10 factors that influence price of airline tickets

While all of us want cheapest possible flight tickets, airlines have their own strategies and methodology to decide on ticket prices so that they can maximize profits, without losing customers to competition. In this post, let us analyze 10 factors that influence your flight ticket price.

1. Historic Data

Historic travel data often form a basis for deciding future price. Holiday seasons that are guaranteed to get lots of bookings are priced higher, seasons known to have very poor load factor are priced cheaper and so on. Combining historical data along with other current factors as well as some amount of gut feeling those who set prices make a decision on what price would work best for a date and destination- they need to maximize profit for the airline at the same time ensuring price is reasonable and not too high to lose customers.

2. Competition

While factors like flying time is supposed to be the logical base for deciding the price, often competition forces airlines to defy commonsense and price cheaper. Take an example- Chennai to Seychelles via Colombo on Srilankan easily costs around 40000 INR. But Mumbai to Seychelles via Colombo on Srilankan is priced at 27000- though Mumbai-Colombo flight time is longer and more fuel is needed. This is because at Mumbai, there’s more competition- Ethiopean offers Mumbai-Seychelles via its base in Ethiopia for about 27000 INR- to win over Mumbai passengers, Srilankan prices its ex Mumbai ticket cheaper, for specific destinations. Same discounted rate may not apply if you’re trying to fly to somewhere else, where there isn’t fierce competition.

Similarly, Delhi Trivandrum on Air India may cost 6000, while Delhi to Male via Trivandrum may cost only 6500, though Trivandrum Male individual ticket would cost a lot more. This is because as a destination Male in Maldives, Air India has competition from Spicejet (which flies to Male via Kochi) and Srilankan (which flies to Male via Colombo) but for Delhi- Trivandrum there may not be much competition. So the logic of distance doesn’t often apply in air ticket pricing. It is often competition on the route.

3. Load factor:

On each flight, first few seats- like 5-10% are sold super cheap-often at a loss as well. Next few seats at higher price and last few seats at maximum possible price. This is the general rule followed in the industry and this is why almost everyone suggests book early to save more. A converse to this is that more convenient flights are often expensive. A flight with shorter connection time, more convenient timings etc will be expensive compared to one with more transit time, flying in n out at late night etc. If you can deal with some inconvenience, airlines are happy to offer a lower fare.

But load factor doesn’t always help if you’re booking 6-9 months in advance. Check next point.

4. Exception to load factor rule

Standard price for far away dates- if you’re trying to book a ticket now for say April 2019, it is most likely to be more expensive than what it costs to fly in October-November 2018. This is because airlines have set only a standard price for long term and haven’t decided to increase or decrease based on load.  Thus unless there’s an offer or sale, booking long term in advance may cost you more. As travel date comes closer, airlines may vary prices- if the flight is empty or competition is tough drop prices further- this is why a near term ticket might be cheaper than long term. So how to use this situation for your advantage? Do check my earlier post on how to book cheapest tickets.

5. Promo fares

Airlines regularly run promotional offers- idea with promo fares is as below

On a normal day, let us say an airline sells 10000 tickets worth Rs 1 crore (assuming an average 10000 per ticket). During a promo/sale, airline hopes to sell much more- say 50000 tickets, at say Rs 6000 on an average and amass a much larger sum- in this case 30 crores.  Though tickets are discounted, airline gets huge working capital in short span- which they can use for immediate expenses instead of having to take a loan. Plus, lots of restrictions are imposed on sale tickets- like no refund, no date change, no baggage and so on- this results in a small % of passengers who booked during sales won’t be able to fly as per plan, resulting in free money to the airline. Plus since there’ll be several months gap from date of booking to actual flight, airline earns interest on money earned from sale. For passengers, promo are an opportunity to fly to their dream destination at a much discounted fare, with a risk of losing 100% if they can’t travel as per plan.

There’s no way to predict which airline will run a sale, when and at what price. Subscribe to airline loyalty programs, keep a list of your target destinations and the average price you’ve seen. If you’re flexible with your dates and destination and have a reasonable certainty of being able to travel as per plan, buying tickets during a sale (buy only if it is significantly cheaper than average price you’ve noted down) could be good idea.

6. Launch Fares

While flying to new locations, airlines may sell some seats at discounted price, to attract customers and create awareness that they are now flying to the destination and are very cheap

7. Bundled services vs no frills model

Low cost airlines which sell super cheap tickets and charge extra for everything are giving real headache to full service airlines. For many passengers the idea of flying cheap and paying extra for only select services where absolutely necessary makes lot of sense. To counter this, even full service airlines are launching fares which exclude some services. If a fare doesn’t include check in bag, costs more to reschedule/cancel etc, such fares could be cheaper. Thus it is important to know what is included in the fare type you’re paying and if all the included services are really needed.

8. Own flight vs codeshare

If your itinerary includes more than one airline, it could cost a bit more than flying with any one airline. A codeshare flight means one airline paying to another airline. If you can book directly on any one airline for the entire journey, then it will be lot cheaper. Thus, pay attention if your itinerary is served by same airline or different ones.

Refer screenshot below- on your flight to Reunion Island, if you book on Air India instead of actual operator, you'll have to pay 17k or 75% more, for same flight. So be careful.

9. Aircraft type

A cheaper aircraft type might be cheaper to fly in. This is not always true- on a bigger aircraft, if airline can sell all seats, per seat cost can be less. But usually if the sector is served by an ATR vs an A320, ATR takes less fuel, costs less to buy and maintain and may attract less airport fees- thus a ATR flight might be priced cheaper than the faster but larger A320 flight.

10. Airport fees

Cheaper airport fees result in cheaper tickets. Chennai airport, managed by AAI, charges much less fees compared to nearby Bengaluru- thus flying out of Chennai is always cheaper than flying out of Bengaluru, irrespective of airline/total distance etc. During international travel the price difference can be easily 5k to 10k INR- often making it more economical for cost conscious passengers to reach Chennai by road/rail and catch a flight.

Of course there’re other contributing factors- staff salary, debt servicing, ground handling and various other costs- but they get distributed evenly and do not significantly contribute to highs and lows of a ticket price for a given origin-destination.