Why do fares increase during high season and close to departure
In: Travel tips
Ever wonder why airfares tend to increase close to departure dates or during popular travel times? Airlines around the world use this pricing model. The reason for this is linked to the amount of money that people are prepared to pay for the flight that they want (demand). When a departure is far out, there is a lower demand for the flight and people are not prepared to pay very much for that flight. However on more popular flights, and flights closer to departure, there is more demand and people are willing to pay more to secure a flight on those seats.
Airlines actually start selling seats below their cost to operate a seat in order to match up with consumer demand. That means that the first seats an airline sells, are actually sold at a loss. The aim of the game is to fill up as many seats as possible because when the cost to operate all the seats is divided by more passengers it is less than if it were divided by a few passengers. As the seats become more expensive the airline will start to sell seats at a break-even price. As they fill up more the airline starts to make a profit to offset the initial losses and only the last few seats sold actually start to carry any real profit for the airline. It’s a complicated system, but it’s the best way that the industry has found to make sure that they can find some profitability.
An important note here is that airlines don’t actually make a lot of profit compared to other industries. We often feel that ticket prices are very high, but the truth is that flying is very expensive. Some of the most profitable airlines in the country will only make about R25 – R30 per passenger in a good year.
Protecting the Customer
Customers rely on the fact that airlines will have a regular schedule. That means flying a route on a regular schedule regardless of whether it’s a full flight or an empty flight. As a result of this, some flights operate at a loss and some operate at a profit to offset that loss, and the airline needs to break even in the long run.
Secondly people should only be required to pay what they are prepared to pay for the flight at hand, so the price is actually entirely determined by the market demand – in other words the prices are “demand based” or in other words, prices are actually determined by the customers.
Protecting the Airline
An alternative route would be to determine a fixed price that covers our costs with a small profit attached. If we took that approach what would happen is that we would sell no seats while other airlines were cheaper than us. As soon as they become more expensive we would start to sell more seats than them, but we wouldn’t end up filling our flights, so the airline would end up operating at a loss and ultimately go out of business.
How can Customers Find Cheap Flights
To help customers get cheap flights we can always offer the following advice:
> Book as early as possible
> Try to travel light to save on luggage
> Be flexible with travel times to find cheaper flights – our Low Fare Finder is very useful here
> Book the standard fare if you suspect you make have to change their flight
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