How the price of airline tickets are determined and important factors which are affecting the price determination of airline tickets

1. DETERMINING THE PRICE OF
AIRLINE TICKETS
Jithin Thomas Philip
S2 MBA
Mar Athanasios College for Advanced Studies Tiruvalla (MACFAST)
Kerala, India
www.macfast.org

2. HOW THE PRICE ARE DECIDED?
The basics
The price of your ticket consists of a number of things.
1 Base fare
2. Taxes and airport fees
3. Fuel surcharge
4. Service fee to issue
5. Food
6. Seat selection
7. Baggage
The last four are sometimes optional (especially for low-cost airlines) where you pay for them
on top of the ticket price if you want them included. With the older, more traditional airlines, and
for long-haul flights, these things are usually included in the ticket price.

3. WHY DO PRICES CHANGE?
Prices change due to seat availability and demand. The
cheaper booking classes might be sold out even if there's
still 3 months before you leave.
There are some dates of the year where there is simply
higher demand. When a lot of people have to fly
somewhere (and even more when they want to go to the
same destination or area), airlines will set their prices at a
higher level. Christmas, Thanksgiving and school
vacations are the busiest times.

4. DÈCIDING THE PRICE OF TICKETS
• Airlines first determine the type of plane they will use
for a flight, and this tells them how many seats are in
each travel class. While a travel class indicates the
quality of class (First, Business, Premium Economy or
Economy), a booking class refers to the type of ticket.
• Each booking class (aka fare class or fare bucket) has
different rules and restrictions. The cost of changing or
refunding a ticket can vary widely, some can only be
booked if your flight is more than 14 days away or
only on weekdays, and sometimes you earn more
f r e q u e n t f l y e r m i l e s ( o r n o n e a t a l l ) .

5. IMPORTANT FACTORS AFFECTING IN DETERMINING
AIRLINE TICKET PRICES
Here are nine factors that determine what you'll pay to fly.
1. Price of Oil
This is the big one, because nothing adds to an airline's cost of doing business like the price of jet
fuel. In 2011, it became the No. 1 operating expense, zooming from about 20 to 40 percent, and that
was after oil prices eased from 2008's high of nearly $150 per barrel. The price is currently hovering
around $93, but it passed the $100 mark just after Christmas.
2. Flight Distance
This is common sense, right? The farther you fly the more expensive your ticket will be. But not
always! A flight between Los Angeles and Portland, Ore., booked last week for late January, cost
about $160 round-trip. But if you flew twice as far -- to Chicago, say -- you didn't pay double.
3. Competition
The more airlines, the merrier -- for passengers. Fierce competition means lower ticket prices.
Recent examples of more airlines causing lower prices: flights to and from Boston and Denver.

6. 4. Timing of Purchase
When you buy your tickets matters. If you buy at the last minute – typically within seven days of
departure, as business travelers do –you’ll pay a hefty premium (which is why airlines love their road
warriors). The best time to buy domestic tickets is between three-and-a-half months and two or three
weeks before departure. The best day to buy is Tuesday, starting at about 3 p.m. E.T. (which is when all
airfare sales have been released and competing airlines have matched the new, lower prices).
5. Timing of Flight
When you fly also matters. The cheapest days to fly, because of low demand, are Tuesdays, Wednesdays
and often Saturdays. Expensive periods include holidays like Thanksgiving and Christmas, and other
must-fly periods like summer vacations. The Super Bowl can be expensive, too; sports fans have
probably noticed this year that January and February airline sales specifically exclude flights to/or from
New York-area airports in the days surrounding the big game, for example.
6. Big Brother Factor
You better believe the government gets its cut of airline tickets. This includes the Sept. 11 Security Fee,
which will rise later this year from the current $2.50 per flight segment to a flat $5.60 or $11.20 per
round-trip flight. And don't forget the “regular” taxes that also take a bite out of your ticket - and wallet.

7. 7. Passenger Appetite
Believe it or not, you do have some control over ticket price, and it's real simple: If airlines price their tickets too
high, people won't fly. It works, too; last year, individual airlines tried to raise ticket prices on 12 separate
occasions, but competing carriers said "no" and the hikes didn't happen. Those naysaying airlines knew the higher
prices wouldn't fly with their customers, and if people don't fly, airlines don't make money. Note: Three of those
12 hikes were considered “successful,” but they were very narrow in scope.
8. Empty Middle Seats
Why is an empty seat a factor? If the airlines can't fill it, prices drop, which is the last thing they want. So, over
the years, airlines have cut capacity and even routes, all with an eye toward filling every seat on every plane.
9. Fees
Although fees aren't strictly part of an airline ticket, they might as well be on some airlines -- unless you’re the
rare nudist traveler who never gets thirsty. Case in point is Spirit Airlines, which charges for checked bags -- as
most airlines do now -- but also for carry-ons. And soda. And coffee. And even water. We’d love to say this is a
solo act, but Allegiant does the same thing, and so (in some cases) does Frontier.