Why is your plane ticket so expensive?

I have been traveling for almost twenty years. In that time, the airline industry has changed a lot. THE use of points and miles became widespread, round-the-world tickets went the way of the dodo, airlines consolidated and there was an explosion of low-cost airlines.

In recent years, the price of plane tickets has continued to increase. They are becoming more and more expensive while their prices often seem illogical.

Since ticket prices are an obscure and poorly understood subject, I want to take the time to explain why your plane ticket costs what it does.

A look at the airline industry

Ticket prices have increased over the decade for several reasons. For starters, the industry has consolidated a lot over the past few decades. As a result of bankruptcies and mergers, there are now only three major alliance airlines (American, Delta and United) in the United States. And with the recent bankruptcy of Spirit and the merger of Alaska and Hawaiian, there is even less competition outside the Big 3.

In Canada, there are only two major airlines: WestJet and Air Canada.

In Europe, Air France-KLM, British Airways IAG and Lufthansa control most of the market. (Although, fortunately, in Europe there are plenty of budget airlines to choose from.)

As airlines have partnered, merged or gone bankrupt, there is little incentive to offer low fares to win your business. After all, when only one or two airlines offer a route, the airlines know you don’t have much choice. Less competition means higher prices.

Second, the price of airline fuel has increased significantly. In 2017, jet fuel cost $1.37 per gallon. In 2024, it’s $6.49 per gallon! The airlines simply passed on this five-fold increase to the consumer.

Third, airline taxes and security fees have increased significantly, thereby increasing the price of your ticket. Have you ever flown to London? Half of the ticket price is made up of fees and taxes!

Eventually, demand fell following the 2008 recession, and to compensate, airlines reduced both the number of routes offered and the frequency of their flights. Fuller planes mean more revenue for passengers and fewer costs for the airline.

This trend has accelerated significantly during COVID. When COVID shut down travel around the world, airlines mothballed many of their older planes and laid off many of their staff. When travel restrictions were lifted and more people started flying again, they didn’t have enough planes or staff to return to a pre-COVID schedule. This decrease in flight supply, coupled with increased demand for travel, meant that airlines had little incentive to lower prices.

According to Rick Seaney of Farecompare.com“Before 2008, the situation was in favor of passengers. After the 2009 crisis, the scales of justice tipped in favor of the airlines.”

Overall, a consolidated airline industry that faces higher costs is simply less likely to offer generally lower fares.

How Airlines Determine Prices

Prices go up and down for many reasons. There are four main factors that determine prices: competition, supply, demand and oil prices.

Together, these four elements affect what is called “the load factor.” Airlines want to fill their planes and maximize profits, and they do this by calculating a plane’s load factor. This is basically the percentage of seats sold on a flight. They want this figure to be as high as possible.

To get the highest possible load factor, airlines will constantly change their prices based on the four categories above in order to entice people to buy tickets.

Airlines use dynamic pricing models and artificial intelligence (AI) to determine the maximum value they can get for each seat. Have you ever wondered why airlines seem to imperceptibly raise their prices after a big event drives up demand? This is not the case. AI is. All he sees is extremely high demand and adjusts his programming accordingly. More demand = higher prices.

These advanced computer systems continually compare booking trends to past sales history, major events, concerts, sporting events, weather and competitor behavior. They can examine consumers’ search and booking behavior, process massive amounts of data, and change prices on the fly (no pun intended) in hopes of getting the best price possible.

This is why a flight can cost $100 one day, then $400 the next day, then back to $100 the next day. As people buy seats on a flight, airlines raise prices, and when demand decreases (at a certain price level), they lower prices until fewer and fewer seats are available, and then they raise prices again. It’s a delicate balance designed to ensure maximum revenue. That’s why prices are cheapest for 5 a.m. flights, more expensive during holidays, and explode during peak season or if there’s a major sporting event in town.

After all, you can’t add more seats to a plane, so all they can do to increase revenue is charge higher fares!

This is also the reason why prices can change in seconds. It’s not because they track your cookies, it’s because the AI ​​responds to seat changes in real time. Think about it. How many booking companies are there? A lot ! Everyone reserves places. Millions of people fly every day, and with limited routes it’s easier to fill planes, so AI doesn’t need to reduce fares as much as in the past.

On a domestic flight within the United States, there can be 10 to 15 different price points. If load factor and demand are low, an airline will increase the availability of cheap fares. If load factor and demand are high, the airline will increase prices.

As Rick said, the airline now has an advantage.

But it is not impossible to find a cheap ticket. There are many ways to find a cheap plane ticket. To avoid being the one who paid the most for your ticket, the main thing is to be flexible.

Airlines are constantly changing their prices to increase revenue, hoping to get people into the highest possible price categories. “About three months out, airlines start running these lowest price points,” Rick says. This means airlines are starting to look at historical trends and current seat sales to determine whether they will post those truly low fares or keep prices high.

If you book in a month, you are playing into the airline’s hands. When your dates are no longer flexible, you will pay what they charge.

To learn how to navigate this system and get a cheap flight, check out these articles I wrote:

• How to get cheap flights
• How to Use Airline Credit Cards for Free Flights
• How to search for plane tickets

The days of cheap plane tickets are long gone. They won’t come back and the prices you see now are the new normal for airline tickets. They will simply cost a lot more, especially if you can’t find the sweet spot when prices are lowest.

But by understanding how ticket prices are set, you can avoid being the person who pays the most.

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