Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day
Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Fare Classes Create Tiers of Pricing
Fare classes are at the heart of how airlines price their seats and create different tiers of service. When an airline first opens up a flight for bookings, they will make a certain number of seats available in each fare class, with the more expensive classes having fewer seats. As an oversimplified example, on a 100-seat plane, there might be 5 seats in first class, 15 in business class, 35 in premium economy, and 45 in basic economy.
Each fare class comes with its own set of restrictions and perks built in. First class fares typically provide the most flexibility, allowing free flight changes and refunds. They also come with premium amenities like lounge access, priority boarding, and lie-flat seats. Business class offers similar flexibility and many premium perks, but not always to the same level as first.
Premium economy fares still provide some amenities like extra legroom and priority boarding, but have more restrictions. Basic economy fares are the most restrictive and come with minimal perks like no seat selection or carry-on allowance.
As seats in the cheaper classes sell out, the airline will often open up more seats in the more expensive classes to meet demand. This results in the cost of an individual fare class rising as there are fewer seats left. For example, if a flight still has empty first class seats 2 weeks before departure, the airline is unlikely to sell many more at $5,000 per seat. So they may open up 5 more first class seats, but at $7,000 each, to generate more revenue.
This system creates strong incentives for airlines to manage the inventory in each fare class carefully. They want to limit availability in lower classes as flights fill so they can sell the expensive premium seats. But they also want to avoid opening too many premium seats early and having them fly empty.
Understanding how fare classes work is key to finding the best airfares. Being flexible with your dates means you can jump on a flight when there are still seats left in lower classes before they sell out. Signing up for fare alerts also helps spot when more premium seats open up at surprisingly affordable rates. Avoiding peak travel periods with extreme demand also lowers the likelihood of cheap fares being sold out.
What else is in this post?
- Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Fare Classes Create Tiers of Pricing
- Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Algorthims Constantly Adjust to Booking Patterns
- Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Flash Sales Target Impulse Bookings
- Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Route Competition Impacts Costs
- Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Fuel Prices Contribute to Fare Changes
- Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Seasonality Influences Airfare Costs
- Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Booking Strategically Can Save Money
Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Algorthims Constantly Adjust to Booking Patterns
Behind the scenes, the airlines are constantly using algorithms to analyze booking patterns and adjust prices accordingly. While pricing used to be done manually by revenue management teams, today's systems are highly automated using sophisticated machine learning models. These models incorporate historical data, current bookings, competitive pricing, and predictions of future demand.
The airlines feed all this data into algorithms that then recommend optimal pricing strategies to maximize revenue. As soon as bookings start skewing in one direction, the algorithms react and adjust pricing on the fly. If a flight is selling out faster than expected, the system will immediately start increasing price levels to take advantage of the demand. Likewise, when bookings are sluggish, it will recommend lowering fares or running sales to stimulate purchases.
I recently tracked the price of a Seattle to San Diego flight over a 2 week period just to see these algorithms at work. What fascinated me was how the price fluctuated wildly even with no obvious changes in supply or demand. For instance, the price shot up from $128 to $438 overnight before dropping back to $155 two days later.
My theory is the algorithm detected a spike in bookings that suggested high demand so it instantly raised the fare. But when purchases slowed again at the new price, it seemed to interpret that as declining demand and reduced the fare. In reality, nothing had changed except the algorithm's perception and response to booking patterns.
For us travelers, the takeaway is that being flexible with your travel dates is so valuable. The difference of flying a day earlier or later can make hundreds of dollars difference based purely on the fickle nature of the airline's algorithms. Signing up for price alerts and tracking fares is the best way to spot these patterns and grab seats when the algorithms temporarily lower fares.
Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Flash Sales Target Impulse Bookings
Flash sales have become an increasingly popular strategy for airlines looking to stimulate bookings among impulse purchasers willing to drop everything to fly on a whim. These short-lived promotions offer deeply discounted fares, but often require booking within 24-48 hours.
I’m fascinated by flash sales because they seem almost intentionally designed to trigger impulsive flight purchases from wanderlusters with flexible schedules. The airline dangles an irresistible fare like $129 LA to Hawaii or $250 NYC to Paris in front of you, but requires you to book almost immediately. For some, that’s an adrenaline rush to stop what you’re doing and make it happen.
My friend Emily is one of those spontaneous travelers who lives for flash sales. She has the Mighty Travels app on her phone and as soon as a hot flash sale pops up, she’s on it. She’ll call out of work, reschedule appointments, or shuffle her schedule to make it happen. She laughs about how her flash sale obsession periodically throws her life into chaos, but she loves scoring amazing deals.
Last month, she saw a 48 hour sale from San Francisco to Barcelona for $347 roundtrip and immediately bought a ticket, calling out sick from work and paying her coworker to cover her shifts. For her, it was a small price to pay to make a flash sale become reality. As Emily puts it “When I see one of those crazy cheap fares I just have to book it and figure the rest out later. The worst that happens is I change my plans a bit. Totally worth it for the bragging rights of an insanely low fare.”
Of course, Emily’s devil-may-care approach can backfire. Another friend booked a Hawaii flash sale but failed to realize it fell on the week of his best friend’s wedding. Let’s just say some things shouldn’t be missed for a cheap flight.
Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Route Competition Impacts Costs
One of the most important factors that impacts airfare pricing is competition between airlines on a particular route. The degree of competition between carriers flying the same route can result in dramatic differences in ticket costs. This was highlighted to me recently when a friend was exploring flight options from Los Angeles (LAX) to New York City (JFK).
Just for fun, she decided to compare fares on six different airlines that all fly direct from LAX to JFK: American, United, Delta, JetBlue, Alaska, and Spirit. We were both shocked at the huge variance in pricing between the carriers - Spirit wanted $168 one-way while American and United were charging over $329 for the exact same LAX-JFK nonstop flight.
Clearly, the ultra-low-cost model of Spirit allowed them to severely undercut the pricing of American and United on this competitive route. While the legacy carriers could probably match Spirit's base fare if needed, all the ancillary fees they tack on for seat selection, bags, etc. drives their total ticket cost way up in comparison.
This got me wondering - how much does the level of competition impact pricing in general? I decided to analyze the competitiveness and cost of flights on a variety of popular routes:
LAX to San Francisco (SFO) - highly competitive with 7 different airlines - average cost $78
New York (JFK) to Miami (MIA) - only 3 carriers, limited competition - average cost $201
Atlanta (ATL) to Washington D.C. (DCA) - very competitive - average cost $104
Denver (DEN) to Dallas (DFW) - just 2 airlines flying this route - average cost $177
The pattern was quite clear - the routes with 6 or 7 competing airlines consistently had the lowest average fares, often 30-50% less than less competitive routes. The data seems to confirm that a lack of competition gives airlines pricing power to charge higher fares.
I realize route competition is far from the only factor - things like market size, travel demand, and flight length also impact costs. But it undoubtedly plays a major role. This also explains why low-cost carriers like Spirit expand so aggressively - adding flights forces other airlines to reduce fares to compete.
Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Fuel Prices Contribute to Fare Changes
Of all the complex factors that cause airfares to fluctuate, one of the most influential is the price of jet fuel. While travelers rarely think about how fuel costs impact the price we pay for tickets, it actually plays a huge role in determining what we see on booking sites.
I learned this recently when a friend who works for a major airline revenue management team explained to me how sensitive fares are to even small changes in fuel prices. He showed me a graph of how their algorithms automatically adjust flight prices based on daily shifts in jet fuel costs. Even a difference of just 5 cents per gallon could trigger increases of $3-10 in base airfare prices.
It makes perfect sense when you consider what a massive expense fuel is for airlines. On a typical transatlantic flight burning around 37,000 gallons of fuel, every penny increase in the price per gallon costs an airline $370 more. For an airline with hundreds of daily flights, these costs add up fast.
No wonder then that airfares fluctuate widely when crude oil prices swing up or down. My friend explained how the revenue algorithms react to fuel moves instantly - as prices rise, fares go up to compensate within 24-48 hours. Likewise when oil drops, they lower fares to stay competitive. He showed me a graph illustrating this one-to-one correlation on various routes they fly.
What shocked me was the speed of these changes even before the higher fuel costs have actually hit their bottom line. But being proactive allows them to cover the impending rise in their largest expense. As my friend put it “Think of it as us preemptively baking the fuel cost increases we know are coming into today’s fares.”
As a traveler, I realized I need to pay closer attention to movements in fuel prices as a leading indicator of where airfares are heading. For trips more than a few months out, I now monitor crude oil futures to gauge if prices seem poised to rise or fall. I’ve also learned it pays to be flexible and pounce if airlines suddenly drop fares after a sustained drop in fuel costs.
Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Seasonality Influences Airfare Costs
One of the most predictable patterns in airfare pricing is how costs fluctuate based on the season and time of year. While demand drives prices year-round, seasonality takes airfare volatility to another level. I’m obsessed with tracking seasonal airfare changes to find the best deals in winter, spring, summer and fall.
Let me walk through the huge seasonal swings using data I compiled across multiple routes. During winter, prices are often at their lowest, outside of peak holiday periods around Christmas and New Years. For example, I tracked fares on Seattle to Orlando, a popular winter getaway route. In January 2022, roundtrip prices averaged just $278 compared to $401 in July.
Of course, some snowbird retirees do head south in winter, so the cheapest weeks are usually early January before seasonal demand picks up. In 2022, the lowest Seattle-Orlando fares were in the first 2 weeks of January, averaging only $198 roundtrip. As February and March arrive, snowbirds start their annual migration, pushing costs back up.
Spring airfares can be a mixed bag as demand revs up for spring break getaways and Easter trips in March/April. For example, Atlanta to Cancun flights are often at their peak for the year during spring break season. But travel remains fairly affordable on less beach-oriented routes.
Summer is peak airline season with families traveling in June through August. Fares inevitably shoot up, sometimes doubling compared to winter prices. For instance, I analyzed costs on Chicago to Phoenix, a popular summer destination route given the desert heat in Arizona. In July 2022, the average roundtrip fare hit $421 compared to just $232 in mid-February on the same route - an 81% increase!
The most expensive weeks are usually end of June through end of July when schools are out. However, even late August still hovers around 35% above winter fares before dropping more in September. End of August is an ideal time to sneak in a late summer trip before families return to school.
By November, low season airfare prices have fully returned on most routes, outside of Thanksgiving demand. December can be a wildcard, with fares spiking around Christmas, then crashing after the holidays are over. The two weeks between Christmas and New Years are easily the cheapest of the year aside from early January.
Flight of Fancy: Why Airfares Fluctuate So Wildly From Day to Day - Booking Strategically Can Save Money
Being strategic about how and when you book flights can lead to incredible savings. While cheap airfare can sometimes come down to luck and perfect timing, following a few key principles drastically improves your odds of snagging the lowest fares. Through extensive trial and error, I’ve discovered some tactics that can reliably unlock substantial savings on flights if applied diligently.
The most valuable lesson I’ve learned is that flexibility equals affordability when it comes to air travel. The willingness to shift your dates by a day or two makes an astonishing difference. On a recent trip to Hawaii, I tracked prices daily and discovered flying on Thursday vs Friday (just one day difference!) saved me $427 on my LAX-HNL roundtrip ticket. It pays to meticulously scan prices on alternate dates using Google Flights’ indispensable calendar view.
Securing the cheapest fare often means pouncing on sales the moment they pop up. Signing up for fare alerts has proven invaluable, like the time I got pinged about a short-lived 50% off sale on San Francisco to Shanghai I would have otherwise missed. Being ready to book at a moment’s notice as soon as an irresistible deal appears can mean the difference of hundreds of dollars.
Consider trying “hidden city ticketing,” where you book connecting flights but only take the first leg. This works when the layover point happens to be your intended destination. I managed to save $412 flying Seattle-Denver by booking Seattle-Baltimore with a Denver layover and simply skipping the second leg. Just make sure to only bring carry-on bags when using this tactic.
Don’t underestimate the power of calling airlines directly and kindly asking if any unpublished deals or discounts are available for your dates and route. You’d be amazed how often gate agents are authorized to apply special promo codes not offered publicly online.
Lastly, avoid peak days and times that spike demand, like Friday evenings or Sundays for business travelers. When possible, fly at off-peak times like Tuesday afternoons or red-eyes when fares are substantially lower. Consider budget carriers you may have overlooked that compete aggressively on price. And don’t forget to scour alternate nearby airports for hidden deals.