Lazarski Aviation Academy
Cheap last minute flights. Who decides about them?
Pricing policy is one of the most closely guarded secrets of any airline. As a rule, the later you buy a flight – the more expensive it is. However, there are exceptions. Here are the basic rules that determine ticket prices.
As always, when you don’t know what’s at stake, it’s money. Revenue from tickets sold for travel in a few weeks or months is used by airlines to finance their day-to-day operations. Therefore, carriers strive not only to make them as high as possible, but also predictable.
Last minute vs. first minute
It has become an established belief that the earlier we buy an airline ticket, the cheaper it will be. And as a rule, that’s how it works. The key, however, is not the date itself, but the number of available seats on a given flight at the time of purchase. The closer we get to the departure date, when the pool of available seats gets smaller and smaller, the more expensive tickets are offered in the sales system.
The second rule is that the cheaper the ticket you buy, the more someone else has to pay. This is why it is assumed that the profitability of a flight is primarily ensured by business and first class passengers. Thanks to the fact that they pay several times more for the flight, fares in economy class can be more affordable.
Demand, supply, price sensitivity. What dictates ticket prices?
But one step at a time. The mechanisms and algorithms that govern pricing are one of the carriers’ most closely guarded secrets. In simple terms – the prices of tickets on the same plane are determined by supply and demand, as well as the price sensitivity of customers. The fewer seats available and the greater the interest – the more expensive. And vice versa.
The latter term, price sensitivity, means the financial threshold acceptable to a given target group. Someone who plans a vacation well in advance will look for cheaper tickets, taking advantage of the first-minute advantage. Likewise, a person who can afford to be flexible – fly a day earlier or later, to an adjacent airport or with a connecting flight, to save on the cost of the flight.
The situation is different for passengers who buy a ticket shortly before departure and simply have to fly. They are able to accept a higher ticket price. It is used to say that they are mostly business customers or in emergency situations. And it is mainly for this reason that ticket prices do not drop the closer they get to the departure date.
To manage ticket prices, airlines employ specialists or entire departments of people to observe, forecast and act to maximize sales profits.
If airlines offered tickets for a given flight at one fixed price, they would lose out. Both when it comes to customers willing to pay less (who would not fly at all) and those who would be willing to pay much more for the same ticket.
Airlines also want the load factor on a given flight to be as high as possible. This is because it allows them to reduce costs per seat.
Last minute sometimes happens
But what if the departure date is approaching, and the aircraft in the sales system is still empty? In such a situation, it may happen that the airline decides to lower the price thresholds or introduce a promotion, a de facto last minute.
Promotions will not be there, where even more expensive tickets sell like fresh buns, due to the popularity of the route and the attractiveness of the travel date.
From this perspective, last minute is really a rare exception that confirms the rule. Airlines will not want to teach and get passengers used to the idea that it pays to delay buying a ticket. This would shake up their revenue management model.
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