understand the rules, the
fee is hidden to them. You could say that people have should educate
themselves, and my reply would be that there's _infinite_ amount of complexity
that could be added to the pricing if needed: _" Oh, on cloudy Wednesdays,
when Jupiter shines and the Yen is down.. it's 2$ extra"_

------
zrail
Southwest, as far as I can tell, doesn't change rates once they've published.
Three rate tiers, optional early check-in to get a better boarding order
position, and free baggage.

The most striking difference is that, in general, the flight attendants are
_happy_. They smile. They joke around. Sometimes they sing songs. I was on a
flight a few months ago where the entire plane played a game because it was
someone's birthday.

If Southwest flies anywhere close to where I'm going, I make a point to fly
with them. Even if they're slightly more expensive, the drastically less toxic
experience makes up for it.

~~~
jcfiala
As a parent, I fly Southwest so that I can take advantage of the two free
checked-in bags you get per ticket. Not having to wrestle several overfull
bags of clothes on and off of the plane makes Southwest a great bargain for my
piece of mind.

~~~
monksy
If each kid has a ticket, you can check a bag under their name. Why do you
need 2 bags?

~~~
namiller2
As in, if they had to pay to check bags, they would bring them all as carry
on, where with southwest they can check them for free and not deal with. I'm
not paying to check bags either.

------
Someone1234
One additional note: While airfares do get progressively more expensive (on
average) as you get closer to your flight, if you book too far out you will
actually pay MORE. A lot of discount fares don't open until around six months
before a flight (approximately), sometimes less. So if you book too far in
advanced you'll pay close to a "full fare" (or at least miss out on some of
the better discount classes). This, I suspect, is because the airline hasn't
yet calculated how many discount classes they'll be opening up, so they just
give you a "default"/safe price that they likely won't regret.

Just something to keep in mind from someone who often plans travel 6+ months
in advanced. Booking flights 3-4 months in advance is fairly safe, longer or
shorter and you might suffer for it.

------
jexe
So has anyone built a site that lets you put limit orders on airline seats
yet? I'd love to, say, have something automatically book a $250 flight across
the country if the price happens to cross that threshold in the next week.

~~~
rbcgerard
I think that's a pretty good idea -

two quick thoughts:

1.as a consumer its hard to do more than "technical analysis" on a chart of
the ticket price to figure out where to set your limit order

2\. What are the odds that the company doing this doesn't share their order
book with the airlines?

still like the idea

~~~
eru
> 1.as a consumer its hard to do more than "technical analysis" on a chart of
> the ticket price to figure out where to set your limit order

You don't do any analysis on the price. You just introspect, and figure out
what is cheap enough to make you get up and fly, and that's the price you set.

------
coldcode
Good overview. Having worked at a GDS subsidiary and written about this topic,
another thing to add is it depends on how many caches there are between you
and the root database. Airfares are heavily cached so the data that is shown
in search results is often stale; only the final booking (when you actually
pay) is the real number. The more contention for seats as you get to the last
few the more likely the final price can jump. For example, Google's flight
data is very stale since they don't do any booking, they don't really have to
update all that frequently, which means they can return results from their own
cache fast.

~~~
giarc
Great explanation, however why do I never see "Your fare has increased $55" on
sites like Expedia but sites like CheapAir.com have it all the time. I expect
Expedia and CheapAir.com have the same source of data therefore it does seem
like a bait and switch situation.

~~~
coldcode
Expedia may decide to eat the difference (it can go up and down) and other
folks may not be able to afford this (remember that airlines only give like
$10 per ticket, not much margin).

------
ExpertFlyer
What no one is telling you is that the actual published fare tariffs don't
change that often. What does change and is dynamically managed by the airlines
revenue management departments is the availability of different fare classes
that the tariffs book into. It's the combination of fares and fare class
availability that determine the current fares available for a flight (and not
just the lowest fare).

On ExpertFlyer, we show all of this hidden raw information that normally only
travel agents have been able to see as we buy the data from the airline
reservation systems. The first few pages of our education guide give a simple
overview of how this works: [http://www.expertflyer.com/edu-
guide.pdf](http://www.expertflyer.com/edu-guide.pdf)

~~~
oostevo
In case it helps:

I've been a subscriber for several years, and this is the first I've seen the
Education Guide. It might just be because I'm oblivious, but perhaps you might
want to make it more prominent on the "New to ExpertFlyer" page?

I've learned everything in there by osmosis at this point, but the strategies
would have been a cool thing to know when I was getting started.

------
rspeer
I was hoping for something that explained the part where they get you to pay a
higher fare by tracking you on the Web. But maybe an insider site like this
wouldn't be willing to talk about that.

There are many sites that describe this happening, such as [1]. And I've seen
it happen to me: a fare would go up by $50 while I was searching, and opening
a private browsing window would make it go back down.

[1] [http://www.halfwayanywhere.com/budget-travel/your-guide-
to-c...](http://www.halfwayanywhere.com/budget-travel/your-guide-to-cheaper-
flights/)

~~~
manacit
I don't mean to sound standoffish, but as far as I know this isn't true.

I have yet to see real proof that airline companies get you to pay a higher
fare by tracking your searches/browsing. While I'm sure you saw a $50
difference, it was likely a slightly different search, which is almost always
what happens when people claim they've noticed this.

About a year ago, someone on reddit went out and offered a year of reddit gold
for anyone that could, there was nobody:
[https://www.reddit.com/r/LifeProTips/comments/1ekv6e/lpt_bou...](https://www.reddit.com/r/LifeProTips/comments/1ekv6e/lpt_bounty_1_year_of_reddit_gold_to_the_first)

As recently as last week, someone claimed they had reproduced, but they used
slightly different search params and ended up with something totally
different:
[http://www.reddit.com/r/travel/comments/2okml5/for_anyone_pl...](http://www.reddit.com/r/travel/comments/2okml5/for_anyone_planning_travel_who_doesnt_use/)

This myth is rife with anecdotal proof, but I've yet to see anything concrete.

~~~
xaro
I experienced this just the other day. My father was looking at a price in his
computer that I couldn't get (I was getting one that was $500 extra). I erased
the cookies of the AA site, refreshed (exactly the same flights, the same
days, everything the same) and bam! $500 dollars cheaper.

~~~
Bpit
I bet you can't reproduce that result ... As someone else here stated, nobody
can prove this happens

------
igrekel
Maybe to point out that the number of seats in a fare bucket doesn't need to
change at any second for the displayed fare to change. For most airlines, the
fare buckets are not independent and bookings in one bucket may decrease
availability from other buckets. These formulas make it unnecessary to change
the number of seats allocated to each bucket all the time. Most changes you
see during the day are just the result of new bookings and cancellations that
are coming in live.

The volume of pre departure cancellations can be crazy for some routes to a
point people wouldn't even believe.

------
geverett
I've always thought it was ridiculous that people would go to a site like
Expedia or Kayak, type in a date and destination, and just hope that they get
the cheapest fare. As this article explains so well, prices are fluctuating
constantly and the chances that you'll be lucky enough to be searching for the
flight at the optimal time are close to nil.

Most flight search engines now let you set up alerts to track prices, but I
also think those aren't ideal because if you're flexible about where or when
you might travel you'd have to set up thousands of alerts. (example: I'd like
to go somewhere warm for a weekend in January from New York. There are 113
warm weather destinations within 4 hours of New York; I can leave on Friday or
Saturday and return on Sunday or Monday; there are four weekends in January =
1808 alerts to set!).

This is exactly why we built Hitlist (hitlistapp.com, available for iOS and
Android), an app which monitors airfares across swathes of destinations and
dates and sends you notifications when there are ridiculous fares. Some of you
might find it useful!

~~~
mb_72
Installed it - it crashes each and every time I search for a destination, find
the destination, then tap on the selected destination name.

~~~
geverett
Are you on iOS or Android?

------
unfamiliar
Corollary: this implies that booking flights which are the cheapest/most
inconvenient will likely end you up in a less populated plane. Double win!

This is another reason to be wary of ubiquitous tracking for marketing
purposes. Say I want to fly from Kent to New York via London. I book my
expensive transatlantic flight and once that is secured, book my domestic
flight.

But if Big Data is watching my actions, what is to stop the airline hiking the
price of the domestic flight as soon as they see me booking the transatlantic
flight? At that point I am committed and will be forced to pay much more than
I had planned for the domestic flight.

~~~
blackRust
> But if Big Data is watching my actions...

Switch the order in which you book the flights. Since we assume separate
bookings and sequential booking order this puts lower risk into your first
purchase, and also Big Data then has all transatlantic flights from London to
choose from to hike your price.

~~~
Istof
or use 2 browsers to load the 2 prices at the same time

------
Throwaway1224
Here's the theory behind the price changes:

[http://en.wikipedia.org/wiki/Revenue_management](http://en.wikipedia.org/wiki/Revenue_management)

------
lifeisstillgood
I think the absolute dynamic pricing is what annoys me - it's like an inverse
Lake Woebegone effect - simply everyone who gets on a plane assumes that they
overpaid.

I suspect there is somewhere in the behavioural economics literature a pricing
mechanism that has many benefits of dynamic pricing but allows the buyer to
feel I control - they know the complete range of fares and the complete range
of prices and so feel able to buy without the fear if missin out.

------
alexivanovs
This is a great piece, definitely, but the question I have, do you - Americans
- consider $500 a fair/reasonable amount of money to pay for a plane ticket?
(I even had to lookup the average salary in the USA)

I'm from Europe myself, and it usually costs us anywhere from $40 to $150 to
travel anywhere in Europe, though the prices do go up if you want to go to a
place such as China, Thailand, or even India. But then again, that's Asia!

~~~
mikeash
What's "a plane ticket"?

I live near Washington, DC. If I fly to, say, New York, then $500 would be
outrageous. I'd expect to pay $100-200 roundtrip for that, depending. It's
about an hour's flight.

If I fly to Miami, I'd expect to pay $200-300. That's about two hours.

If I fly to San Francisco, then $500 becomes a reasonable price. That's a six
hour flight.

It makes no sense to talk about "a plane ticket" in isolation. From where to
where? How far?

~~~
alexivanovs
You're right.

------
pbreit
An article like this needs to at least mention that the relatively
unsophisticated pricing approach by Southwest has led it to generally
outperform the rest of its competition for decades (I know, staying out of
bankruptcy is not a very high bar).

~~~
coldcode
Since their fares are not comparable since they don't let anyone show theirs
in the same list as other airlines, you really cannot know if they are cheaper
or not. In reality this means they are able to set their prices on average
higher than those who have to compete in a list. Better control vs. more
exposure.

------
tchvil
cheapair.com could keep the various fares for a flight and show you their
progression

------
michaelochurch
"We did that Uber shit before it was cool." \-- The airlines.

Another thing that surprises most people is how expensive business and first
class are, relative to coach. After all, if you're only getting 1.5-2x as much
space, it doesn't seem fair that you'd have to pay 10x prices. The truth is
that many of those seats are filled via upgrades to frequent fliers and more
fairly priced in that view. But someone who asks for an _assured_ first-class
seat (which is where the 5-10x premium is charged) is identifying himself as a
captive buyer. About half of the first-class seats are upgrades (especially to
make room, because airlines often overbook) given that day, and those are
cheap or free, but the other half are a mix of business travelers under time
pressure, invited conference speakers whose flights are booked by a third-
party, and people with disabilities. While people complain about the
"assholes" in first class getting marginally better treatment, a surprising
percentage of the people up there aren't rich at all, but have disabilities
(e.g. back and knee problems) and _can 't_ fly coach, and those people fly
once a year (!!) at most, because they can barely afford it. Perversely, the
disabled guy of modest means is going to see a higher fare for a first-class
seat than a business traveler on a corporate rate.

Oddly enough, air travel is getting to the point where airlines are
intentionally making coach travel worse to make up for a decline of first- and
business-class passengers since 2008. While one might think that the purpose
of the checked bag fees is to make a little extra money (and that's part of
it) there's a much larger gain in filling up the overhead bins (thanks to
those horrid checked-bag fees, overhead bins always fill up early) and then
selling early boarding for $50 per ticket. Waiting spaces at many terminals
have been deliberately neglected for acoustics and outlets, to push people
into buying first-class tickets just to have access to the lounges. Natural
demand for first class seats hasn't recovered since 2007 and, even with the
economy back, it won't, so air travel is now an experience where
unpleasantness is deliberately induced.

~~~
phantom784
People buy first class tickets just for the lounges? Usually, you can just pay
$30 or so for a day pass to a lounge.

~~~
chrisseaton
$30 for a day pass to a first class lounge? I can't believe that at all. Can
you show me which airports and lounges offer that because I'm going to take
them up on it.

~~~
spdustin
Um... All airports with United or American lounges? It's $50 a day, though.
With American, they actively try to sell you a day pass on their in-airport
check-in terminals.

Edit: please don't correct actual life experience with a quote from Wikipedia.

United Club is the name of their "first class" lounge, as people incorrectly
refer to them. Those United Club Lounges have complimentary booze [1]. And no
airline is going to allow a passenger to board who had obviously consumed the
amount of alcohol you're referring to. I know: I practically lived at the T3
United Club lounge at O'Hare for many years, I was traveling so much. Not as
much any more, but when I've been delayed significantly and I'm super-stressed
because I'm speaking at a conference or something, I still occasionally get a
day pass.

The United lounges you're referring to are considerably more elite, and most
travelers don't even know they exist. Again, taken from actual experience and
not a quick perusal of a Wikipedia article.

American's "Admiral's Club" [2] no longer offers complimentary liquor.

[1] [http://www.united.com/web/en-
US/content/travel/airport/loung...](http://www.united.com/web/en-
US/content/travel/airport/lounge/amenities.aspx)

[2]
[https://www.aa.com/i18n/travelInformation/airportAmenities/A...](https://www.aa.com/i18n/travelInformation/airportAmenities/AdmiralsLocations.jsp?anchorLocation=DirectURL&title=admiralsclublocations)

~~~
chrisseaton
That's United Club - that's not the first class lounge at all.

If you read the wikipedia page
[http://en.wikipedia.org/wiki/United_Club](http://en.wikipedia.org/wiki/United_Club)
it says you can buy access to United Club, but doesn't say that about the
first class lounge. In fact it says:

"the access rules are significantly more restrictive than for United Club.
Access to Global First Lounges is generally restricted to United Global First
passengers, Star Alliance First Class customers, and Global Services
passengers confirmed in Business Class."

In the first class lounge you get free food and drink including alcohol. If
you could really get in for $50 a day, you could easily eat and drink that
much worth.

~~~
monksy
That's because they're a huge international airline and they have to keep
things kosher.

GS is a special invite status reserved for celebrities and high ranking
politicians. My assumption is that they need that space so that they can load
the person from the tarmac or have them check out of the airport. Thats
speculation, but those individuals do have different needs from an airline.
[Also onboarding needs as well as that they don't enter from the jetway]

~~~
khuey
Global Services is just a set of people who spend a ton of money on United.
It's not only people who have interesting personal security requirements.

