Why Do Flight Prices Change?

Cost of Flight

I recently bought an airplane ticket from Heathrow to Hamburg for £103 and the next day the price dropped to £47. I'm kicking myself thinking I could have saved myself £56. Why do airlines change their prices so regularly and how can I avoid paying more than I need to? Brian Banner, Billingham

Our Answer

Dear Brian,

Thank you for the question. Unfortunately, we've all at some point been in the same situation, but with the online tools now available you can lessen the chance of overpaying.

How do airlines price their tickets?

To understand why airlines change their prices, we need to look at things from their perspective. Firstly, they have to consider operating costs. The most volatile of which is oil prices - the price of oil in 2008 went from $90 to $147 to $40 a barrel. Changes in the price of crude oil lead to changes in airfare. Some airlines avoid higher prices by entering into agreements (called fuel hedging contracts) that freeze prices for a certain time, but generally higher oil prices means higher flight prices. The recent increases in oil prices will most likely trickle down to consumers. As from next year, carbon emission quotas will be imposed on airlines adding another cost to an already-burdened industry.

On top of this volatility, airlines have to fill up the their planes and make a profit. They do this by price segmentation, meaning that for the same flight they will charge different prices. For the early bird who books well ahead the price is low, because they are still concerned with filling the plane. As the flight date approaches, the price increases as there are less and less seats available. Airlines also know that business travellers, who often book very late (the red zone), are not concerned about the price they pay - because ultimately their employer pays. Occasionally, if it's proving difficult to fill a plane, airlines may offer cheap last-minute tickets, but this happens very rarely on busy routes. Special events that create excess demand drives prices up. Anybody who has tried to get a flight to a sporting event or around bank holidays will have experienced this.

The final factor to consider is competition. Airlines constantly monitor each other's prices in order to stay ahead. If airline A starts a lightning sale, airline B has to respond or risk not being able to fill their plane and cover costs. This usually leads to price wars that are great for us consumers. With many travellers choosing to book online, airlines can monitor demand by the minute. All these factors are fed into an algorithm and a computer outputs price points. Sometimes prices change many times a day. In 2010, the busiest American route, Atlanta to Las Vegas, had over 2 million price changes - almost 7000 price changes a day.

Start looking early

The universally applicable rule to getting a cheap flight is to start looking early. The longer you have to look for your flight, the more options you have. But don't spend so much time researching that you end up in the red zone frequented by business travellers. There are no hard and fast rules about the best time to purchase a ticket, but most airlines roll out their midweek sales on Tuesday.

Using online flight search engines

Before looking for tickets online clear your web cookie cache. Web cookies are small files that record information about visits to sites. Some airlines are known to monitor demand by collecting information from the web cookies of unsuspecting visitors. If you repeatedly look at a specific ticket, do not be surprised if its price increases as airlines record those repeat visits as demand for the ticket.

Use flight search engines to compare prices across airlines. Some popular flight search engines (and their up-to-date Twitter feeds) include:

Airlines often reserve their best sales for their own websites so don't forget to keep checking their sites or alternatively sign-up for their email alerts.

If you've just missed a sale

If you just miss a sale do not despair. The smart thing to do is monitor the activity of competitors. Quite often a day or two later other airlines will respond with similar, if not better, prices. Some airlines will also refund you the difference between your purchase price and the sale price. Check with the airline what their policy is and don't be afraid to ask for a refund.

Pick connecting flights

On long haul flights, connecting flights are always cheaper than direct flights. If you don't mind making stopovers in some exotic locations, the hassle of changing planes and the sometimes long waiting times, these flights can be worth the savings. Instead of having visited just one country you can boast of visiting many - if briefly.

Happy ticket hunting!

Last Updated: July 2011