With fewer planes, less competition, and higher capacity, airlines can charge a lot more for tickets

A few months ago, I was speaking with the folks from Singapore Airlines and we ended up talking about the public perception of the cost of airfare. Everyone is always renaissance hotel washington dc looking for the cheapest flight. And while there are ways to get cheaper airfare renaissance hotel washington dc , the age of rock bottom prices are simply over. If you ve been flying for at least the past few years, you might have noticed ticket prices, even the cheapest ones, seem to be going up and up. Save some flash sale or price war, consumers are simply paying a lot more than they used to. If you really want rock bottom prices, you'll need to invent a time machine and go back ten years. (Don't forget to take me with you!)
But that conversation inspired renaissance hotel washington dc me to sit down and write this post. Since ticket pricing is complicated, I want to take some time out to explain why the hell your airline ticket costs so goddamn much as well as let you know a few tricks to making renaissance hotel washington dc it cheaper.
renaissance hotel washington dc Ticket prices are high today for a number of reasons. For starters, the industry has consolidated a lot over the last few years. Less competition renaissance hotel washington dc means less need for cheaper prices. Thanks to bankruptcies and mergers now there are only 4 major airlines in the US (soon to be three when American merges with US Airways). renaissance hotel washington dc In Canada, renaissance hotel washington dc you have 2.  In Europe, KLM and Air France are now one company, and Lufthansa has its hands in many smaller airlines. (While renaissance hotel washington dc budget airlines keep prices renaissance hotel washington dc cheap within Europe, once you leave the continent, those 10 Euro prices disappear!) As airlines have partnered up, merged, or gone bankrupt, there is little incentive or need to create renaissance hotel washington dc low fares to win your business.
Secondly, the price of airline fuel has increased tremendously . Back in 1996, airline fuel cost 55 cents per gallon. Now, it's $2.97 per gallon. Airlines can't absorb all of that increase, so they pass some of that on to the consumer, leading to higher fares.
US APHIS User fee of $5, US International Transportation renaissance hotel washington dc Tax of $16.30 renaissance hotel washington dc per arrival or departure; and Foreign Government security/tourism/airport/international transportation taxes and fees of up to $290 (varies widely by destination renaissance hotel washington dc and fluctuates with exchange rates).
Moreover, following 9/11 and the recession, demand fell and to compensate, airlines reduced both the number renaissance hotel washington dc of routes they offered and the frequency of their flights. They did this to save money and fly fuller planes. Fuller planes mean more passenger revenue and fewer costs for the airline. renaissance hotel washington dc It's why if you live far from a major city you've seen fares go up and the number of flights go down. Planes fly close to full now and airlines are quite happy about that.
With fewer planes, less competition, and higher capacity, airlines can charge a lot more for tickets. There's nothing to stop them and they don't need to lower prices. United CEO Jeff Smisek said that only now are airfares priced appropriately . When you have a CEO say something like that, it means prices are not going to go down anymore, but only up.
Prices go up and down for many reasons. No one can really renaissance hotel washington dc predict when or if a price is going to go up or down.  Only the airline knows that. But there are four things that drive prices: competition, supply, demand, and oil prices. The first and last items are the ones that really affect prices the most.
Together, those four things all affect a lovely thing called load factor. Airlines want to fill their planes and maximize profits, and they do this by calculating a plane's load factor. Essentially, this is the percentage of seats sold on a flight. They want this number to be as high as possible.
Airlines tend to manage their load factor by constantly changing the price of tickets to fill the plane and get maximum revenue. On a U.S. domestic ticket, renaissance hotel washington dc a flight might have 10-15 different price points, according to Rick Seaney.
In the airline industry, there are two types of passengers: business travelers and leisure passengers. Business travelers are flexible on price (the boss is paying) but not on dates. Leisure travelers aren't flexible on price (the cheaper the better) but are on dates.
Airlines know that a certain number of people will book far in advance if they can find a decent price. Airlines also know that they need to hold a certain number of seats for business travelers who will book last-minute and pay more.
As Scott Mayerowitz, airline reporter for the Associated Press , says, "To maximize their profit, airlines developed sophisticated computer systems that constantly compare booking trends to past sales history. renaissance hotel washington dc If tickets renaissance hotel washington dc are selling faster than in the past, the price rises. If a competitor raises fares, the airline will probably raise theirs too."
It s not impossible to find a cheaper ticket. Am I going to find that $500 roundtrip fare to Europe? Maybe if I get extremely lucky but typically not. Heck, you can sometimes renaissance hotel washington dc fly to Asia for the price it costs to fly to London!
One trick to not being the person who paid the most for your ticket is to be flexible. As I said, airlines are constantly changing prices and trying to balance leisure and business travelers; they ll do their best to avoid having customers pay the lowest price point.
"About three months before, airlines start to manage those bottom price points," Rick says. That means airlines begin to look at historical trends and current seat sales to figure out whether they will release those really rock bottom fares or keep prices high.
If you are booking inside a month, you are playing into the airline's hand. As Rick pointed out to me, the bulk of the tickets are sold within 30 days of departure. Booking that late is a bad idea. At that point, airlines know they have you. When your dates are no longer flexible, you'll pay whatever they charge.
To quote Scott again: "The days of routinely flying from New York to San Francisco for $99 each way are long gone. That said, there are occasional fare wars when airlines like Virgin America or Spirit enter a new market. renaissance hotel washington dc Airlines will also still deeply renaissance hotel washington dc discount flights when traffic is low, such as winter flights to Europe. The catch is: travelers need to be flexible about when they fly. ITA Software s airfare search provides a calendar of the lowest fares on given routes. It's a great way to find the best fares, if you have some flexibility."
And, while there are many other tricks to reduce the cost of your ticket , the main two are flexibility and flying when demand is low. That means avoiding flying on Monday, Friday, or Sunday, flying mid-week, and taking early morning or really late flights.
The days of cheap airfares are long over. They aren't coming back and the prices you see now are the new normal for airline tickets. They are simply going to cost a lot more, especially if you don't find the sweet spot when prices are their lowest. But by understanding how tickets are priced, you can avoid being the person renaissance hotel washington dc who paid the most.
Taxes are awful, and I ve started adjusting where I go based on airport taxes. Take the Caribbean: taxes to Puerto Rico are $5 but over $100 for the Dominican Republic. Same beaches, same ocean. (The DR is cheaper overall, so it might make sense to get that pricier ticket if for a longer trip).
renaissance hotel washington dc I have the most success with fares when I book as early as possible. My plans are often really inflexible because of my work schedule, so I need to leave at specific times. When I book really early, I m more likely to cheaper seats at the exact time I need to leave. Yes, I miss out on last minute fare sales, but the fare sales often don t work with my schedule anyway.
Kay, I ve done a lot of research on taxes and fees. In my recommendations for finding cheap flights, I tell people to consider taxes when flying. The more airports you fly into, the more you will pay. Sometimes it may be cheaper to break up your flight into segments.
I did an entire feature on taxes and fees (see my comment below) and was quoted in The Washington Post in an article about airline taxes. People now see the total costs of their flights (rather than just the airline advertised price) but I still don t think people really understand the impact taxes and fees can have.
Thanks for pulling all this together Matt and explaining it. Those free credit renaissance hotel washington dc card frequent flyer miles you talk about in your book are even more valuable to help offset higher fares. Your advice helped when I received a 35,000 signup bonus in the mail and decided to act on it. Thanks Matt!
Thanks for this really in-depth, informative post, Matt; I really learned a lot about how tickets are priced (and got a little depressed that they're going to stay at high prices). Guess it's time for me to start researching travel hacking haha!
I remember when I was able to fly RT to Buenos Aires for a mere $600 back in 2008. Today, I only see offers for double that price (or higher!). We can pretend to beat the system and be smarter than airlines, but reality is that the joke is on us this time around. Still, pretty informative article.
Great information, Matt. I was surprised when 60% of the cost of my flight to Croatia last month was taxes. Maybe that cost will go down once there are direct flights from USA to Croatia (one less European airport the airlines have to pay).
This was an interesting read and a good thing to keep in mind while buying tickets and trying to not get frustrated over prices. I know in my brain that fuel and taxes cause the prices to go higher, but then I remember when I was 19(*only* 13 years ago), I flew to London(from Chicago) for $200. Sure it was in January, but it was $200!
When I was in college in the early 00s I would see STA advertising $200 NYC-London flights every winter. When I was studying abroad, I walked into an STA office in Germany around Thanksgiving and bought a round trip ticket home over Christmas for about $350. Round trip! I don t recall the routing being particularly inconvenient either.
Good article. I use Kayak to compare prices as it ll show you the prices up to three days on eithe