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How in the World are Airfare Prices Determined?

How in the World are Airfare Prices Determined?

After flying domestically and internationally for over 40 years and accumulating in excess of 3 million flight miles, The Traveling Professor is always amazed and confused on how airfares are determined.

For instance, why does it cost $677 to fly R/T between Hartford and and Dallas but if you drive just 100 miles to fly out of Boston Logan airport, the cost of the flight is 1/3 the price?  In flying between New York's JFK and Rome, an American Airlines flight is $1,700 but flying the same dates on the same airline between JFK and Madrid, the flight is only $532?  A round trip flight between JFK and Paris CDG airport is $1,100.  However, if you fly out of Boston which connects at JFK on the $1,100 flight, the cost of the flight is reduced by $359?

Airline flight pricing is madness and we have few clues as to how airlines determine airfares.  At a trade show conference with airline executives that The Professor attended a few years ago, he had a congenial conversation with a person responsible for setting airfares for a major airline.  One of the responses to The Professor's questions was "I am not always really sure how we price some itineraries".

Here are some clues (not always reliable) on how airlines price flight itineraries:

One Way Trips Can Be Priced Higher, Especially For International Flights On Legacy Carriers:   In looking at a one way flight from Paris to JFK on American Airlines on September 15, the coach one-way price is $2815.  Add an outbound segment TO Paris on September 1, the price drops to $736.  Some airlines like Icelandair, have affordable one-way pricing. 

Direct (non-stop) Flights Can Be More Expensive:  Try pricing JFK to VCE (Venice) departing October 7 and returning October 16.  Right now, there is only one non-stop (Delta, Alitalia, KLM, AirFrance) prices it at $1781 to $4396 for a coach flight.  Why not fly American Airlines with a one stopover each way at $644 R/T?

"Budget" Airlines Don't Necessarily Mean Lower Prices:  When pricing domestic airlines like SouthWest vs. American Airlines to comparable cities, SouthWest pricing is almost always higher.  

Distance Traveled Has Nothing To Do With Price: Trans-continental flights between New York and Los Angeles can routinely be found for about $300 on American Airlines.  Want to fly between Boston and Pittsburgh?  Be prepared to pay over $400.

Why Is My Local Airport So Expensive To Fly Out Of?:  Flying on American Airlines to Los Angeles to/from Albany, New York will set you back $680.  Or, you could have driven to either Boston or JFK and saved at least $300 per person.  So, it seems that the best strategy is to fly out of a big airport.

Holiday Travel Is More Expensive:  Finally!  Something that makes sense. 

Why Are Some Airports Drastically Cheaper Than Others?  I don't know, but to save lots of money, when flying into Europe fly to Madrid, Barcelona or Milan (MXP).




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