5 ms·

When to Buy Airline Tickets

62 points by thmzlt 16y ago

alanh 16y ago
“Southwest didn’t appear once” Southwest flights don’t show up in online airfare searches — just their own website.
- jrockway 16y ago
  I think he is paying Mechanical Turkers to look up the prices. But it's suspicious that AA is missing, who is also not listed on many search sites. (But in general, Southwest is often not the cheapest fare. They do have cheap fares, but if some other airline wants its market, it can use its high-profit routes where Southwest does not fly to subsidize its low-profit routes where Southwest does fly. Southwest is 50% advertising and 50% good customer service, where the other airlines are 100% "revenue management". Both models seem to be working.)
  - smackfu 16y ago
    Another difference is that Southwest won't try to compete with a non-stop that they don't have. NYC to LAX round-trip is $500+ on SWA, with a stop. Other airlines it is $300, non-stop.
rgejman 16y ago
I wonder how these prices change over time. e.g. are tickets for travel in February cheapest if bought in July?
lachyg 16y ago
He should contact Adioso, I'd imagine they would have all sorts of data on this!
cellurl 16y ago
I wonder how the airlines set prices?
tomkarlo 16y ago
He's testing the wrong thing. It's not (just) the time of year, it's the time to flight that determines fare (which is why he's seeing the highest fares for flights in the upcoming week. Airlines use complex loading systems to maximize both capacity utilization and total revenue. So when a flight is far off, the fare is moderate (because they still have a long time left until the flight). If there's extra capacity on a flight, they'll start lower the price to use up capacity as its date approaches. When you're in the last week or two before the flight, the fare may go way up (because there are only a few seats left and they are looking to maximize their price) or go down (because they have a lot of seats left and they're looking to fill them.) Generally, if an airline is doing things right then a lot of flights will be fairly full, so you'll most often see prices rising in the last week or two before the flight date. (An additional factor is that if you're looking for a ticket next week, you probably have less date flexibility than someone booking a month in advance.) (Conversely someone once told me that the actual marginal cost of an empty seat on a commercial flight is around $35. In theory, if a flight is about to leave the gate and a seat is empty, the airline should be willing to sell a ticket for any price over $35... ) There are some other factors as well, such as trying to segregate business travelers from vacation travelers. Business travelers tend to book last-minute, want refundable fare and don't want their trip to extend over a weekend day. Hence the spike on traveling from LAX to the east on Thursdays - many flights from LAX to JFK or MIA on a Friday won't arrive until late Friday night at best.
- dvvarf 16y ago
  Just curious, where did you acquire this knowledge? Is there somewhere that I can read up on the industry, or did you learn all this from experience?
  - tomkarlo 16y ago
    I've spent time working with companies that do GDS systems (basically travel ticketing back-end infrastructure) and talked with a few startups in the affiliate/rewards space. Load management is also used a lot in business schools as a case study of how more complex pricing schemes can be used to extract a higher average price than would be indicated by a traditional macro-economic demand curve approach. Basically you're segmenting customers and also varying pricing based on available inventory. Airline seat inventory and hotel rooms as well are an interesting problem because they're essentially wasting inventory - if you don't sell a hotel room or airline seat before the day it's available, it becomes worthless. That's why airlines and hotels love to have reward systems where you're compensated with free travel/stays - it's a way to get value from something that might otherwise go to waste. (This is also why Priceline works - they are a way for hotels to get rid of excess inventory on a no-name basis.)
powera 16y ago
There's a follow-up already posted: http://dlo.me/flying-on-the-cheap/ http://dlo.me/flying-on-the-cheap/ That said, I'm not quite sure what he's trying to show. Is it what days are cheapest to travel on, or what days are cheapest to purchase the tickets? And as has been noted, this approach is going to ignore Southwest and other airlines that don't show up on the aggregators, as the people doing this aren't going to go to every website.
memoryfault 16y ago
I would like to see / hear more about the script he wrote!
- bryanh 16y ago
  It seems he used Mechanical Turks (https://www.mturk.com/mturk/welcome https://www.mturk.com/mturk/welcome).
joblessjunkie 16y ago
This study is hopelessly naive. It's like trying to predict the motions of the stock market. I have worked on airline pricing software, and have seen the dirty bowels where your airfare is cooked up. The truth is that pricing rules are so complicated that occasionally even the people who are supposedly in charge of these things are not entirely able to predict or explain the prices. Airline cabins are broken up into a dozen or more "fare classes", with a set number of seats available in each class. As you move towards the back, things get cheaper. As fare classes sell out, the prices for all fare classes on the flight will be moved up. Travel between a particular pair of airports does have a base underlying fare, but so many special rules apply based on day of week, length of stay, holidays, and more that prediction is a lost cause. If the airline suspects you are a business traveler, you will be charged much more. Round trips within a business week are tip-offs. Saturday night stays mark you as a leisure traveler. If you are traveling on routes that the airline is trying to promote, or on which they are competing on fares with another airline, you may pay less. If you wait until the last minute to purchase, you will almost certainly pay much more -- unless the flight is nearly empty (and the airline can figure this out), in which case you will not. If part of your journey connects you through another airline, special rates apply. If you are military, special rates apply. All of these rules and many more go into a soup and the "pricing engine" is supposed to sort it all out. Afterwards, there may be significant debugging as the engineers try to explain why some fares have been applied. When a competing airline surprises everyone by having extra-low fares, a sudden panic may set in, and new, "high priority" rules may be put into place to override the pricing engine to be competitive. These new rules may or may not stick around forever, where they complicate future pricing puzzles. Then, of course, the actual tickets are sold through various online intermediaries, where pricing enters a whole new realm of negotiation, bulk sales, markdown and markup. Hey, it's better than the 60's, when all this stuff happened on paper, and it wasn't until an hour before departure that the airline even knew how many people would show up at the door of the plane. Southwest was one of the first to bust through this morass. One of the many reasons that Southwest kicked everyone's ass was their ability to set prices simply and predictably, and the fact that all of their tickets are sold direct to the customer with no intermediaries.
- mkramlich 16y ago
tptacek 16y ago
I'm not surprised SWA doesn't show up in a study like this. The point of SWA isn't that they're always the cheapest, only that they're consistently and predictably cheap.
- wtn 16y ago
  Yes--plus, you don't pay an extra 20-30 for checked bags.
  - aneth 16y ago
    Or $50-100 change fees.
ajays 16y ago
I attended a talk by an economist, and he gave the following explanation of how things worked. The assumption is: the value of a seat goes to 0 at the instant a plane takes off. For a given number of seats available, you can plot a price (Y axis) -vs- time left (X axis) curve. This curve will gently slope down and hit 0 when t=0. Now you can plot a whole series of such curves, one for each N (where N = number of seats available). As N goes lower, the curves are higher. If you're at a certain point in the curve for a particular N, if a seat gets sold, then you can jump up to the curve for N-1 . Obviously, the airlines' systems aren't fast enough to do this in realtime; so they do this adjustment in batches (every Monday and Wednesday?). Anyways: this was what he claimed was going on. I'm not sure how correct the above is.
- prodigal_erik 16y ago
  This gets into iterated game theory: even though the value of an empty seat is basically zero at takeoff (marginal fuel and cabin crew labor don't add up to a lot), the airline has a long-term incentive not to reduce the price so that the market for that one flight clears, because in the future it doesn't want people waiting for cheap last-minute tickets they expect will again be available.

62 points by thmzlt 16y ago

alanh 16y ago

“Southwest didn’t appear once” Southwest flights don’t show up in online airfare searches — just their own website.

jrockway 16y ago
I think he is paying Mechanical Turkers to look up the prices. But it's suspicious that AA is missing, who is also not listed on many search sites. (But in general, Southwest is often not the cheapest fare. They do have cheap fares, but if some other airline wants its market, it can use its high-profit routes where Southwest does not fly to subsidize its low-profit routes where Southwest does fly. Southwest is 50% advertising and 50% good customer service, where the other airlines are 100% "revenue management". Both models seem to be working.)
- smackfu 16y ago
  Another difference is that Southwest won't try to compete with a non-stop that they don't have. NYC to LAX round-trip is $500+ on SWA, with a stop. Other airlines it is $300, non-stop.

rgejman 16y ago

I wonder how these prices change over time. e.g. are tickets for travel in February cheapest if bought in July?

lachyg 16y ago

He should contact Adioso, I'd imagine they would have all sorts of data on this!

cellurl 16y ago

I wonder how the airlines set prices?

tomkarlo 16y ago

He's testing the wrong thing. It's not (just) the time of year, it's the time to flight that determines fare (which is why he's seeing the highest fares for flights in the upcoming week. Airlines use complex loading systems to maximize both capacity utilization and total revenue. So when a flight is far off, the fare is moderate (because they still have a long time left until the flight). If there's extra capacity on a flight, they'll start lower the price to use up capacity as its date approaches. When you're in the last week or two before the flight, the fare may go way up (because there are only a few seats left and they are looking to maximize their price) or go down (because they have a lot of seats left and they're looking to fill them.) Generally, if an airline is doing things right then a lot of flights will be fairly full, so you'll most often see prices rising in the last week or two before the flight date. (An additional factor is that if you're looking for a ticket next week, you probably have less date flexibility than someone booking a month in advance.) (Conversely someone once told me that the actual marginal cost of an empty seat on a commercial flight is around $35. In theory, if a flight is about to leave the gate and a seat is empty, the airline should be willing to sell a ticket for any price over $35... ) There are some other factors as well, such as trying to segregate business travelers from vacation travelers. Business travelers tend to book last-minute, want refundable fare and don't want their trip to extend over a weekend day. Hence the spike on traveling from LAX to the east on Thursdays - many flights from LAX to JFK or MIA on a Friday won't arrive until late Friday night at best.

dvvarf 16y ago
Just curious, where did you acquire this knowledge? Is there somewhere that I can read up on the industry, or did you learn all this from experience?
- tomkarlo 16y ago
  I've spent time working with companies that do GDS systems (basically travel ticketing back-end infrastructure) and talked with a few startups in the affiliate/rewards space. Load management is also used a lot in business schools as a case study of how more complex pricing schemes can be used to extract a higher average price than would be indicated by a traditional macro-economic demand curve approach. Basically you're segmenting customers and also varying pricing based on available inventory. Airline seat inventory and hotel rooms as well are an interesting problem because they're essentially wasting inventory - if you don't sell a hotel room or airline seat before the day it's available, it becomes worthless. That's why airlines and hotels love to have reward systems where you're compensated with free travel/stays - it's a way to get value from something that might otherwise go to waste. (This is also why Priceline works - they are a way for hotels to get rid of excess inventory on a no-name basis.)

powera 16y ago

There's a follow-up already posted: http://dlo.me/flying-on-the-cheap/ http://dlo.me/flying-on-the-cheap/ That said, I'm not quite sure what he's trying to show. Is it what days are cheapest to travel on, or what days are cheapest to purchase the tickets? And as has been noted, this approach is going to ignore Southwest and other airlines that don't show up on the aggregators, as the people doing this aren't going to go to every website.

memoryfault 16y ago

I would like to see / hear more about the script he wrote!

bryanh 16y ago
It seems he used Mechanical Turks (https://www.mturk.com/mturk/welcome https://www.mturk.com/mturk/welcome).

joblessjunkie 16y ago

This study is hopelessly naive. It's like trying to predict the motions of the stock market. I have worked on airline pricing software, and have seen the dirty bowels where your airfare is cooked up. The truth is that pricing rules are so complicated that occasionally even the people who are supposedly in charge of these things are not entirely able to predict or explain the prices. Airline cabins are broken up into a dozen or more "fare classes", with a set number of seats available in each class. As you move towards the back, things get cheaper. As fare classes sell out, the prices for all fare classes on the flight will be moved up. Travel between a particular pair of airports does have a base underlying fare, but so many special rules apply based on day of week, length of stay, holidays, and more that prediction is a lost cause. If the airline suspects you are a business traveler, you will be charged much more. Round trips within a business week are tip-offs. Saturday night stays mark you as a leisure traveler. If you are traveling on routes that the airline is trying to promote, or on which they are competing on fares with another airline, you may pay less. If you wait until the last minute to purchase, you will almost certainly pay much more -- unless the flight is nearly empty (and the airline can figure this out), in which case you will not. If part of your journey connects you through another airline, special rates apply. If you are military, special rates apply. All of these rules and many more go into a soup and the "pricing engine" is supposed to sort it all out. Afterwards, there may be significant debugging as the engineers try to explain why some fares have been applied. When a competing airline surprises everyone by having extra-low fares, a sudden panic may set in, and new, "high priority" rules may be put into place to override the pricing engine to be competitive. These new rules may or may not stick around forever, where they complicate future pricing puzzles. Then, of course, the actual tickets are sold through various online intermediaries, where pricing enters a whole new realm of negotiation, bulk sales, markdown and markup. Hey, it's better than the 60's, when all this stuff happened on paper, and it wasn't until an hour before departure that the airline even knew how many people would show up at the door of the plane. Southwest was one of the first to bust through this morass. One of the many reasons that Southwest kicked everyone's ass was their ability to set prices simply and predictably, and the fact that all of their tickets are sold direct to the customer with no intermediaries.

mkramlich 16y ago

tptacek 16y ago

I'm not surprised SWA doesn't show up in a study like this. The point of SWA isn't that they're always the cheapest, only that they're consistently and predictably cheap.

wtn 16y ago
Yes--plus, you don't pay an extra 20-30 for checked bags.
- aneth 16y ago
  Or $50-100 change fees.

ajays 16y ago

I attended a talk by an economist, and he gave the following explanation of how things worked. The assumption is: the value of a seat goes to 0 at the instant a plane takes off. For a given number of seats available, you can plot a price (Y axis) -vs- time left (X axis) curve. This curve will gently slope down and hit 0 when t=0. Now you can plot a whole series of such curves, one for each N (where N = number of seats available). As N goes lower, the curves are higher. If you're at a certain point in the curve for a particular N, if a seat gets sold, then you can jump up to the curve for N-1 . Obviously, the airlines' systems aren't fast enough to do this in realtime; so they do this adjustment in batches (every Monday and Wednesday?). Anyways: this was what he claimed was going on. I'm not sure how correct the above is.

prodigal_erik 16y ago
This gets into iterated game theory: even though the value of an empty seat is basically zero at takeoff (marginal fuel and cabin crew labor don't add up to a lot), the airline has a long-term incentive not to reduce the price so that the market for that one flight clears, because in the future it doesn't want people waiting for cheap last-minute tickets they expect will again be available.