Flight prices: how are they set and how to save money when you book a flight

The aviation industry has gone through a significant transformation in the past 40 years in terms of routes availability, birth of new airline carriers, increase in the number of passengers as well as their differentiation based on categories, government regulations and recently to the use of artificial intelligence applied to determine flights prices.

Let’s take a step back in the last century

Before 1980, the aviation market was strictly regulated by governments and airfares where not based on passengers demand, like nowadays, but rather on the distance from one city to another. Moreover, the international routes were operated by a single national carrier. From 1980 to 1990, government controls became less strict or even removed, making the market open to new airlines (especially low-cost) and new routes.

In 1990 the aviation industry has been liberalized with the effect of making prices more competitive and this led to several agreements between airline carriers which decided to merge in order to become more powerful and dominant. How did they gain more market? With this kind of agreements, the airlines were able to cover more destinations compared to a standalone airline. This kind of trick is still working, as you can see in the table below, between April 2017 and March 2018, 68% of the US airlines market was controlled by 4 airlines:

This market structure led to a decrease of prices in larger cities airports like London, Milan, Paris, Singapore, New York etc… but also caused damage to small airports with a reduction of connections, competition and consequently with an increase of fare prices.

Since 1980 there has been an incredible increase in number of passengers. People started earning more money and they discovered that going on vacation is nice, so the demand for new routes or more flights during the day or during the week for high touristic destinations has increased. In 2019 airlines carried 4.5 billion passengers around the world (data source https://www.statista.com/).

How airline carriers set up flight prices?

Apart from the basic dependencies like the fuel price fluctuation and taxes, airlines set flight prices mostly based on a strategy called airline revenue management which takes advantage of Artificial Intelligence. There are algorithms that calculate fares based on past bookings, remaining capacity on the aircraft, the likelihood of selling more seats in the upcoming days or months, the average demand for certain destinations and passengers category.

Carriers discovered that passengers can be divided into 2 categories: business and economy. Economy passengers don’t want to pay a lot for flying and they usually try to book well in advance their holiday (even months in advance in case of long distance destinations).

Luggage, Suitcases, Baggage, Bags, Vacation, Journey

Usually airlines start with prices which are not too high in order to assure that most of the aircraft will be full and this is the time when economy passengers spend money to book a flight. Airlines increase prices as the flight date approaches, usually when Business travelers tend to book a flight. It’s unusual for them to plan a work trip well in advance and because of that they are not so sensible to prices compared to economy passengers.

Tie, Necktie, Adjust, Adjusting, Man, Business

Where to look for convenient flight?

Nowadays is really common to search on Google flights, Skyscanner or Hopper in order to find the cheapest flight for your next destination. It’s doubtless that it’s easier and quicker compared to Airlines websites as within one website/app you get prices, timings from different carriers and moreover you have the possibility to flag if you prefer a direct flight or if you want to include in your research airports located nearby for both from/to locations.

There is also another option in case you’re looking for a really convenient flight which is Jack’s Flight Club. The founder, Jack, has an incredible passion for travels as well as for cheap flights to reach all destinations around the world. He started the Jack’s Flight Club in the UK around two years ago, but the club has started to expand in the US and in the EU to cover flights deals for all major airports in Germany, Belgium, Norway, Sweden and the Netherlands. If you live in one of those countries take a change to go to Jack’s Flight Club website, enter your e-mail and select the country you’re from. You’ll get emails periodically with lots of cheap flight destinations!

So…Have your passport and luggage ready, you’ll never know when your next amazing trip is going to happen!

Passport, Luggage, Trolley, Travel, Trip, Vacation

Useful links:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s