Why airfares fluctuate: The method to the madness

By Kirrily Schwarz

Prices fluctuate due to fierce competition, however, there really is a method to the madness. Photo / 123RF
Prices fluctuate due to fierce competition, however, there really is a method to the madness. Photo / 123RF

Anyone who has tried to book a flight will know the struggle: you find a price one day, and it's cheap, but when you go to book it the next day, it's expensive.

There actually is a method to the madness.

It's called airline revenue management, the science of adjusting fares in real time so airlines can put as many butts in seats as possible throughout the year.

Here are the secrets to help you use it to your advantage.

How it works

Basically, airlines allocate a certain number of seats to a certain price, so when the cheapest tier sells out, they offer the next tier, and so on.

The question is whether you're better off getting in early, or waiting until the last minute.
"As part of the selling technique, many of the local airlines say they've only got three seats left at this price," said Angus Kidman, editor-in-chief of finder.com.au.

He said it creates a sense of urgency when you're booking, and that even if you miss the cheapest tickets, many people get sucked into paying more for the next tier.

f you do miss the cheapest flights, however, you can try the long game.

"Travel agents have the ability to hold seats on flights for their clients, without commitment, sometimes for months," said Rosie Richardson from Mosaic Travel.

"Not everyone purchases these tickets, so when the seats are released back to the airline, all of a sudden the airfare gets cheaper, as a cheaper airfare that previously wasn't available, now is."

Occasionally, that means travellers can find incredible last-minute bargains.
However, experts say that's the exception, and getting in early is always a safer bet.

The biggest trap

A common mistake is thinking dirt-cheap airfares will save you money.

Rome2rio ranked Australia and New Zealand's domestic airlines by average price.

At face value, Tiger and Jetstar offer almost equally low fares, while Virgin tickets are about double, Qantas costs three times as much, and Regional Express is almost 11 times more expensive.

Air New Zealand costs even more than Qantas, at more than three times the price of Tiger and Jetstar.

However, it's important to understand they're not offering the same thing.

For example, Air New Zealand and Qantas are renowned for going above and beyond for customers on delayed flights or tight connections, whereas budget travellers must fend for themselves.

In a similar vein, Rex flies to regional destinations larger airlines don't.

"You might see a A$19 fare and think that's amazing, but you'll have to pay for checked baggage on top of that, and for a meal if you want one," Mr Kidman said.

He also pointed out that since many budget airlines operate early in the morning or late at night, public transport might not be running to the airport.

"It's very easy for your taxi to cost more than your airfare," he said.

Timing is everything

Rome2rio reports the most popular times to travel are Christmas and the winter school holidays.

Avoiding peak times will save you a fortune, because fares skyrocket according to demand.

Saving money on flights doesn't have to be difficult, if you know when to book. Photo / 123RF
Saving money on flights doesn't have to be difficult, if you know when to book. Photo / 123RF

"Generally speaking, you're better off flying to Europe in February on a Tuesday, i.e. a time when no-one else wants to fly," Ms Richardson said.

Flying off-peak will also help you save on domestic flights.

"You don't want to fly on a Friday afternoon, a Sunday afternoon or a Monday morning because you're competing with professional commuters," Mr Kidman said.

"They have corporate cards, and they don't care how much it is."

Forget about cookies

At some point, you've probably had a friend tell you to clear your browsing history, so airlines don't know how often you look at their fares.

The theory suggests that if you're searching regularly, airlines will know you desperately want a seat on that flight, and they'll increase the fare accordingly.

However, Mr Kidman says this is "fundamentally more myth than reality".

"You can easily clear your cookies or launch an anonymous browser, but on the whole that's not a big deal because they'll still be able to sell the seats to somebody."

Always get in early

To make sure you get the cheapest fare possible, always book as early as you can so you get the first round of tickets that go on sale, and have your pick of off-peak times and days.

"If you see a cheap flight, book it. It's very rare you'll see the price go lower. I would tend to say get in there, and sign up while you can," Mr Kidman said.

- news.com.au

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