We at TravelPlex are often asked questions about what determines airline pricing and why air prices are available one minute and gone the next. We’d like to address these questions. The first blog will be “The Why’s and How’s of Airline Pricing”. Our next blog will address “What Determines Airfares?” 

However, the first thing you need to realize is that to an airline, an empty airline seat is as worthless as a rotten piece of fruit. As airlines struggle to re-capture the days of record profits, the yield-management system that the airlines have employed for years has given way to a revenue based model. This program monitors each flight's profitability versus a mix of the flight's yield and flight's load.

The success, and very existence of each airline, relies on the business traveler, who pays top dollar for last minute reservations (this, you already know). Many times, these airlines do not want to allocate seats for business travelers that cancel flights or just don’t turn up. To avoid this, airlines operate powerful new computers utilizing probability analysis, applied statistics and econometrics to sift through months of booking, cancellation and fare record data to determine exactly how many seats on each flight should be sold at specific prices. The airlines have discovered how to pack their planes by selling the same seat at a variety of prices. A side note: airlines examine this data each night between 2:00am and 4:00am and the largest price reductions are made at this time. TravelPlex’s fare scanning system pulls on average 10 flights a night where price savings exceeds $250. New invoices are then sent to the traveler and the fare's savings is tracked and reported to the company.

This pricing practice has been made infinitely more complex by the so-called hub and spoke system adopted by major airlines over 30 years ago, and still operated today.  A typical airline operates as many as 3,000 flights a day, but serves as many as 30,000 different city pairs. Factor in that there are an average of 10 different fares in coach and about 150,000 fare changes a day, and a computer must juggle more than 100 million different possibilities at any one moment! This is the main culprit and reason why fares are there one moment, and gone the next. You are a victim, as the airlines would say, of fare econometrics.

Though these computer systems can cost tens of millions of dollars, they are well worth it. One airline estimates that its computer’s sophisticated revenue management will bring in an additional $100 to $200 million in annual revenues. TravelPlex is doing everything possible to ensure that our clients are NOT the travelers fueling airline profits. Your assistance in booking further out from the date of travel will assist us greatly in keeping your company’s travel cost down. This will also allow us a greater search window in finding you the absolute lowest price. The more the traveler does to help us, the more we can help the traveler.

Our next blog will delve deeper into what factors determine airline pricing.