Airlines break out the seats on a plane into what they call buckets. Usually the first bucket is set aside for frequent flyer seats (if the airline has a loyalty program). Airlines have to provide at least a few seats on each plane that people will book using frequent flyer miles or points. These seats bring in no revenue, so they don’t help the airline get any closer to covering the costs for that flight. That’s why they limit the number of these seats per flight.
Pro tip: Most airlines file their pricing schedules 330 days in advance. So if you have miles you've been saving up for a trip to a highly desirable location—say Hawaii—you may have to book that flight 11 months in advance. Call ahead and find out the exact date you can begin booking and make sure you’re on top of it.
It may be surprising, but for all the new technology available, airlines use a fairly old-school method for pricing their flights. They just look back at last year. There’s a little more that goes into the decision (for example, if they know fuel costs 15 percent more than last year, they’ll add that cost in and increase ticket prices, as well as a fuel surcharge sometimes) but the basis for their pricing decisions is the question ‘What did we charge last year?’ and on a secondary level, ‘What is our competition charging now?’
And more importantly, they look back to see when people booked flights. This brings us to the crux of the pricing discussion.
When you book your flight—both time of year and proximity to the departure of that flight—have a bigger impact on the price you pay than nearly anything else.
Part of the reason when matters so much is that 80 percent of airline profit comes from roughly 20 percent of their customers. That’s right. They’re making the vast majority of their money from just a few important customers: business travelers.
Business travelers are less worried about price and more worried about logistical details. If you have to travel to San Francisco for a business meeting on Monday morning, then you have to get there by Sunday night. There’s not a lot of flexibility there. And when your company, or a client, is paying, you’re far less sensitive to cost than when it’s coming out of your own bank account. Business travelers also tend to book later in the game. Sure some business trips are known for weeks or months in advance, but many are not. If your client calls you up and says you need to be in Chicago next week for a key meeting, you’re booking your flight and hopping on the plane.
Now back to our time discussion. There are roughly two ways to get a cheap fare on a flight (aside from being a member of FlyinAway and grabbing a great deal through us): book your flight far in advance of the departure date; or book your flight during a system-wide sale period, which take place traditionally during three times throughout the year.
The first is just after the New Year, traditionally for flights during the spring time. Next is just after Easter in the spring, for flights during the summer. Finally, near the end of the summer there is a last round of sale prices for flights in the fall and winter, sometimes including the busiest holidays—Thanksgiving and Christmas.
Also remember airlines need cash to operate. Obviously, all companies need revenue to keep the lights on and the doors open, but the airline industry is particularly driven by the need for positive cash flow. So airlines will give some on price to get your cash in the door early. If you book a flight in mid January for late April travel they get your money three months before they’re providing you a service. If you can plan far enough out, book early. And preferably book during one of those sale times mentioned above.
So, airlines will give on price far out from the departure date to get cash in the door. From there, as you move closer to the departure date, the price starts to go up as the available seats decline.
Many people who have traveled last-minute for personal reasons are amazed at how expensive it is. Why wouldn't an airline slash prices at the last minute? Isn't selling a seat at half price better than not selling it at all? The answer brings us back to the way they price seats to begin with: they look back to last year. And last year, people did buy those seats at the last minute. Chances are they were business travelers. Remember, business travelers are more prone to book on late notice and are far less concerned about price, because someone else is paying and they don’t have a choice in whether to take their trip.
The business traveler is also why Tuesdays and Wednesdays are the cheapest days to fly. These are the days of the week least likely to be booked by business travelers and the number of empty seats based upon last year’s data would suggest the airline can offer lower-priced seats closer to the departure date.
So what does this all mean for you?
Remember these tips to save on flights:
- Book as far in advance as possible.
- Book during the traditional, industry-wide sale times (after New Year, after Easter, and end of summer) for travel later in the year.
- Fly on the days least frequented by business travelers—Tuesday and Wednesdays.
