While all of us want cheapest possible flight tickets, airlines have their own strategies and methodology to decide on ticket prices so that they can maximize profits, without losing customers to competition. In this post, let us analyze 10 factors that influence your flight ticket price.
1. Historic Data
Historic travel data often form a basis for deciding future
price. Holiday seasons that are guaranteed to get lots of bookings are priced
higher, seasons known to have very poor load factor are priced cheaper and so
on. Combining historical data along with other current factors as well as some
amount of gut feeling those who set prices make a decision on what price would
work best for a date and destination- they need to maximize profit for the
airline at the same time ensuring price is reasonable and not too high to lose
customers.
2. Competition
While factors like flying time is supposed to be the logical
base for deciding the price, often competition forces airlines to defy
commonsense and price cheaper. Take an example- Chennai to Seychelles via
Colombo on Srilankan easily costs around 40000 INR. But Mumbai to Seychelles via
Colombo on Srilankan is priced at 27000- though Mumbai-Colombo flight time is
longer and more fuel is needed. This is because at Mumbai, there’s more
competition- Ethiopean offers Mumbai-Seychelles via its base in Ethiopia for
about 27000 INR- to win over Mumbai passengers, Srilankan prices its ex Mumbai
ticket cheaper, for specific destinations. Same discounted rate may not apply
if you’re trying to fly to somewhere else, where there isn’t fierce
competition.
Similarly, Delhi Trivandrum on Air India may cost 6000,
while Delhi to Male via Trivandrum may cost only 6500, though Trivandrum Male
individual ticket would cost a lot more. This is because as a destination Male
in Maldives, Air India has competition from Spicejet (which flies to Male via
Kochi) and Srilankan (which flies to Male via Colombo) but for Delhi-
Trivandrum there may not be much competition. So the logic of distance doesn’t
often apply in air ticket pricing. It is often competition on the route.
3. Load factor:
On each flight, first few seats- like 5-10% are sold super
cheap-often at a loss as well. Next few seats at higher price and last few
seats at maximum possible price. This is the general rule followed in the
industry and this is why almost everyone suggests book early to save more. A
converse to this is that more convenient flights are often expensive. A flight
with shorter connection time, more convenient timings etc will be expensive compared
to one with more transit time, flying in n out at late night etc. If you can
deal with some inconvenience, airlines are happy to offer a lower fare.
But load factor doesn’t always help if you’re booking 6-9
months in advance. Check next point.
4. Exception to load factor rule
Standard price for far away dates- if you’re trying to book
a ticket now for say April 2019, it is most likely to be more expensive than
what it costs to fly in October-November 2018. This is because airlines have
set only a standard price for long term and haven’t decided to increase or
decrease based on load. Thus unless
there’s an offer or sale, booking long term in advance may cost you more. As
travel date comes closer, airlines may vary prices- if the flight is empty or
competition is tough drop prices further- this is why a near term ticket might
be cheaper than long term. So how to use this situation for your advantage? Do
check my earlier post on how to book cheapest tickets.
5. Promo fares
Airlines regularly run promotional offers- idea with promo
fares is as below
On a normal day, let us say an airline sells 10000 tickets
worth Rs 1 crore (assuming an average 10000 per ticket). During a promo/sale,
airline hopes to sell much more- say 50000 tickets, at say Rs 6000 on an
average and amass a much larger sum- in this case 30 crores. Though tickets are discounted, airline gets
huge working capital in short span- which they can use for immediate expenses
instead of having to take a loan. Plus, lots of restrictions are imposed on
sale tickets- like no refund, no date change, no baggage and so on- this
results in a small % of passengers who booked during sales won’t be able to fly
as per plan, resulting in free money to the airline. Plus since there’ll be
several months gap from date of booking to actual flight, airline earns
interest on money earned from sale. For passengers, promo are an opportunity to
fly to their dream destination at a much discounted fare, with a risk of losing
100% if they can’t travel as per plan.
There’s no way to predict which airline will run a sale,
when and at what price. Subscribe to airline loyalty programs, keep a list of
your target destinations and the average price you’ve seen. If you’re flexible
with your dates and destination and have a reasonable certainty of being able
to travel as per plan, buying tickets during a sale (buy only if it is
significantly cheaper than average price you’ve noted down) could be good idea.
6. Launch Fares
While flying to new locations, airlines may sell some seats
at discounted price, to attract customers and create awareness that they are
now flying to the destination and are very cheap
7. Bundled services vs no frills model
Low cost airlines which sell super cheap tickets and charge
extra for everything are giving real headache to full service airlines. For
many passengers the idea of flying cheap and paying extra for only select
services where absolutely necessary makes lot of sense. To counter this, even
full service airlines are launching fares which exclude some services. If a
fare doesn’t include check in bag, costs more to reschedule/cancel etc, such fares
could be cheaper. Thus it is important to know what is included in the fare
type you’re paying and if all the included services are really needed.
8. Own flight vs codeshare
If your itinerary includes more than one airline, it could
cost a bit more than flying with any one airline. A codeshare flight means one
airline paying to another airline. If you can book directly on any one airline
for the entire journey, then it will be lot cheaper. Thus, pay attention if
your itinerary is served by same airline or different ones.
Refer screenshot below- on your
flight to Reunion Island, if you book on Air India instead of actual operator, you'll have to pay 17k or 75% more, for same flight. So be careful.
9. Aircraft type
A cheaper aircraft type might be cheaper to fly in. This is
not always true- on a bigger aircraft, if airline can sell all seats, per seat
cost can be less. But usually if the sector is served by an ATR vs an A320, ATR
takes less fuel, costs less to buy and maintain and may attract less airport
fees- thus a ATR flight might be priced cheaper than the faster but larger A320
flight.
10. Airport fees
Cheaper airport fees result in cheaper tickets. Chennai
airport, managed by AAI, charges much less fees compared to nearby Bengaluru-
thus flying out of Chennai is always cheaper than flying out of Bengaluru,
irrespective of airline/total distance etc. During international travel the
price difference can be easily 5k to 10k INR- often making it more economical
for cost conscious passengers to reach Chennai by road/rail and catch a flight.
Of course there’re other contributing factors- staff salary,
debt servicing, ground handling and various other costs- but they get
distributed evenly and do not significantly contribute to highs and lows of a
ticket price for a given origin-destination.
The flight option will reduce a 600 kms/9 hours bus journey between BLR/Chennai and Thoothukudi to some 3 hours (90 mins flight)+ airport time.
