Cheap flights and variable pricing

Why are cheap flights and other airfares on airline websites so fleeting?
 
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02.Finding the cheapest flights

Variable pricing on websites appears to be mostly a supply and demand model. Fewer cheap flights will be available when more people are trying to buy them. But they can also become much cheaper without warning if, for instance, an airline wants to fill the last few seats on a flight. We watched a Virgin flight from Sydney to Los Angeles drop from $3682 to $2707 in less than three hours (departure was 18 days away).  

For Australians, the ability to travel overseas is closely tied to economic circumstances. According to one recent study, a 10% increase in average weekly income will mean a 12% rise in overseas air travel from Australia in the short term and a 40% increase over the long run.  When unemployment is high and consumer confidence low, overseas flights should face lower demand and therefore be cheaper. 

variable-airline-pricing-difference-bubble

But it’s a different story on the other side of the equation – airfare increases don’t have much of an impact on the volume of travellers. A 10% increase in airfares only decreases air travel by 0.6% in the short run and 2% if the prices stay high, suggesting that Australian travellers view flights as a fixed cost despite the price variations.   

How to find the cheapest flights 

  • Book as far in advance as possible – last-minute deals may crop up, but not reliably enough to plan a trip. Note: flights generally can’t be booked more than 12 months in advance. 
  • Avoid peak business traveller days, such as Sunday nights, Monday mornings and Friday afternoons. 
  • Avoid peak traveller hours, generally between 6.30am and 9.30am and 4-7pm. 
  • Avoid surcharges! Pay through BPay or the POLi system.
  • Use flight comparison sites to compare ticket prices, but be sure to check the airline’s own site before making a purchase. The price may be the same, and the booking fees less. 
  • Clear your cookies before purchasing a ticket so the airline or booking site can’t track your searches. 

variable-airline-pricing-long-term-increase-bubble

Tracking the price changes

During a spot check in March we found airfares can vary widely for the same flight if you check at different times of the day. They can also vary widely depending on where you book, but that’s another story. 

We looked at airfares for a direct flight leaving Sydney on 31 March and returning on 7 April, across a 24-hour period. The prices we found don’t include any credit card surcharges. In this instance, only Virgin’s website showed radical price variation, but all ticket sellers seemed to engage in dubious messaging about available seats.

variable-airline-pricing-variation-graphic

* Peak times are generally summer and Christmas, but special events can also drive up airfares. I Source: Seetaram N, "Estimating Demand Elasticities for Australia's International Outbound Tourism", Tourism Economics 2012

 

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