It seems crazy to me that one day a ticket from place A to place B for one airline can cost like $500 and the next week the same exact flight and airline can cost over $1000. What justifies the fluctuation we see in ticket prices all the time?
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Supply and demand. If yesterday night, a company booked 50 of it’s employees to go to B for a corporate meeting, there’s not that many seats left.
Airlines track thousands of live demand points and historical demand. It knows that there’s an influx of people going to Boston every year on that date for the marathon. It knows there’s a dramatic rise in people going to Orlando at Christmas time. And when there’s a conference like CES or comicon in Las vegas, the airlines know there’s going to be a lot of people going there.
Airline ticket pricing is determined by a complex algorithm that takes account of a lot of factors, but is mostly driven by history. airlines have sold a lot of tickets, and I mean a lot of tickets, over the years. They have every bit of data associated with the selling of those tickets. The date they were sold, the day of the week, the time of day, whether they were bought online, through a travel agency, who paid for them, whether the flight was taken, or cancelled, or rescheduled, how close to the time of departure, what kind of seat the ticket paid for, etc. Computer programs can detect patterns in all of that data, and construct pricing models designed to maximize revenue accordingly. however because they’re in a dynamic environment, with competition and other factors that can impact day to day and minute-to-minute pricing, the algorithms rely not just on the historical data, but on constant feedback about current ticket sales, what the competition is doing, etc. Very clever and sophisticated programmers have managed to create a tool that allows the airline to change ticket prices hour-by-hour, route by route, and even purchasing method by purchasing method, so that it maximizes the amount of revenue the airline receives. Typically, pricing is highest the closer you are to the time of departure, because most people who are buying a ticket on the same day of the flight have very little choice about whether to take that flight. But there are far more subtle details in the patterns and computers are far better able to tease that out than humans are.
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Largely demand/supply. When you get to the time shortly before a flight, airlines typically post very high prices since:
1.) There may only be a few seats left on that flight. The airline figures someone might be desperate enough to pay the asking price.
2.) Someone looking at last minute travel arrangements probably doesn’t have much flexibility and likely will be travelling that route by some means.
For some routes, specific times of the week may see higher demand than others.
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