How Airlines Set Prices and Why They Change So Often CheapAir

8/6/2019 How Airlines Set Prices and Why They Change So Often CheapAir

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An airlines goal is to get as much as they possibly can for each seat on the plane. If10 people are willing to pay $1000, they would love to sell 10 of the 100 seats for thatprice; if there are another 20 people willing to pay $500, then theyd sell 20 moreseats at the $500 rate; and so on until the plane is full.

But how can they do that?

Same Seat, Different Fares

Airlines never just have one fare they have several, even dozens, of fares for eachseat and they employ sophisticated techniques to maximize the number of people whoget stuck paying the higherof those fares.

Heres a real-life example. United Airlines currently publishes 43 different one wayeconomy class fares for flights between Los Angeles and Chicago. These fares startat $109 one way, but there are also fares of $139, $149, $159, $189, etc. all the way

up to $1765! The highest fare is more than 16 times more expensive than the lowestfare even though, no matter which price you pay, youll end up with the exact sameseat, the exact same food (or lack thereof), and the exact same service. (To be thefair, the very highest fares do usually include a few extra, but relatively minimal,perks like being refundable, easier/cheaper to change, first dibs at the best seats on theplane, etc. but nothing that substantially changes what you get for the fare that youpay.)

Knowing that a given seat on a United Airlines flight to Chicago may cost anywherefrom $109 to $1765, you would naturally say Ill take the $109 option but, ofcourse, the airlines dont make it that easy. Their goal is to funnel every would-betraveler into the highest fare bucket that they can. They do that, first, by addingrestrictions to the lowest fares that limit how many people can take advantage ofthem. For example, the $109 fare to Chicago requires you to purchase it 21 days inadvance and to fly on Tuesdays, Wednesdays, and Saturdays (the least popular traveldays, where its harder to sell seats at higher fares). Other fares have 14 day advancepurchase requirements and, still others, 7 day. Some fares are blacked out aroundholiday and other peak travel times. Generally speaking, the lower the fare, the morerestrictions there will be on it, and the fewer flights that that fare will be offered on.

But just as important is the fact that, even if a fare is offered on a certain flight, the

airlines will limit the number of seats available at that fare level. For example,United may say that on a given flight they will only sell up to 10 seats at the $109fare, 15 seats at the $139 fare, 20 seats at the $149 rate, etc. From a practicalstandpoint, this is the probably the most important point to understand about airlinepricing. As more and more seats are booked on a flight, more and more fare levelswill be closed out so the end result is that additional passengers will be stuck payinghigher fares.

Its actually even more complicated in practice. Airlines actually have computerprograms that are constantly monitoring flights, analyzing booking patterns, and inreal-time changing the number of seats available at each fare level . If a flight is

booking up faster than expected, an airline may decrease the number of seats availableat some of their lowest fare levels, or wipe them all out altogether. If a flight is not


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selling well, suddenly more seats may appear at fare levels that were previously soldout.

Why Fares Change all the Time

This is why fares change all the time. If you see a different fare today than you sawyesterday, the issue is probably not that the airline made a conscious decision to raiseor lower their prices at least not directly. Instead, its likely that seats in the lowestfare categories sold out or were closed out. For instance, if there are 3 $109 seats lefton our example flight to Chicago and someone grabs them, the lowest fare availablewill change to $139. If Uniteds yield management system looks at the flight and saysWow, bookings are strong, it may choose to close the $139 level, too. Then thefare will appear to jump to $149. But what if two days later 2 families of 4 bookedon the flight decide to cancel? The same system might say Uh-oh, we have way toomany empty seats and decide to open the $109 and $139 fare levels back up. Thisprocess happens continuously until hours before departure. Generally, over time fares

on a particular flight will get higher and higher as more and more seats gets bookedand more and more fare levels get closed. But there are short term blips all the timeand, if you look at it hour to hour or day to day, there will be moments when farestemporarily dip before heading back up once new bookings come in. This entireprocess is extremely dynamic as at any given time there are hundreds of thousands ofshoppers looking for flights and making reservations and each reservation mayhave repercussions on the fares paid by subsequent travelers on the same flights.

Fare Sales

What about fare sales? Airlines are constantly promoting one sale or another and youmay be wondering how fare sales play into all of this. In fact, if you subscribe to ourfare alerts, you probably are constantly hearing about a brand new fare sale oftenmore than one a week.

The real news would be if there were no sales going on. To the airlines, almosteverything is a sale. Returning to our United Airlines Los Angeles to Chicagoexample, of those 43 fares, about two thirds of them are considered to be sale fares.A sale fare really just means that it requires booking or traveling between aspecified time period . Some sale fares are really good deals; others are worthwhileonly because they provide decent fares on dates or times that previously werent

eligible for the lowest fares; and still others are just plain meaningless because theyare no better than one or more other fares already in the market.

Whats important to remember about sale fares is that, if they are really lower than theother fares in the market, they will be even more limited from an inventorystandpoint. So, for example, if United introduces a 3 day sale fare to Chicago for $99,it will almost definitely not be offered on flights where the existing $109 fare hasalready been sold out. In practical terms, this means that when sales hit the market,they will usually only be obtainable on flights that are pretty wide open.

Confused Yet?


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We apologize if youre more confused than when we started. Air fare pricing will dothat to you. The bottom line is this:

- It is not uncommon for fares on a particular flight to change on a daily, sometimeseven hourly, basis

- If you see a fare, know that it may not be there the next time you search it could behigher, it could be lower- Neither CheapAir.com, nor any other on-line travel agency, has the ability to setprices; we aim to do a really good job at sorting through tens of thousands of optionsto find the best deals, but it is the airlines and their pricing teams who are actuallyresponsible for those deals- Fares on a particular flight will generally increase as the flight becomes moreheavily booked but at certain points, fares may fall dramatically if a fare sale islaunched or an airline computer determines that booking levels are below where theyshould be for a given departure date

Got questions? Leave a comment and well be sure to get back to you or join ourFacebook community to share your thoughts.

54 Comments

1. Nelson AnnanApril 20, 2011

Great article. Good for you for publishing it. I am not sure United will behappy that they were used as an example. But giving an actual example was anexcellent way to make your point.

Reply to this comment

2. DonnaApril 20, 2011

Good information! Thanks for explaining!



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3. barbaraApril 20, 2011

Thank you for this valuable information, i always had questions about how

this all works and to be honest it does become very frustrating. Thanks somush for clarity, it all makes sense now. Thanks again!


4. Brad YoungApril 20, 2011

This process of managing bulk and market-driven fares is also why Ive foundit much cheaper to use a Canadian or American agency on-line (like CheapAir) than a local airline or agency here in Moscow, where Im staying.Great article; most enlightening! Thanks!


5. AlecApril 20, 2011

Is it true that the yield management software is sensitive to the number of faresearches and requests too? And that by making lots of requests to find out thefare on a route perhaps on different dates or with different websites oneperson can cause the fares to rise by making it look like a sudden strongdemand from lots of different people?


o cheapairApril 20, 2011

Alec: good question. While each airline has its own yield management

algorithm and practices, we have never heard of an airline adjustingfares based on inquiries (as opposed to bookings). Even if they were to


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do so, given the enormous number of inquiries being made across allof the travel sites every second of the day, it would be highly unlikelythat any one persons searches could have a meaningful impact onthose numbers.

6. AngeloApril 20, 2011

Ive heard from others that say booking a flight on certain days of the week orlate at night/very early morning yield cheaper fares. It would seem that withthe above explanation this would not be necessarily true and not necessarily asystematic way to always get the lowest fares?



Angelo: we have never found time of day to be a big factor in farelevels, but day of the week definitely can make a difference, at least fordomestic flights. This is because the airlines have gotten into the habitof frequently launching one, two, or three day fare sales on Mondaynight or Tuesday. There are a million exceptions to this and no perfectpatterns, but if we absolutely had to rank the best days of the week tobuy flights we would say Tuesday, first, then Wednesday, Thursday,and Monday in that order.

7. Kay SApril 20, 2011

Ive been selling travel for almost 25 years, and this is one of the bestexplanations on price flucuations Ive ever seen. Thank you, Cheapair.com!And pretty much everything youve described re: airfares applies to cruisefares as well. Prices change at the speed of light, and as a travel agent, I haveno control over those changes! When you see a flight or a cruise fare that you

are comfortable paying, book it right then, dont wait! It may be lower before


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you travel, but the chances are far greater that if you wait, youll end uppaying more!


8. Kay HewittApril 20, 2011

Thank you so much for this information on price flucuations. I learned somuch and I also appreciated Kay S. suggestions. Thank you again for settingall of us straight. I think your company does a wonderful service for all of usthat are on a limited income.


9. RonAApril 20, 2011

I have had the experience of being quoted one fare on an inquiry and thenseveral minutes or hours later being quoted a higher fare for the identical trip.(I dont ever recall being quoted a lower fare.) I have also experimented withdeleting my browser history and cookies and immediately thereafter beingquoted the original fare which had, curiously, disappeared on my secondinquiry. Are the airline web sites tracking individuals who use their sites andusing yield management on an individual basis?


o Ron MarkusApril 22, 2011

I have also had that same experiencedeleted cookies and history,then initiated my query again, to find the fare went back to theprevious, lower quoted fare. Otherwise, it seemed the fare kept rising,as if trying to prompt me to purchase now, while the price is lower.

Is it possible, in light of the above explanation by CheapAir, that this ismerely coincidence? Stranger things have happened, I suppose.


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o TerryApril 23, 2011

Thats weird! Why didnt Cheapair answer your cookie deletingquestion? Hmmmmm..


Terry: we answered Rob, another user who also posed the question

(see below). Here is our reply:

Rob: I cannot speak for other sites, but I can categorically say thatCheapAir.com never has and never will adjust price quotes based onwhat may or may not be in your cache or cookies. It is true that if youwere to do a search for fares and leave your browser window open fora few days and then come back to it, you may still see the original fareyou were quoted even if it has since changed. But as soon you

continue to the next page, it would be corrected. We double check allfares just before asking for your credit card to make sure they are stillcurrent.

As for our revenue model, we collect a flat fee per ticket sold. So weactually benefit when fares are low we sell more tickets

10. MichaelApril 20, 2011

Very well written. Thank you.



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11. MauriceApril 20, 2011

This in amazing article and very considerate of you to send this out to your

customers. Bottom line. Great customer service on your part. Keep it up! Now,if only the airlines would think to do the same with customer service, wouldntthat be something?


12. PaddyApril 20, 2011Excellent article.In off peak periods when flight prices are low and there are a number of emptyseats would prices normally drop say 4 or 6 weeks before travel?


13. Jennifer HendricksApril 20, 2011

Good information. I have always wondered about the changes in ticketpricing. Thank you for explaining


14. Sheree G FitzpatrickApril 20, 2011

Thanks so much for a very well written article on airline pricing. Ive had thishappen beforeeven on an airlines site (Southwest)and was really frustrated.Buying an airline ticket these days is like playing a video computer gamewhat a challenge! It helps at least to understand this. Wonder what would

happen if grocery stores tried this tactic? Looks like oil companies already do.Thanks again.


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15. Kathy LApril 20, 2011

I agree with RonA By clearing your browser history and deleting cookies,you can sometimes get the original quote. I wonder how many sites use thistactic to fool us into buying the higher fare?


16. RossApril 20, 2011

Whoever wrote this article should be commended for having exceptionalwriting skills. I have never seen a more clearly written explanation of atechnical topic than this piece provides, and I have worked in the computerfield for over 40 years. Great job!


17. Linda JenningsApril 20, 2011

Thanks so much for this information. It explains a great deal that I wonderedabout.


18. Evelyn KaneApril 20, 2011

Thanks for the great info ! Explained al last!


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19. kiamhong tanApril 20, 2011

It woudl seem I have been not so luckythe several times I looked atfaresand by the time I actually decided to buy them the price/s jumpedupwardsnot once did I get to enjoy the downward pricingcestlavie.


20. MichelleApril 20, 2011

Such a great, informative article, thanks! It definitely takes away a lot of themystery surrounding flight search results.


21. MichaelApril 20, 2011

Transferable tickets would be the bomb. Being in a foreign country with anon-transferable ticket $#cks!


22. Willie SmithApril 20, 2011

Simply amazing downright good information to know. Indeed, thanks for

sharing this. Airfares 404 one of the best.


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23. Jenni GreenApril 20, 2011

Thanks for the info. It was very easy to undersstand and to the point andexplained with examples.


24. mApril 21, 2011

Excellent explanation. Never underestimate the airlines.


25. HarendraApril 21, 2011

Very informative article. Thanks!!!


26. Sara SmithApril 21, 2011

Just echoing the thoughts of others here; great article and clears it up for me,This was something that had frustrated me for years, but now I understand itmuch better!



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27. Michael MorseApril 21, 2011

Admirably clear and very helpful; many thanks!


28. AajadaApril 21, 2011Yes, well explained article. I have been frustrated with the constantchanges in ticket prices, when first seen the low advertised sale price.Im curious?.does it also hold true for business class and first class as well?I have seen some advertising of business class fares as 60 -70% off!Thank you for the well explained article.



Until a few years ago, business and first class fares were a lot simpler.Usually there was just one price per route, and it didnt change veryoften. Since the recession, though, airlines have tried to get morecreative and some of the same principles do apply now. Althoughbusiness and first class fares arent nearly as dynamic as economyclass fares, there are still a fair amount of sales fares that can be had ifyou book far enough in advance. For example, for travel to Europe thecurrent lowest business class fares in many markets require you tobook 50 days in advance.

29. Bob JApril 21, 2011


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Cant speak to all air line policies; but I know if Southwest lowers a fare afteryouve purchased the ticket, they will give the difference as a credit on yournext flight. But, you must discover the change yourself by frequently checkingback then calling and requesting the credit. Ive done this.


o ArleneApril 22, 2011

Wow, I didnt know Southwest would do that. I love that airline andhave been flying with them for years. Ill keep this in mind for futureflights.

30. Remon MittiasApril 21, 2011

Great article, Thank you so much. Though I am one of the people who have

seen price drops between the time I viewed a ticket and the time I purchased it,I would definitely agree that you should buy when you feel a price isreasonable because when it happened to me the price drop was not reallyhuge; however, the price increase always seems high.I bought an international ticket (on cheapair.com) for a family emergency oneday prior to my departure and the price was at least 40% cheaper than thecheapest price I found on other websites I am not sure, even after readingthis article, how that was possible, but I am definitely thankful.


31. Reese EmmanuelApril 21, 2011

Great article, thanks for writing! I actually have once had the luxury of gettinga downward quote. Got one price to London and was all ready to book,computer literally froze/crashed. When I was able to get back online, the price

had gone down over $100 this was several years ago and has NEVERhappened again.


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32. OLOLO from SOCALApril 21, 2011

I knew all this from my Econ classes at the university. There is no surprisepeople, just book your tix when you feel that the price is right! However, Imust admit that I was burned once. I booked a ticket from LAX to FRA forabout $1300 and several weeks later, the price dropped to $1150 for the sameexact dates and time But overall, the price always go up when the less seatsare available for the flight.CheapAir, thanks for the heads up on what days to book tickets. Ill try it nexttime I book domestic flight.


33. TommyboyApril 21, 2011

I used to work for a number of scheduled airlines as a dispatcher and wouldsee the booking levels on a flight as a matter of course. I automatically knewhow the booking levels and fares related, but this is the best explanation ofhow it works that I have heard. I imagine that the software is much moresophisticated now than in my airline days.


34. mscoApril 21, 2011

Thanks, now I understand why the changes. I recently missed out on tix to goto Europe. Didnt book it right away for the three of us. Came back the nextday and the prices went up. Frustrated, but have to keep looking. Still needthree tix for us. Traveling with two children is not easy to find the seats.Thanks.



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35. donApril 21, 2011

How can I learn what the lowest of the many fares is? Can I authorize you tobuy a ticket for me at that lowest price if/when it becomes available? I amretired and can travel at my leisure and would do so more often if I could flyfor lower prices.



Don: You may want to try our flexible date search for something likethis. From our home page, enter your cities and instead of enteringdates click My dates are flexible. Then you will get back a list of thelowest possible fares that are currently offered. From there, you cansearch for dates on which each fare is available.

36. DaphneApril 22, 2011

Decided to take the time to read your whole articleit was well worth it.Thanks. My experience was that I booked tix for my hubby and me from ourhome city to visit relatives in Boston. I booked them separately (but at thesame sitting) because we each had our own code numbers. I did his first, thenmine. His flight to and from Boston were at the advertised special rate, as wasmy flight to Logan. But when I clicked on (seconds later) for my return flight,the price had gone up 20% for that seat! I followed through as far as I couldwith the airline but they said they had no control over price jumps like that,even in the middle of a transaction.



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37. RobApril 22, 2011

So, how does cheapair make money. Do you never change your commission,

and is it a flat rate? Why do the fares change when I empty my cache anddelete cookies? I think theres more to the story here.



Rob: I cannot speak for other sites, but I can categorically say thatCheapAir.com never has and never will adjust price quotes based onwhat may or may not be in your cache or cookies. It is true that if youwere to do a search for fares and leave your browser window open fora few days and then come back to it, you may still see the original fareyou were quoted even if it has since changed. But as soon youcontinue to the next page, it would be corrected. We double check allfares just before asking for your credit card to make sure they are stillcurrent.

As for our revenue model, we collect a flat fee per ticket sold. So weactually benefit when fares are low we sell more tickets.

38. LindaApril 23, 2011

Excellent information, clearly written. Thanks so much for helping out thispoor befuddled traveller!


39. aliciaApril 23, 2011


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Thanks for giving this enlightening article. It does explain some of theairlines gimicks!


40. AlexApril 25, 2011

Fantastic, now if I could only convince my partner that the closer to myplanned departure the cheaper the ticket. I might luck out Like I did once inMiami four years ago in the summer. I found a 99 dollar one way back toPortland from Ft Lauderdale.


41. kenApril 26, 2011

Can you by a ticket too far in advance. Is there an optimum time period beforthe flight to book?



Ken: Great question, and an important one. Yes, you definitely can buya ticket too far in advance. When airlines have sales, they typicallyonly include flights over the next few months. So if you book tooearly, you might end up missing the best deals. While there is no hardand fast rule, the sweep spot is generally about 4-8 weeks in advancefor domestic tickets, and 6-12 weeks in advance for international. Onecaveat: if you are travelling somewhere where you know flights aregoing to be heavily booked (i.e. holiday travel, Super Bowl, MardiGras, summer in Europe) you may want to book a little earlier than you

otherwise would, because once a flight gets too heavily booked youcan be sure the rate will go through the roof.


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42. ChrisApril 27, 2011

Thanks for providing a very detailed explanation into air travel ratesfluctuating. As a travel enthusiest, I have discovered some of these points onmy own however, sometimes find it difficult to convey to potential clients forthem to gain the proper understanding, good job!!


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44. cheapairApril 26, 2011

N8: Are you seeing this on our site, or somebody elses? With CheapAir.com,the fare data that we show after each request comes straight from the airlines.All searches are done anonymously. The airline knows only that

CheapAir.com is requesting the data, but they have no way of knowing whoits for or whether or not that customer has done the same search before, or hasanything specific in his browser history. If you are seeing this behavior on oursite, send us the details (search parameters, exact times of searches) and Illhave our tech team have a look. If theres a discrepancy, well provide anexplanation.


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