Why Your Airplane Ticket is So Expensive

By Nomadic Matt | Published April 25th, 2013

Flying High in an airplaneA few months ago, I was speaking with a representative of Singapore Airlines, and we ended up talking about the public perception of airfare costs. Everyone is always looking for the cheapest flight. And while there are ways to get cheaper airfare, the age of rock-bottom prices is simply over. If you’ve been flying for at least the past few years, you might have noticed that ticket prices, even the cheapest ones, are going up and up. Save some flash sale or price war, consumers are just paying a lot more than they used to. If you really want rock-bottom prices, you’ll need to invent a time machine and go back ten years. (Don’t forget to take me with you!)

That conversation inspired me to sit down and write this post. Since ticket pricing is a complicated and arcane subject, I want to take some time to explain why your airline ticket costs so goddamn much, as well as share a few tips on how to still get cheap airfare.

Why Have Prices Increased?

Ticket prices are high today for a number of reasons. For starters, the industry has consolidated a lot over the last few years. Less competition means less need for cheaper prices. Thanks to bankruptcies and mergers, there are now only four major airlines in the US (soon to be three when American merges with US Airways). In Canada, there are two. In Europe, KLM and Air France are now one company, and Lufthansa has its hands in many smaller airlines. (While budget airlines keep prices cheap within Europe, once you leave the continent, those 10 Euro prices disappear!) As airlines have partnered up, merged, or gone bankrupt, the incentive to create low fares to win your business has mostly disappeared.

Secondly, the price of airline fuel has increased tremendously. Back in 1996, airline fuel cost 55 cents per gallon. Now, it’s $2.97 per gallon. Airlines can’t absorb all of that increase, so they pass some of that on to the consumer, leading to higher fares.

Additionally, airline taxes and security fees have increased, adding a lot to your base fare. Currently, the following fees are added to the cost of your ticket:

  • September 11th Security Fee of $2.50 (up to a maximum of $10 per round trip)
  • Passenger Facility Charge of $4.50 per segment (up to a maximum of $18 per round trip)
  • US Federal Domestic Segment Fee of $3.70 per segment
  • US Travel Facilities Tax of $8.20 per direction (only applicable to flights to/from Alaska and Hawaii and the 48 contiguous US states or between Alaska and Hawaii)
  • US Immigration User Fee of $7
  • US Customs User Fee of $5.50
  • US APHIS User Fee of $5
  • US International Transportation Tax of $16.30 per arrival or departure
  • Foreign government security/tourism/airport/international transportation taxes and fees of up to $290 (varies widely by destination and fluctuates with exchange rates)

That’s a hell of a lot of fees! And it’s not just the United States. Ever fly into London? Half the ticket price is made up of fees and taxes!

Moreover, following 9/11 and the recession, demand fell, and to compensate, airlines reduced both the number of routes they offered and the frequency of their flights. They did this to save money and fly fuller planes. Fuller planes mean more passenger revenue and fewer costs for the airline. It’s why if you live far from a major city, you’ve seen fares go up and the number of flights go down. Planes fly close to full now, and airlines are quite happy about that.

With fewer planes, less competition, and higher capacity, airlines can charge a lot more for tickets. There’s nothing to stop them, and they don’t need to lower prices. United CEO Jeff Smisek said that only now are airfares priced appropriately. When you have a CEO say something like that, it means prices aren’t going down anymore — only up.

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

Why Do Prices Fluctuate?

Prices go up and down for many reasons. No one can really predict when or if a price will change. Only the airline knows that. But there are four things that drive prices: competition, supply, demand, and oil prices. The first and last items are the ones that really affect prices the most.

Together, those four things all affect a lovely thing called load factor. Airlines want to fill their planes and maximize profits, and they do this by calculating a plane’s load factor. Essentially, this is the percentage of seats sold on a flight. They want this number to be as high as possible.

Airlines tend to manage their load factor by constantly changing the price of tickets to fill the plane and get maximum revenue. On a U.S. domestic flight, there might be 10–15 different price points, according to Rick Seaney.

If the load factor is low and demand is low, an airline will increase the availability of cheap fares. If the load factor is high and demand is high, the airline will raise prices.

In the airline industry, there are two types of passengers: business travelers and leisure passengers. Business travelers are flexible on price (the boss is paying) but not on dates. Leisure travelers aren’t flexible on price (the cheaper, the better) but are on dates. Airlines are constantly trying to strike a balance between these two types so they can make a profit. Why fly a plane full of cheap fares when you can get people to pay more?

Airlines know that a certain number of people will book far in advance if they can find a decent price. Airlines also know that they need to hold a certain number of seats for business travelers who will book last minute and pay more. Ticket prices jump up and down based on the demand for seats from these two types of passengers.

As Scott Mayerowitz, airline reporter for the Associated Press, says, “To maximize their profit, airlines developed sophisticated computer systems that constantly compare booking trends to past sales history. If tickets are selling faster than in the past, the price rises. If a competitor raises fares, the airline will probably raise theirs too.”

How Do You Get Cheap Fares?

I remember the days when I got excited over $500 fares to Europe. Now, with prices typically around $1,000, I get excited over $750 round-trip fares. (“Yay!” I say sarcastically.)

It’s not impossible to find a cheap ticket. There are many, many ways to find cheap airfare, and while I go into incredible detail in this other post, here are some basic pointers:

To avoid being the person who paid the most for their ticket, you need to be flexible. As I said, airlines are constantly changing prices and trying to balance leisure and business travelers; they’ll do their best to avoid having customers pay the lowest price point.

“About three months before, airlines start to manage those bottom price points,” Rick says. That means airlines begin to look at historical trends and current seat sales to figure out whether they will release those really rock-bottom fares or keep prices high.

If you’re booking inside a month, you’re playing into the airline’s hand. As Rick pointed out to me, most tickets are sold within 30 days of departure. Booking that late is a bad idea. At that point, airlines know they have you. When your dates are no longer flexible, you’ll pay whatever they charge.

To quote Scott again: “The days of routinely flying from New York to San Francisco for $99 each way are long gone. That said, there are occasional fare wars when airlines like Virgin America or Spirit enter a new market. Airlines will also still deeply discount flights when traffic is low, such as winter flights to Europe. The catch is: travelers need to be flexible about when they fly. ITA Software’s airfare search provides a calendar of the lowest fares on given routes. It’s a great way to find the best fares, if you have some flexibility.”

(For more tips from Scott, check out my interview on airlines with him.)

And while there are many other tricks to reduce the cost of your ticket, the main two are flexibility and flying when demand is low. That means flying mid-week, taking early-morning or late-night flights, and avoiding flying on Monday, Friday, or Sunday.

The days of cheap airfares are long over. They aren’t coming back, and the prices you see now are the new normal for airline tickets. They are simply going to cost a lot more, especially if you don’t find the sweet spot when prices are their lowest. But by understanding how tickets are priced, you can avoid being the person who paid the most.

Now that you know why flights are expensive, learn how you can get cheaper flights than the person sitting next to you:

? 10 Ways to Get Cheap Flights
? How to Use Airline Credit Cards for Free Flights
? How I Search for Airline Tickets

comments 101 Comments

Taxes are awful, and I’ve started adjusting where I go based on airport taxes. Take the Caribbean: taxes to Puerto Rico are $5 but over $100 for the Dominican Republic. Same beaches, same ocean. (The DR is cheaper overall, so it might make sense to get that pricier ticket if for a longer trip).
I have the most success with fares when I book as early as possible. My plans are often really inflexible because of my work schedule, so I need to leave at specific times. When I book really early, I’m more likely to cheaper seats at the exact time I need to leave. Yes, I miss out on last minute fare sales, but the fare sales often don’t work with my schedule anyway.

Kay, I’ve done a lot of research on taxes and fees. In my recommendations for finding cheap flights, I tell people to consider taxes when flying. The more airports you fly into, the more you will pay. Sometimes it may be cheaper to break up your flight into segments.

I did an entire feature on taxes and fees (see my comment below) and was quoted in The Washington Post in an article about airline taxes. People now see the total costs of their flights (rather than just the airline advertised price) but I still don’t think people really understand the impact taxes and fees can have.

Thanks for pulling all this together Matt and explaining it. Those free credit card frequent flyer miles you talk about in your book are even more valuable to help offset higher fares. Your advice helped when I received a 35,000 signup bonus in the mail and decided to act on it. Thanks Matt!

NomadicMatt

That’s great news! Happy flying!

Thanks for this really in-depth, informative post, Matt; I really learned a lot about how tickets are priced (and got a little depressed that they’re going to stay at high prices). Guess it’s time for me to start researching travel hacking haha!

NomadicMatt

That ebook is coming soon!

I remember when I was able to fly RT to Buenos Aires for a mere $600 back in 2008. Today, I only see offers for double that price (or higher!). We can pretend to “beat the system” and be smarter than airlines, but reality is that the joke is on us this time around. Still, pretty informative article.

NomadicMatt

There’s nothing we can do. All we can do is hope to get the bottom of the price range.

JDK

Or you could not play the game and fly less.

This was actually a really interesting and informative article. Thanks for sharing.

NomadicMatt

Welcome!

Great information, Matt. I was surprised when 60% of the cost of my flight to Croatia last month was taxes. Maybe that cost will go down once there are direct flights from USA to Croatia (one less European airport the airlines have to pay).

This was an interesting read and a good thing to keep in mind while buying tickets and trying to not get frustrated over prices. I know in my brain that fuel and taxes cause the prices to go higher, but then I remember when I was 19(*only* 13 years ago), I flew to London(from Chicago) for $200. Sure it was in January, but it was $200!

When I was in college in the early ’00s I would see STA advertising $200 NYC-London flights every winter. When I was studying abroad, I walked into an STA office in Germany around Thanksgiving and bought a round trip ticket home over Christmas for about $350. Round trip! I don’t recall the routing being particularly inconvenient either.

NomadicMatt

Those were the days….

The prices nowadays are ridiculous. I’ll be sure to let you know when I get that time machine working ;)

Good article. I use Kayak to compare prices as it’ll show you the prices up to three days on either side of your preferred departure date, or even an entire month if you can be that flexbible. And they have a flight tracker feature which is very handy.

I’m Canadian and flying within my own country is quite pricey. This explains why: http://www.yvrdeals.com/is-it-possible-to-get-a-good-deal-on-a-flight-within-canada

Even with flights costing so much, generally speaking, I still feel lucky I can afford to travel internationally. I met some locals in Indonesia last year that don’t even own passports because they can’t afford to travel.

Awesome info Matt. Flights are the most expensive part to our permanent travels so always good hear how we can save money

Sales still happen, I saw a flight from Montreal to Madrid today for $678 CDN departing June 2. But there is no more norm cheap rates.

I am hopeful that more competition will come from smaller airlines growing, or who knows, maybe passenger ships will get cheap for crossing the pond! :)

NomadicMatt

Sales happen but high is the new norm!

sue

Is that total with taxes///??????

That is SO informative, and makes me want to rack my brain even more in order to save as much as possible on airfare.

In Canada, in addition to having very little competition, taxes are also very, very high, which constantly makes the ticket even MORE expensive than it already is.

NomadicMatt

I know! Every time I try to book a flight in Canada, I’m shocked at high how it is….and there are never any sales!

Michelle

Thanks for the awesome tips!! Here’s hoping that I can find much better prices the next time I jet off to somewhere! Getting anywhere from Canada is so so so expensive. I mean flying within Canada itself is a killer sometimes.

Flying within Canada is so expensive because we have a sparse population and large geographical distances to cover.

I would like to know about credit card offers for Europeans to get free airmiles, anything i ever read on travel blogs always focuses on the US.

I don’t mind prices going up so much — that makes sense unless some amazing new technology comes along that drives down the cost. However, I’ve been really disappointed in the lowered quality of the travel experience in the past 10-15 years. Unless you can afford business/first class (which is usually at least twice the price of a regular seat), economy has become too… blah. I like that some airlines are offering an Economy Plus or Premium Economy area with more legroom and a few other bonus features (yet is still fairly affordable), but they’re mostly limited to transoceanic flights.

NomadicMatt

Now, you pay a lot more for less! But people shop on price so airlines get away with it.

Good article! However, prices haven’t fluctuated that much for flights to/from Africa. In 2006, I paid almost 1600 to/from ABQ to JNB. Now, that flight can be had for 1300 RT via the middle east or ~1600 through about any major carrier….and, even better, Delta flies direct to JNB from ATL now! That flight consistently is around 1300-1400.

One thing to consider is globalization and population growth. This will inevitably have an effect on route increases/fair changes, possibly in a positive way. Maybe I’m just being optimistic :)

I think a bigger concern overall is airlplane technology advancement. Thankfully, we still have a duopoly between Boeing and Airbus, however if one of them were to go under, we’d be in major trouble. Fuel prices would rise while technology stays stagnant.

I personally believe that although prices may slightly increase, airlines will have to improve dramatically. Take a look at the new Boeing Dreamliner…electrostatic window tinting, cabin pressure at half the simulated altitude as modern planes, and many other things to write home about!

I’ve spent a lot of time analyzing the costs as well and did a full breakdown on taxes and fees. The post I wrote got noticed by The Washington Post and they included me in their article about taxes. They’ve written a lot about the cost of flying. Here’s the bottom line.

The cost of flying has gone up – for a number of reasons. Taxes and fees are a part of it. Airfares SEEM more expensive now because airlines have to disclose the total price of tickets now including taxes and fees. Flights are also going up because of fuel (as you mentioned). However, another key component are airline mergers.

In the US, American and US Air are merging. United and Continental have merged. Delta bought Northwest. Southwest bough AirTran. What does this mean? When airlines merge, flights are consolidated meaning fewer flights each day and fewer seats. Less supply and increased demand (expected to be up about 2% this summer over last year) means the costs of flying will continue to go up.

I wrote a post a couple of years ago about how people can get a cheap flight. These aren’t just search for deals on airfare sites or know when to shop but ideas that might be a little outside of the box.

For more insight into taxes and fess, here’s the article on the Washington Post as well as my breakdown on taxes and fees

http://www.budgettraveladventures.com/traveltips/flightsairlinesairports/airline-ticket-taxes-and-fees/

http://articles.washingtonpost.com/2012-04-05/lifestyle/35451866_1_taxes-and-fees-air-travelers-lower-taxes

Thanks for another super well-written blogpost! Another way to look at it is that it’s actually cheaper to fly today than, for example, during the 70′s;) (if you find the right ticket of course.)

NomadicMatt

You’re welcome.

Vee

I was buying my tickets to AK, SE Asia and thinking the same thing… it’s costing an arm and a leg to go anywhere… although I understand that going to Asia in the summer would be expensive regardless! What do you think about this rumor: tickets are cheaper on Tuesdays?

Just another reason to have a flexible schedule and be location independent – and, of course, while travel hacking as much as possible :) . There are ways to get around high airfares, it just takes a lot of planning and a bit of luck.

Thanks for the well-written article, Matt.

Always enjoy your writing – straight shooting from the hip.

In the “old” days a direct flight (note: ‘direct’ doesn’t mean the plane doesn’t stop along the way, just means you don’t have to change planes when it does) was less expensive but now I find non-stop flights (my preference) are often the less expensive option.

I’ve also seen that one-way tickets purchased to get me there and back are $50-$150 less (total) than a round trip… again, opposite of the “old” days. Recently used the one-way approach to purchase flights in/out of EWR and saved $97.00 over the round-trip ticket cost.

Interesting trends and so glad you’re here to keep us abreast of them. :-)

Wow, this was really interesting to read and informative! Thanks for pulling this together and communicating it in such a fascinating way!

Lots of info, thanks Matt! Its so much easier to find a sale or good fare now that we don’t have jobs and a set schedule to have to meet, I think that’s the biggest money saver!

Hey Matt,
This is actually what I studied in college as an aerospace engineer, and like you suggested, gas is the #1 thing that has gone up. Half the weight and half the price of the tickets (depending on distance) are based on gas prices. BTW did you know that multiple leg trips (with layovers) are cheaper because you are basically carrying less weight, thus its cheaper to operate! Boeing has thought about scrapping long distance airplanes altogether and just making multiple fuel stops.

NomadicMatt

True but multiple stops means more taxes due to all the landing fees.

Makes me feel unease and slightly depressed. I got a flight 2 years ago from Sydney, Australia to Vancouver for just over $900. Probably, no certainly the cheapest flight I would ever pay for. I only fly those cheap dreaded late nights or early mornings with the longer lay overs, but if you see the positives, its all worth it. You can save a lot! and you have time in the airports to catch up on something you have been needing to do, for me it’s usually work (if you blog/work online).

I still fantasize about the time I found a flight in the summer time to Costa Rica from Los Angeles for $199 ($99 before fees!) at the height of the recession. It was to Liberia too, not seedy San Jose! Those days are Long gone. Looooong gone.

Super blog. Thanks so much for writing it. I was kind of blindsided as my company used to purchase my travel reservations for me. So when I found myself having to make my own I was pretty dissatisfied with my initial discoveries. I read this and actually spent about 20 whole minutes to cut the initial price I found in half. Thanks so much for these tips. You are a live and money saver!

Great article, lot of information in it. I agree the fares are increasing but you can still find some great deals or even totally unbeliavable deals – few months ago I bought tickets from Italy to Japan for €62 (return flight) ;-)

NomadicMatt

Really? On what airline? I’d like to see proof of that. That would be a mistake fare where the computer messed up like when United had $10 dollar redemptions to Singapore.

An interesting post, I’ve been travelling since 2008 with my first trip being London to Sydney one way and found it quite cheap at the time. Now I’m on my third trip abroad and (ironically) looking for a cheap flight from Sydney to London. It seems breaking it up is going to be cheaper but my eyes usually widen whenever I see how much is just based on taxes!

NomadicMatt

Flying out of the UK is the worst in regards to taxes.

Well explained for those not use to dealing with fares.
What I find also quite interesting (from the travel agent point of view) is that airlines do not give us commisions anymore (0%) of the ticket, but we are still the ones to blame for the increase of the price. Funny, they keep the amount they use to pay us and on top of that, charge the client a fee for issuing their own tickets. The richest getting richer!

Bob

Thank you for this cogent analysis. The cheapest fare I’ve ever hooked was $49 from Amsterdam to Boston — unheard of nowadays.

Nice article Matt, another reason that prices go up is the increasing airport taxes since some times taxes are more than half of the whole ticket price…

Matt, this is an excellent explanation of how airfare prices are determined. If you don’t mind, I’d like to share the link in the My Itchy Travel Feet May newsletter to be published on Wednesday, May 8.

NomadicMatt

No problem!

I’ve also noticed this increase of prices recently although as you said, prices are still very competitive in Europe.
On the other hand, prices tend to decrease in South America. They used to be ridicously expensive in the past but if you look inside Brazil, you can get for example a ticket Florianopolis-Rio for 60 bucks which is a great improvement. Unfortunately those prices can be found only for connections between the biggest cities. It still costs a lot to do Buenos Aires – Ushuaïa for example.

Phyllis

Sharon,
I flew from SLC to Paris on Delta,Economy Comfort and I highly recommend it. More legroom, wider seat. Like it used to be before the airlines started cramming in passengers like in cattle cars.

NomadicMatt

Urban legend.

I’ve been told that you want to book flights on Tuesdays (as in go online and check the prices then, I don’t mean fly in and out on Tuesdays necessarily) because that’s when the airlines typically put out their best deals, has anyone else heard anything similar?

Wow. An incredibly researched article.

While prices may have gone up it’s still very possible to achieve good deals. For the most part now I tend to always find flights with a connection in an interesting place. If you can extend that connection for a few days then that essentially to little mini-excursion en-route feels like a freebie. :)

Interesting to hear about this from a US perspective… In Australia it can easily cost $2000 and up to get anywhere and it was much the same in the early `00s. The only respite was during the financial crisis `08 `09 `10 where a ticket to the US could be found for not much more than $1000.. but as you say the industry is now consolidating and the fares are going back up. Honestly a $750 ticket to Europe sounds like absolute heaven to me!! Ah to live closer to the rest of the world! The major change that I have noticed is the number of people on flights. In 2002 I’d regularly get three seats to myself for that $2000, nowdays it’s a middle seat with screaming kids all around me!

When ever the airlines raise prices the goverment of that country is also responsible for those increases . There are so much taxes airlines have to pay and also have to make their own profits.

TJ

I propose that NOBODY on EARTH fly in an airplane for 6 months ….AT ALL,..ANYWHERE!!! Let the damn airlines close down…In the past 15 years I have only taken buses everywhere I have gone in the US, When I went to Mexico several years ago, I rode with a family to Cabo in the RV and then hitched and hiked down to Panama…Had a great time and the rode with other RV’ers and got rides all the way back to the US/MX border where I caught a bus in San Diego back to Portland…No planes Work on boats to cross Atlantic and Pacific…Like to do that…

I remember flying from Jamaica to Belgium four $700round trip not so long ago. Gone are those days. Great post Matt

Jessica

Great post! Unfortunately, I am now priced out of even flying domestically. It is really depressing when you love travel as much as I do. Rail isn’t much less expensive, and even it was, I would have to drive two hours to the nearest station and pay to park my car -or pay extra to take the bus.

Thanks!

True that air tickets have gone up considerably but if you start your search months in advanced then you are likely to find something at a good price. Still more expensive than they used to be but that’s to be expected.

Also, buying tickets is not a one day task, I’ve spent weeks looking for tickets with the right price finally showing up as I stumbled onto a time where the fares dropped for some reason.

Nina

As a person who is happily shunned and denied access to actual immigration to be with my to-be spouse, increasing flight prices are a massive chagrin. Before my travel budget could be a perfectly manageable 1000 euros. Now flights alone cost more than that. And if the trend is prices going up, I am seeing massive financial difficulty in arranging our sparse time spent together.

I wonder whether we’ll see a price fluctuation or a change in marriage and immigration laws first… possibly neither.

I feel you guys, it’s a bummer.
But it is what it is.
And at least those folks driving the cars down below us are having to pay higher fuel prices as well ;)

Rick

Hmm, so how do you see airfares panning out over the next 10-20 years? Are there any credible forecasts on this?

I’ve read that world oil production will be at *half* by 2030. Presumably that means jet fuel becomes many times more expensive… does that mean a return airfare to, say, Asia will be $5-10k (in todays terms)?

If airlines are struggling to break even now, is airtravel soon going to slip out of reach of the middle classes?

NomadicMatt

Fares are just going to go up in both real terms and inflation terms. Flights wont slip out of reach too much since airlines will still need those travelers to help make them profitable.

DK

Interesting article. But simply put Airlines are gouging travelers. There is no regulation on baggage fees either so expect soon to pay $100 / bag. Airlines are using technology to their advantage. That is what has changed significantly. They exactly know the demand for seats with a single click of their mouse and are artificially pricing the fares high. Statistically they know how many people will travel regardless. None of this was possible few years ago. All planes are 100% full these days. There is not much competition either. They all work together in unison. They are controlling the supply of seats! If you want to take a local flight say SF to Las Vegas in the coming weekend it is around $500 at normal hours. God forbid, if you happen to have family emergency and have to fly internationally in a day or two expect to pay several thousand dollars. One of my recent acquaintance had to pay over $4K for economy. Fares, fees taxes etc all have gone up and customer service has gone down the toilet.

Capo

These prices are crazy ! My family and I travel to Florida (Orlando) annually..and we’ve become accustom to paying around 250$ or so. This year the avg ticket is going around 350$ !!!! SMFH !

Brooke

I love this article! I work for a major US airline and I am trying to explain this to people daily. They want to know why a ticket with a base fare of $300 suddenly jumps to $500 once taxes/fees are added and blame us for an “outrageous price” when they should be shaking their finger at governments and oil companies! When comparing charts of airline ticket prices 50-100 years ago to today, prices are still relatively close in value. When you consider the general inflation and cost of living increases they should be much higher but no one would pay that much so we have to charge all kinds of random ancillary fees to help recuperate some loss. It totally sucks for the consumer which is why I got a job there so I can get free/cheap flights to afford my travels! Great article :)

Bubba Born

Let’s get real.. Prices are being driven by many pressures.. Years ago the passenger railroads were forced into bankruptcy.. by the auto and the airlines! The airlines are now facing technological competition by video-conferencing and VOIP.. The TSA stands for “Thousands Standing Around” and until the public decides that the price we pay for government intervention in our daily lives is too costly, the pleasure traveller will have to bear the burden of costly airfares.. That’s not withstanding all the mergers and the lack of competion they are causing.. Add in a more sentient, aging population and to remain fiancially responsible to their stockholders the airlines will be soon establishing prices every nanosecond.. Get used to change… Like they used to say..”It’s … ’cause nobody rides for free!”

Patricia

I keep seeing comments on the cost of travel between places that are very far away from each other and/or international. But I am amazed at how expensive it is to travel from just one state to another that is relatively nearby, when the distance is just too much for a drive. I, like many others, have very limited free time, so to make the most out of a three day trip, do I want to spend 8 hours or more of it driving? NO way. I live in the Gulf Coast near Mobile, AL, and a flight to Atlanta, Ga was costing me around 500 bucks round trip, and it was not a direct flight. And we still didn’t get there until like 4 hours after arriving at the airport. One state over. Ridiculous. There’s got to be a happy middle ground somewhere in our transportation system.

Nice Posting.. I worked in travel agent for 2 years.. in my humble opinion to get the lowest ticket price :
1. Never buy the airline ticket for holiday season… extremely high.
2. Get LCC
3. The best time to search the ticket is midnight. I often find cheap tickets at this time.
4. For low season try to look for 2 to 3 days before departure, there is often a price promo which released.

KevinA

I am no economist nor business person… but I wonder if there isn’t a point (or, a line) at/below which the cost of owning a fleet is too high per plane. Some complex set of variables including number of routes, number of flights, cost of the plane, cost of the maintenance, lifespan of the plane… availability of enough planes and crews at enough locations to cover all planned (and paid for) flights.

In other words, I’m wondering if increasing demand by decreasing supply has a tricksie bottom limit below which fixed costs (crews, staff, planes, maintenance, airport contracts, etc.) suddenly become disproportionate to variable costs and sales. And conversely, if profits are easier to leverage the more you people you fly every day (smoothing out and padding that tricky set of fixed costs down below)…

Bryce

I think the real question should be “Why were airline tickets so cheap?”

For most of aviation history, prices were extremely high. The reason prices were high was because they government regulated them, and at the regulated prices the airlines were guaranteed profits. Because the airlines didn’t compete on price (they all charged the same regulated prices, even if you bought last minute), they competed on service. Elegant dinners, cocktails, and friendly service were to be expected.

The current state of affairs, where airlines compete aggressively on ticket price, began when prices were deregulated in 1978. Of course there was still a culture of high service in place, and the ability to cut prices was hampered by the generous contracts negotiated by airline unions when prices were still regulated and profits guaranteed.

It really took the advent of budget airlines, who had neither a legacy of generous contracts nor a service-oriented culture/reputation to shake off, to effectively offer low fares while avoiding high customer expectations in terms of service levels. Legacy airlines simply can’t do this, in part because they need to offer higher levels of service in order to create loyalty and protect their business class clientele. The need to offer a high-end experience is essentially why many legacy airlines have attempted to compete with low cost airlines by launching their own low-cost divisions. It’s pretty clear that this is extremely difficult to balance these two roles effectively, given the non-profitability of virtually all legacy airlines over the last decade as well as the numerous bankruptcies. I mean, can we really sit here and pretend that airlines are reaping huge profits at the expense of consumers when they’re dropping like flies?

To read many of the comments, it’s clear that consumers want everything: we want the service of the regulated era, the ticket prices of the budget era, and none of the ancillary charges (i.e., baggage fees, etc) of the current era. Airlines aren’t really profitable. Any airline that offered all of these things would be out of business pretty quickly. Get used to paying more if you want good service. Get used to paying more if you want to eat, drink, or pack a bag. Complain all you want, but the reality is that you’ll take the lower price all the time, despite how you feel about their service and/or service charges. And if you really think you’re getting royally gouged by the airlines, I suggest you buy some shares in the worst offenders, so you can share in their profits.

jrose

Another reason why “last minute sales” are a myth is because many airlines make sure to have many different plane sizes, so they can be flexible. For example, if it’s a month before a particular flight and they’ve sold less than 50% of the seats, they will just swap out the flight’s usual plane for a smaller aircraft. This isn’t as common with domestic routes, where one plane can have several scheduled flights per day and thus isn’t as flexible, but it happens a lot with long-haul flights. You’ll notice it when you buy your ticket extra early – often the airline won’t let you select seats in advance, because they’re not sure what size aircraft they’ll be using until about a month before the flight.

koolbreez

There is really nothing new in this article. Prices across the board are going up and always have been. I remember years back paying only 10 cents a pound for ground beef, and 30 cents a gallon for gasoline. Higher prices are relative and in this article price increases have been taken out of context when compared to cost of living increases over the same years. In that respect fare prices haven’t really gone up, and good sale prices can be found.

Price increases for anything should always be compared to cost of living increases. If a price has increased more than the cost of living percentage, then that price has gone up. If the item price went up at a lower percentage rate than cost of living, then in actuality that item’s price has gone down in relative cost. Plane fares have matched and in some cases been lower than the cost of living increases over the last 15 years, and in the last 5 years plane fares can be classed as lower than cost of living increases.

The cost increase in oil has affected all elements of consumer, and commercial costs, not just the airlines, and in most cases corporations have used oil’s price increase to justify them making added profit. Airlines, for the most part haven’t done this, they have only increased prices to help cover oil’s increased cost, not making an extra profit from the cost increase.

As far as what to do to get the cheapest fare, all factors addressed here have always been used. You always book as far as you can in advance to get the best price. Everyone knows this. You always try to be as flexible as possible on the travel dates to get the best fare, if you can, and your time of travel. I remember the cheap “red eye” flights for business travel, and consumer cost savings.

The biggest change over the last 15 years has been the trend of no longer using a travel agent to make all your travel arrangements, and finding you the supposed best prices. Except for upper income travelers, most everyone does their own flight, and hotel bookings themselves on the internet.

Travel agents, for the most part, no longer get kickbacks from airlines from ticket sales. Agents now only get kickbacks from hotel bookings, and are used by the people that aren’t as price conscious, or want to deal with the hassle. They still exist, but not in the numbers they used to, and in lots of cases, not as their only source of income.

While I commend this author for doing the research to refresh people’s knowledge of what makes up a plane ticket’s total price, and how to save money, nothing is really new, and the basic premise can be misleading. Compared to cost of living increases, plane fares haven’t really gone up in relation to other consumer cost increases. It costs 300%+ more to drive in relation to costs 15 years ago, and only about 80% more at the most in the cost to fly. Very few plane fares have doubled in cost, as compared to the quadrupling of the cost of driving someplace.

Dan Peters

There are no direct flights to London from here in Cleveland any more. That’s a bit frustrating.

sockgal

As a middle class family of four, we have been completely priced out of flying. What happens when airlines lose a whole class of millions of people? Are there enough wealthy people to keep planes in the air? We can’t really travel anyplace that requires flying and that is depressing. I have wanted to take my kids to Hawaii, but t$4000 plus for the four of us to just get there is crazy expensive. We can’t even fly across the country to see family. We moved from Cali to Atlanta 7 years ago, thinking we could fly back every year. We did it the first year, but have been priced out the last six. When we moved we decided to move close to a huge airport hub to make travel easier and cheaper. Not sure what the “new” normal looks like, but life isn’t nearly as fun and adventurous as it used to be for this upper middle class family!

Samara

I agree with this blog.If airlines are going to continue to raise their prices year after year less people will be traveling especially during the vacation time.Since this is when airlines raise their prices drastically.

sue

I booked a trip to Europe and the air fare was $ 300. great….The taxes though were huge., $600. The taxes are DOUBLE the Air fare. Wow…….
Most of it was …Fuel surcharge., a huge $462…..Since when was fuel all Tax….?

alski

Recently, I listened to a radio interview of some FRS econimist who said there is “very little inflation in US”… ha-ha-ha

Gerry

Hello, I wish you would explain why on the same flight most times the taxes charged are higher if the price of the basic fare is lower. Meaning the higher the fare the lower the taxes. When you think you have found a low fare then you will find that the taxes are higher then the ones applied to a higher fare and in the end the total amount is the same. So frustrating and a total rip off. Can you explain the reasoniing behind this? Thanks

NomadicMatt

Do you have an example? There could be a lot of reasons. I’d have to see the tax break down.

Cat

I have to agree about almost everything you said, especially airline consolidation. I’ve been trying to find a one-way ticket from Montreal to the UK and it’s impossible. As a real example, one-way with KLM is $1800 but if I set an arbitrary return date, it’s $700. I asked them why that is and they said it’s ‘to encourage people to fly back with the same company’ but in doing so, they punish customers who only need to fly one-way. If they can offer a $700 return flight, they can offer a $350 one-way flight (which is what they were doing up to about 2 years ago). It’s particularly annoying considering I’ve been a frequent flier with KLM for more than six years, some of those as a silver card member. Doing a Google Flight search showed that all the airlines had similar prices and I can only assume that they’re fixing prices between them because there is no reason for a one-way flight to cost so much. I really hope someone busts up their little racket they’ve got going and teaches them a lesson!

bee

When hubby and I were first married, just over 8 years ago, we’d go to Chicago each Christmas for a family reunion (from CA). We’d get 2 tickets for $500 (2005). Then slowly but surely the costs kept going up and this year it was $1000! That’s INSANITY! Last year it was only $750… I did book earlier but this year I kept being told “oh it’ll go down don’t get your tickets yet” but the price difference is less than $100, so if I booked earlier I would have spent just over $900, still too much. I had to tell hubby that we probably won’t be able to go every year from now on, maybe every other year… Kind of upsetting considering his grandmother and his great uncles/aunts are in their late 70s and 2 of them are not doing well…

Britz

Love all the answers from everyone and in my words they are all right! YAY:)

You are right about “Heck, you can sometimes fly to Asia for the price it costs to fly to London!”. Everytime I plan a Europe summer vacation, I end up going to India for $200 more with a stop-over in Europe.

Kim

I went to Japan (Newark to Narita) this year for about $1,200 round trip. Obviously that is not cheap but when I compare flights to London & Paris and they are the same price, there is something wrong here.

NomadicMatt

Yup! Europe flights are way overpriced when compared with flights to Asia or even Africa.

Stevo

Help!
Why is a round trip United flight from Boston through Newark to Sao Paulo much less expensive than Newark to Sao Paulo (without Boston)? The Boston trip takes the very same Newark to Sao Paulo flight! So why is it is cheaper rather than more expensive? This is bizarre. It’s a big price difference.

NomadicMatt

Airline pricing is a mystery.

Bartolo

That CEO is right.
Let’s imagine an intercontinental op to serve a 250 passenger list on each leg.
A 150M aircraft can cost ~9M depreciation per year, which for 8030 hours (22 hours of flying on each day of the year) = 1120(a) per hour cost
+
2.5M for crew salaries per year = 310(b) per hour cost
+
8000(c) per hour cost in air operation

365 days = 730 legs of 11 hours each = ~182000 passengers (near 100% occupation)
1120(a)+310(b)+8000(c) = 9430 per hour total operating cost = ~104000usd for a 11h leg = 416usd per person per leg (excluding gov, security and other required taxes)

Remember maintenance was not considered and that airplanes cost more while on the ground than flying, insurance and refunds are not considered as well.

Now tell me, how safe do you feel flying when the captain didn’t slept much due to company profit push or his salary was cut so corporate revenues may fit competitive margins, or his getting so little money that is all the time thinking in his private life monthly fees, or when the aircraft had no time for regular inspections, or even that inspections are made not according the plane manufacture guide so the air company can save ground time (the most expensive one)…?

Ben

Matt,

There’s something that always puzzles me, it’s the price difference between originating your flight from the US, compared to originating from Europe.

For example, take a flight from SFO to CFG, anytime in the summer. It’s going to be 60% on average more expensive than the same flight, same dates, same airline, but in the other direction (CDG to SFO). I just don’t get why. If I’m flying on the same dates, why would I pay almost double than someone from Europe?

Jo

I’ve decided that if I have to travel to somewhere locally I’ll take the car, period.

Quite often I found out it’s cheaper (or same price) to drive to the state I need to go to, than to fly there. One or two adult tickets would actually pay for the needed gas to go where I need to go and I can also take my children with me at no extra charge.

I personally don’t mind driving and I get to see nature. It’s a longer drive yes, but we don’t care. Why would I want to expose my family to the abuses of TSA, super uncomfortable cramped seats, terrible service from employes who don’t want to work there, and then experience the incompetence of brand new pilots who are not taught how to properly fly an aircraft when computers fail! No way! I can get a lot better service driving in our comfy Merc Marauder and enjoy the seas of traffic part ways.

Of course this how I like to do things. I’m not saying you should do it, you may not be able to afford the time etc. However for those of us who can, we do ask the airlines the following question: give us a very good reason why we should choose your service over our own? Right now we don’t see any reason why we should fly with any of them, at least locally.

mac

Some years back a newspaper had cost of airfares compared to wages. It was cheaper then ever to fly and the aircraft didn’t take a day to go from Vancouver to say Toronto. That also was before free bees, air miles whatever. I would say not much has changed except even with today’s prices for an airline ticket. Look at the wages many are making. If they can afford the high priced homes, the cost of heat and light, telephone and internet may as well say everyday living. Air travel is still the best bang for the buck and not a priority.

NomadicMatt

Supply and demand. More people are flying so the airlines raise their prices.

Ash K

Great article Matt. Some of it common sense but can’t help feel I’m being had every time I pay 1700 return to London from the US .

Eva

It’s a real shame that they cut the amount of routes offered and hiked the prices up because people like me (lower/middle class) are traveling way less for leisure. The bigger the gap gets between upper and middle/ lower class, the harder it is for the everyday American to travel. Less travel means less vacations, means a more stressed population, not to mention ignorant to what the rest of the world or even the rest of the country is really like. And then consider what it does to the economy in regards to tourism. The higher prices go up, the more isolated I feel in my part of the country. And for business travel, the more technology that becomes available for webinars and group discussion face to face over your computer screen, the less business travel there is going to be. I think the airlines need to rethink their strategy.

I love using Google’s flight finder to find tickets, it gives you a graph of when prices dip in the market so you know when the best time to go

Eric Martin

Good article. It’s also worth pointing out that cost of living rises every year so ticket prices will too. For instance. $1000 in today’s dollars was about $790 ten years ago.

To the notion of round-trip tickets to Europe for $500…I remember those, but it was in the late 1980s. $500 in 1988 is about $985 in today’s dollars.

WillowBay

May2014—–
I checked the itemized cost of a flight from Philly to London, (British Airways)
Basic Fare $361- Taxes and Surcharges $708 !!!!!! Total cost $1069
Double the amount of the actual fare! And that’s in the economy (catlle section) of the plane!

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