Why Your Airplane Ticket is So Expensive

I have been traveling for almost twenty years. In that time, the aviation industry has changed a lot. The use of points and miles became widespread, tickets around the world went the way of the dodo, airlines consolidated, and there was an explosion in budget airlines.

Over the past few years, the cost of air tickets has been steadily rising. They are becoming more and more expensive while their prices often seem irrational.

Since ticket pricing is such a nebulous and misunderstood topic, I want to take some time to explain why your plane ticket is so expensive.

A look at the aviation industry

Ticket prices rose over the decade for several reasons. For starters, the industry has consolidated a lot over the past few decades. Thanks to bankruptcies and mergers, there are now only three major allied airlines (American, Delta, and United) in the United States. With the recent bankruptcy of Spirit and the merger of Alaska and Hawaii, there is less competition outside the Big Three.

In Canada, there are only two major airlines – WestJet and Air Canada.

In Europe, Air France-KLM, British Airways IAG and Lufthansa control the bulk of the market. (Although, fortunately, Europe has plenty of budget airlines to choose from.)

As airlines have partnered, merged or gone bankrupt, there is little incentive to offer low prices to win your business. After all, when only one or two airlines fly a route, airlines know you don’t have much of a choice. Less competition means higher prices.

Second, the price of jet fuel has risen dramatically. Back in 2017, jet fuel cost $1.37 per gallon. In 2024, the price will be $6.49 per gallon! The airlines simply passed this five-fold increase on to the consumer.

Third, airline taxes and security fees have increased significantly, increasing the cost of your ticket. Have you ever traveled to London? Half of the ticket price consists of fees and taxes!

Finally, demand declined following the 2008 recession, and to compensate for this, airlines reduced the number of routes they offered and the number of flights they operated. Full aircraft mean more passenger revenue and lower costs for the airline.

This trend has accelerated significantly during the Covid-19 crisis. When the coronavirus brought global travel to a halt, airlines grounded many of their older aircraft and laid off many of their employees. When travel restrictions were lifted and more people started flying again, they didn’t have enough planes or staff to return to a pre-coronavirus schedule. This decline in the supply of flights, combined with the increase in travel demand, means that airlines have little incentive to lower prices.

According to Rick Sini of Farecompare.com“Before 2008, things were in favor of passengers. After the 2009 crisis, the scales of justice tilted towards the airlines.”

Taken together, a consolidated airline industry that faces more costs is simply less likely to offer lower prices overall.

How do airlines set prices?

Prices rise and fall for many reasons. There are four main factors that drive prices: competition, supply and demand, and oil prices.

Together, these four things affect what is called the “load factor.” Airlines want to fill their planes and maximize profits, and they do this by calculating the aircraft’s load factor. Basically, this is the percentage of seats sold on the plane. They want this number to be as high as possible.

To get the highest possible load factor, airlines will constantly change prices based on the four categories mentioned above in order to entice people to buy tickets.

Airlines use dynamic pricing models and artificial intelligence (AI) to figure out the maximum value they can get for each seat. Have you ever wondered why airlines seem to aggressively raise their prices after high demand for a big event? They are not. Artificial intelligence is. All you see is demand skyrocketing and adjusting to their programming. More demand = higher prices.

These advanced computer systems constantly compare booking trends with past sales history, major events, concerts, sporting events, weather and competitor behavior. They can look at consumer behavior in searching and booking, process lots and lots of data, and quickly change prices (no pun intended) in hopes of getting the best price possible.

All of this is why a trip might cost $100 one day, then $400 the next, and then back to $100 the next. When people buy seats on a flight, airlines raise prices, and when demand drops (at a certain price point), they lower prices until fewer seats are available, then raise prices again. It’s a delicate balance designed to ensure maximum revenue. This is why prices are cheapest for 5am flights, more expensive during holidays, and highest during peak season or if there is a major sporting event in town.

After all, you can’t add more seats to the plane, so all they can do to increase revenue is charge higher prices!

This is also why prices can change in seconds. Not because they track your cookies, but because the AI ​​responds to real-time changes in seating. Think about it. How many booking companies are there? a lot! They all reserve seats Millions of people fly every day, and with limited routes, it’s easier to fill planes, so AI doesn’t need to discount prices as much as it did in the past.

On a domestic flight in the US, there may be 10-15 different price points. If the load factor is low and demand is low, the airline will increase the availability of cheap fares. If the load factor is high and demand is high, the airline will raise prices.

As Rick said, the airline has an advantage now.

But it is not impossible to find a cheap ticket. There are many, many ways to find a cheap flight ticket. To avoid being the person who paid the most for their ticket, the main thing you should do is be flexible.

Airlines are constantly changing prices to increase revenue, hoping to lure people with the highest prices possible. “About three months ago, airlines started running these lower price points,” Rick says. This means that airlines start looking at historical trends and current seat sales to see whether they will really launch those low prices or keep prices high.

If you book within a month, you are in the airline’s favor. When your dates are no longer flexible, you will pay whatever amount they charge you.

To learn how to navigate this system and get a cheap flight, check out these articles I wrote:

The days of cheap air tickets are long gone. They’re not coming back, and the prices you’re seeing now are the new normal for airline tickets. It will simply cost too much, especially if you don’t find the right place when prices are at their lowest.

But by understanding how tickets are priced, you can avoid being the one paying the most.

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