Understanding How Airlines Set Their Ticket Prices

If you are curious about the ever – changing flight rates, Flyopedia will tell you the science behind how airlines set their ticket prices. Flight prices are very volatile every time you see it. You may have found a great price for the ticket you’re planning on buying. But after you made up your mind a few hours later, the ticket price has almost doubled. This seems counter – intuitive because everyone has faced this issue. So, before you use our best last minute flight deals to India from USA, here’s what you need to understand.

How do airlines set their flight ticket prices?

The first thing we need to begin with is the driving force behind the price fluctuation. This is because of Revenue Management, the airline’s commercial department. Airlines employ revenue management practices to ensure they sell the right ticket to the right person, at the right time and price. It is a careful balance to sell as many seats as possible on a flight while maximising the profit they earn from each sold ticket.

Strategies airlines employ to determine best prices for flight tickets

According to revenue management, there are many strategies airlines employ to increase the profits from flight tickets. These techniques include yield management, dynamic pricing, price matching etc. But that’s not all, it also factors in many other factors like time. These decide the fare you will get for a specific route at a specific time. We’ll discuss a few of these strategies airlines use to determine best prices for their tickets.

Yield Management (Demand)

One of the main factors affecting flight price fluctuation is their demand. Airlines set their prices according to the demand. Here’s what to know before you grab cheap flight tickets to India from USA with Flyopedia.

When demand increases, supply decreases and vice versa. Once supply decreases, the airline revenue management algorithm works automatically to increase the rates of the remaining flight seats. To maximise their profits, airlines sell the same seat at different rates to different customers at different times. This is done using variable pricing strategy.

Process of flight ticket price increase

Airlines set different fare segments for the same class. Once the flight tickets are made available, the seats tend to be the cheapest. As the cheapest fare segment is booked, the prices are automatically increased to optimise the revenue. Once the 2nd segment is booked, prices increase even more. However, if the demand isn’t met in the 3rd segment, prices roll back to scope for fliers.

Dynamic Pricing (Time of the booking)

Prices of flight seats change according to weeks and months before a journey because of historical data. Airlines use this to forecast their flight prices and regulate the optimal balance between sales and earnings. This is the reason behind last minute flight bookings being expensive.

Price Matching (Competition)

Airlines closely monitor the flight rates their competitors are offering. This is why once their competitor drops the price, they do too. This strategy is known as price matching. Additionally, it is also the reason behind why airlines don’t drop their prices below a certain point. Because other airlines will follow and sell low priced flight tickets which could’ve been sold for a higher rate.

Cheapest Day To Book Flights (Day of the week)

You may have heard that the cheapest day to book flights is Tuesdays. There is a science behind it. Business travelers are the ones usually driving demand during the weekdays.

Hence, when they fly out on Mondays, they return on Thursdays or Fridays. That makes Mondays, Thursdays and Fridays the most expensive days of the week for flight travel. On the other hand, Tuesdays and Wednesdays are the cheapest. And god forbid if airlines launch new prices, those changes are usually implemented from Mondays. This affects the price change as well.

So, go get cheap flight tickets to Chennai from USA with Flyopedia now! The prices fluctuate and will increase if you delay it a moment longer. Explore the world today!

Also Read: Amazing travel tips for getting the cheapest flight tickets