Monday, March 26, 2012

Why Airlines charge different fares at different hours and on different days

Why don't airlines just charge uniform fares for the same cabin class? Why do two passengers in the same cabin class pay completely different fares? These are questions that have intrigued travelers for generations but the answers simply lie in the market forces while the process of adjusting ticket prices to market forces.

Cheap Flights, Expensive Flights: Flights are not all they seem to be
 You are probably on a flight from Nairobi to Johannesburg, in a Kenya Airways flight in the Economy cabin class. Along the way, you strike a conversation with your very personable seatmate and realize that while you paid $730 for your flight, your seatmate only paid $430. Why are you being ripped off? You ask yourself. If you purchased your ticket from a travel agent in Nairobi, you are literally fuming and swearing at your favorite travel agent for ripping you off, but it's not their fault, it's definitely your fault that you are paying such high fares for your flight and partly the fault of the system.

Why do airlines charge different fares on different days? Or better still, why do airlines discriminate and charge passengers different fares for the same class on the same flight? It all comes down to revenue management. Airlines have invested millions of dollars in computer systems and computer geeks that tweak fares on different days and at different times of the day to maximize revenues for the airline. These complex systems will determine who gets which fare and whether you will pay $1000 while your personable seat mate will pay $700 for the same cabin class and same services depending on the day or time of day when you book your flights. In the eyes of the flight attendant, two passengers sitting side by side in the economy class are the same but in the eyes of the airline revenue manager, these two passengers are as different as day and night. One has brought in hundreds of dollars in profits while the other has only brought in a few tens of dollars.

The airline computer system and the geeks behind the complex software will match different kinds of passengers with the fares they are presumably willing to pay using a very complex algorithm to maximize profits on every seat, every plane and every route.

If you always want to travel cheaply and pay the fraction of fares paid by your fellow travellers, you must understand and be able to predict how the airline algorithm works. This will allow you to understand the best time and day to book an air ticket. But it's not just the time and the day that determines how cheap or steep an air ticket will be as we will see shortly.

If you understand how the airline revenue management works for the airline, then you can make that system work for you too saving you thousands of dollars in travel  expenses every year. Making the airline revenue management system work for you requires volumes of quality research and getting the right tips from qualified travel professionals who understand how the system works.

Airline Seat Pricing
When you are booking a ticket say from Nairobi to Mumbai in the Economy Class, you, like many travellers will assume that all the seats are priced the same, after all they are all in economy class, right? Not really. Airlines divide fares into price points. Some airlines have as many as ten price points and each price point has hurdles that a passengers must cross in order to find themselves into the lower price points and pay lower fares.

There is a top end of airline tickets where prices are typically pricy but the prices are relatively stable. Then  there's a bottom end of airline tickets that's subject to several variables.  These variables include:
•    Competition on Route
•    Seat Demand
•    Distance of Route
•    Seat Supply
•    Fuel Prices
 
The airline price points are often split in half with the lower portion known as "leisure" and the upper portion are the "business" tickets.  The rationale here is that business travellers are typically less price conscious and are more likely to buy last minute expensive tickets than leisure travellers. Leisure  travellers are uber conscious about ticket prices and spend hours and hours searching for bargain prices and are also quite flexible on travel dates and destinations. While the business traveller will grab the last available seat on a direct Kenya Airways flight to Dubai, a leisure traveller can take a much cheaper seat that will be available tomorrow or the day after tomorrow and are not worried with what route or stop overs that the flight will go through.

For example, on a flight from Nairobi to Johannesburg, an X airline might have the following price points: $750 $700 $650 $600 $550 $500 $480 $460 $430 $400. Passengers who book 3 months in advance are likely to land the $400 fare while those that book last minute will pay the $750 but all these is managed by a complex computer software, the judge and the jury that determines who smiles all the way to their destination and who complains all the way to their destination city.

Getting a Cheap Ticket is Like a 3000m Steeplechase race

If you have ever watched a 3000m Steeplechase race in an Olympics or the IAAF meetings, then that's what it takes to score a cheap airline ticket. The airline places some hurdles on the way to an affordable ticket. You must understand all these hurdles and conditions in order to clear them and secure your cheap ticket.

How to Stay Clear of the Airline's Hurdles and Land yourself a cheap ticket

It's the job of the airline revenue management platform to ensure you buy the most expensive ticket and maximize yield and to accomplish this feat, the airline has placed several tough "hurdles" to stop you from easily getting your hand on the cheapest tickets, even if they are available. Behind the simple airline booking engine where you enter your departure city, Destination city, nature and date of flight, lies a complex psycohology at play that will determine whether you will land the cheap ticket or the more costly ticket for the same flight and class.

To get to the cheapest tickets on a particular flight you must clear the hurdles or traps that the airline has set for you. Clearing these hurdles will ensure that you always pay for cheapest tickets on offer. While passengers are busy whining about the steep costs of airline tickets, you can wind down on your seat and smile while sipping your whine. You have a secret knowledge of airline operations that they are not yet privileged enough to comprehend. Here are the hurdles that the airline will set for you to try and push you into the high price point(costly tickets):

•    Advance Purchase: To get the cheapest air fares, always purchase your air ticket at least 14 days before departure. Normally, these advances purchases are non refundable. If you buy an airline ticket just before the departure date, they will be more costly and the tickets are normally reundable. There's an element of risk here. You go for cheap but there's no possibility for refund in case of any eventualities. You buy theb costly tickets and of course you can be refunded!

•    Minimum Stay
•    Departure Day Requirements: Increasingly, cheap airline tickets require you to depart or return on Tuesday, Wednesday or Saturday – the slowest air travel days. If you want to travel cheap, svchedule your flights on these days.
•    Flight Time Requirements: Insome cases, the cheapest airline tickets restrict departure time to the least popular times of travel. You pay very low fares but depart at 6.15am. That's the price of cheap.
•    Maximum Stay: In international travel a restriction off 30 days or less of stay is required for you to get the cheapest offers. If you book a return a flight to London and will be staying for more than 30 days, the airline system eliminates you from the low fare pool and offers you a pricier option for purchase.
•    Travel Window: Often airfare sale prices “set” a travel departure window – so that you can’t buy cheap airline tickets in June for the popular December vacation season (the window is usually two to four months from the date you purchase the tickets). Also, you may not buy tickets for your Esster Holiday in November.
•    Purchase Date
•    Flight Restrictions: Sometimes, the cheapest airfares are forbidden on non-stop routes. If you are going to pay cheap, then no direct flights for you.
•    Blackouts: High passenger traffic seasons like Easter and Christmas are normally blacked out meaning you will never book cheap tickets for these seasons. For example, if you are planning to book cheap tickets in January to Mombasa for the April Easter weekend, then those tickets will be unavailable, blacked out.
•    Surchages: Peak travel days are normally slapped with an extra fee called a surcharge that that can be anything from $10 to $30 each way.

These are just some of the airline hurdles but there are more hurdles that are imposed by airlines impose to prevent you from accessing the cheapest flights: based on supply, demand, predicted trends, historical trends and convenience.

To get the best fare offers, always contact an experienced travel agency to advise you on the best fare offers.

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