You search for a flight and get excited when you find a reasonably priced airline ticket, however when you return to the website later you find that the price has now shot up! It can be frustrating when price fluctuations don’t go in your favour – however occasionally they do, and you might even find the price goes down in between finding a flight and actually booking it.
So why do air fares fluctuate, and who is responsible? Well, it’s all down to the airlines and a little thing known as yield management, which basically relates to airlines optimizing their profit by charging different fares. Let’s clarify this using an example:
Fly High Airways has a plane with seating for 120 passengers, scheduled to fly from Gatwick to Barcelona. Potential passengers are made up of two groups, those who are willing to shop around for the right price, and those that will fly regardless of how much the ticket is (e.g. those traveling to make an important meeting).
Airlines want to appeal to the masses, they don’t want empty seats – so can’t set prices too high (they known most passengers don’t have to fly with them). However, they’re unwilling to fill their plane with bargain hunters when they could sell seats for a higher price!
They get around this by offering only a certain number of seats at a certain price – and adding restrictions. This forces some passengers to book seats at a higher price. The airlines use specialist software to analyse customer demand, and will alter the airfares based upon this, so every time new passengers book you might see a change in price!