The dark art of ‘revenue management’ was born four decades ago and taken to new heights by the budget airlines. The aim: to fill as many seats as possible on each flight by micromanaging air fares. At its heart is the concept that the price for what appears to be exactly the same product — typically a seat on a plane flying 1,000 miles — is, in fact, highly variable. What you pay depends on the strength of demand from other travelers, overlaid with the behavior of competing carriers.
‘Dynamic pricing’, as it’s known, has never been entirely opaque. As a general rule, though, it worked like this: book well in advance for a midweek departure in November and you’ll get an excellent deal; buy at the last minute for a holiday flight on a summer Saturday and you’ll pay many times more.
Some passengers still feel miffed when they discover they paid several times more than the person sitting next to them. But most are conditioned into accepting that committing well in advance is rewarded, helping airlines with their cash flow, with later bookers paying more.
Why do ticket prices vary so wildly?
The Covid-19 pandemic has done more than turn highly profitable airlines into chronic loss-makers; it has also torn the heart from the long-established choreography of revenue management. The intricate and constantly changing balance of supply and demand has disintegrated. Everything has become volatile. Demand from passengers swings wildly, depending on government action. When Portugal became the only major, accessible nation on the UK government’s quarantine-free ‘green list’, a surge in demand for southbound flights saw fares quadruple.
Read more: Which countries can I travel to from the UK? The latest from the government’s traffic light system
Just 17 days later, moving the country to ‘amber’ triggered an even steeper rise in fares for northbound trips in the 100 hours before self-isolation would become obligatory.
Supply, too, is turbulent. A dismal pattern has emerged over the past 18 months. In the mood of eternal optimism that prevails in the travel industry, airlines put thousands of flights on sale. The aim is to attract millions of paying customers — putting planes, pilots and cabin crew profitably in the skies.
Some passengers sign up, but a few weeks before departure, a tranche of departures is likely to be axed: operating planes two-thirds empty is a sure way to accelerate an airline’s losses. Conversely, if a location suddenly opens up to travelers, airlines will add capacity overnight, flooding the market with empty seats.
So, how best to maneuver through these troubled skis?
When should I book?
With market forces confounded by the Covid-19 pandemic, conventional wisdom on booking early for the best fare and availability doesn’t apply. Normally, a late booking to a conventional summer destination would cost a fortune. But in mid-July, the 2,800-mile round trip from Birmingham to Malta, staying for five days, was available for just £20 return with Ryanair.
All the signs I see indicate that fortune favors the late booker. The pandemic has been characterized by sudden and often conflicting decisions. In early July, for example, just after Malta had been placed on the UK’s ‘green list’ of low-risk destinations, the island’s government placed British arrivals on the Maltese ‘red list’ — with very specific vaccination requirements.
As a result, you could spend more on a couple of drinks at the airport bar than on the flight.
As the airline industry struggles back to its feet, and travel begins at some reasonable scale, prices will slowly return to the good old days (from the airlines’ perspectives), when they’d hold a few seats back to sell for a fortune to people with a sudden and desperate need to travel.
Right now, though, the potential downsides of booking early — that you might not wish to travel, or the airline messes you around by canceling — appear to outweigh the possible price advantage. But if you see the flight you need at an irresistible fare, then you might want to book with the reassurance of some flexibility.
Flex fares: how good are they?
Two years ago, the idea that passengers who’d paid the lowest fares would be able freely to change their mind would seem absurd: in addition to paying any fare difference, there was typically a hefty fee. This summer, airlines are falling over themselves to offer the chance to change your mind. You won’t get a cash refund, but you’ll be able to postpone your trip.
For flights up to September 30, EasyJet gives you the chance to change to any other departures on any routes currently on sale, up to two hours before the original trip is supposed to leave.
British Airways goes one step further, with the chance to trade your booking for a voucher up to the close of check-in, on all trips up to 30 April 2022.
And Ryanair has a ‘zero change fee’ on all bookings until 30 September for travel before the end of the year. You must make the move at least a week before the original trip.
Fares are increasing before my very eyes. What do I do?
be patient. I’ve witnessed this on several occasions this summer, usually when a new destination is placed on the green list. Buyers pile in and the fare predictably soars. But airlines are getting nimble and can readily lay on extra flights. As soon as carrier X sees its rival Y commanding disproportionately high prices, it will add capacity. When Majorca was given quarantine-free status at the end of June, fares initially rocketed — but within a few days, they’d subsided again as more planes were deployed to Palma.
Will I pay more or less, on average, than before?
According to Michael O’Leary, the combative chief executive of Ryanair, a lot more. In June he told the Transport Select Committee, “Thomas Cook no longer exists — that’s four million seats gone. Flybe no longer exists — that’s six million seats gone. Many of the other airlines have reduced their capacity.
“So, there’s going to be anything from 15-20 million less seats annually between the UK and Europe for the next two, three or four years.”
Supply will be limited: assuming demand recovers, market forces will take over and prices are sure to rise.
After all that, my flight has been cancelled. What are my options?
Millions of us have had this experience since the cancellations began to rattle across the world in March 2020. And the vast majority, I venture, believe it’s a straight choice between a different flight on the same airline or a full cash refund (ignore the voucher option unless there’s a healthy incentive).
Somehow, the airlines seem to overlook the fact that, for many passengers, the best option is rebooking on a rival carrier. Under European air passenger rights rules, when an airline cancels your flight — for any reason — and can’t get you to your destination on the same day, it must buy a new flight for you.
Hard-pressed carriers won’t thank me for pointing this out, but as they know, it’s the law.
Simon Calder is a travel journalist and broadcaster, and The Independent’s travel expert. Find him on Twitter @simoncalder
Published in the September 2021 issue of National Geographic Traveler (UK)
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