Airline Prices in a Crisis

Covid-19 has set the world into a frenzy that saw thousands of people in difficult situations, trying to get home on some of the last flights departing many destinations. I understand that people are frustrated by not being able to find flights at a reasonable cost, but I’d like to clear up a common misconception.

AIRLINES DO NOT RAISE PRICES DURING A CRISIS!

At any time of a ‘normal’ year, if you try to book a one way flight anywhere internationally, on short notice (1-5 days, maybe even up to 14 days), prices are going to be high, you’ve probably just rarely had to do that, so you are surprised when you see it. The airline is not out to get you. They haven’t raised their prices. They aren’t trying to gouge you, but yes, the ticket price could be five times higher than what you paid.

Here’s what’s happening.

There are a fixed number of seats on any plane. Each airline has a variety of options ranging from the most restrictive of fares in economy class to the most flexible of fares in Business Class. While you and your bestie may sit side by side on the plane, have the exact same size seat and get the same meals and service, you may have paid two very different prices. Sometimes they could be hundreds of dollars difference.

How can that be?

Most people just think of it as Economy, Premium Economy or Business class, each with their own section of the plane, but it’s far more complicated than that.

It’s not just about the physical location on the plane. The prices are based on a package of benefits. It includes the location of your seat on the plane, the leg room, if your luggage and seat selection are included, if your ticket is non-refundable, changeable or refundable for a fee and how many loyalty points you earn. Then it is also based on the level of service you receive on board, how many flight attendants per passenger there are, the quality of food and extra amenities like hot face cloths and champagne served before take off, just to name a few.

Each class of service has a different set of rules, and a different amount of flexibility. The cheaper the price, the fewer benefits you get and the more restrictive the fare is. If you pay for a business class flexible ticket, you can change or refund for no fee in some cases. If you pay for a cheap, basic economy ticket, if you need to change, you are SOL my friend. You get to buy a brand new ticket and you don’t get a refund for the cheap one you bought earlier.

Keeping in line with this, as you can imagine, the bulk of the seats on a plane fall into Economy Class. Within that, there are various pricing levels with different flexibility options when it comes to inclusions, refunds and cancellations. You might have paid $100, but have a fully non-refundable ticket, pay for your luggage separately and only collect 25% loyalty points. The person sitting to your left might have paid $300, have a change fee of $150 and be getting 50% loyalty points. The person on your right pay have paid $500, have a change fee of $50 and be getting 100% loyalty points. All of you are in Economy seating.

Woah! Did I just blow your mind?

Covid-19 Crisis

Now, let’s bring it back to Covid-19, or any crisis, really, where people for whatever reason need to buy flights on short notice.

Airline tickets are normally available for purchase somewhere about 10 – 11 months in advance. It varies a bit by airline and route, but that’s a general rule of thumb.

Most people buy their airline tickets three to nine months in advance. Of course there are always people who buy flights, especially domestically, one or two months in advance.

The majority of people book into the Economy Class category where they are looking for the cheapest flight to get them to their destination. Let’s just say, for ease of math, there are 100 seats on a plane. 10 are business class, 20 are Premium Economy and the remaining 70 are Economy. Break it down further now and of those 10 business class, you have five basic business class and five flexible business class. In Premium Economy you have 10 flexible and 10 more restricted. In Economy, there could be up to four variations and different prices, so 17-18 seats at each level. In this example alone, that gives you eight different price points.

To complicate things further, the prices on International flights fluctuate not just with the class of service, but with the exchange rate of the connecting flights that are going through different countries and the taxes of each separate airport, which also fluctuate with exchange rate. Sorry, there is no ‘fixed price’ for an international flight.

If you are flying Halifax – Toronto – Frankfurt – Addis Ababa – Johannesburg and then return, you are affected by the taxes at five airports in four countries and the exchange rates of four different currencies that fluctuate daily.

If the majority of people buy their flights six to nine months in advance and are looking for the cheapest prices, what do you think is the first to sell out? That’s right, the cheapest fares on the flight with the most restrictive rules and fewest inclusions.

And, at two months prior to take off, what do you think is left? The higher priced classes of service within Economy, with more inclusions and fewer restrictions. By this point, you’ll also often find that Premium Economy is sold out as many people choose to pay extra for the extra comfort and benefits offered. Then you are left with Business Class, if it’s not full, and the most flexible options of Economy class.

Fast forward to the plane being nearly sold out one month in advance. People who were late buying their tickets missed out on the cheapest level of service and paid more. They likely don’t understand that they have a more lax cancellation policy or that the cheaper price didn’t included luggage.

Let’s say there are five seats remaining on the plane, because 95% of the plane sold out more than one month in advance. Let’s say there are three Economy seats, one Premium Economy and one business class seat available.

All of a sudden on March 13th, 2020 you are already in destination and discover that you need to get home before the borders close on the 15th at midnight due to a crazy pandemic. Let’s call it Covid-19!

There is one flight left and it has five seats available but 100 people trying to get those five seats. The prices of the five seats don’t change, but once the three cheaper economy seats sell out, all that’s left is Premium and Business Class. To make it more complicated, if you are searching for two seats, for you and your partner, and two of the economy class seats have already sold, you’ll get an error saying there are no seats available.

Not quite true! I’ll tell you a secret; one of you could go in economy and one in Premium Economy, but an online system won’t tell you this, or allow you to book this easily or quickly enough when there is high demand. You could get one seat booked and then the other one is gone and one of you is staying behind. How’s that for scary?

Travel agents have ways around this … It might literally be the difference in both of you getting on the same plane or not. You might not pay the same price for both seats, but you might arrive home together!

It is the same reason that your travel agent will tell you not to wait until last minute to book flights for your vacation and that it is very unlikely there will be a ‘sale’ if you wait until one month prior to travel. The cheap seats will already be sold out, therefore you end up paying a higher price. The airlines did not raise the prices, you are just paying the rate of the day for the class of service that is available at that time.

In a crisis situation, where countries are restricting travel and closing borders, it is also important to note that there are many fewer routing options available and much higher demand for those last few seats. If you don’t get on them quickly, you might miss out. It’s good to have a professional watching for these things for you while you are on vacation!

There are lots of reasons to book with a good travel agent. The intricacies of airline bookings are just one of many. If you get stuck abroad due to a natural disaster, or pandemic, do you want to deal with it alone, spending hours on hold trying to reach each airline or would you rather have a professional taking care of the arrangements for you and telling you what you should do next?

If you’d like to work with a professional on your next trip, for peace of mind and so many other great benefits, I’d be happy to hear from you at stucker@tpi.ca or 902 402 7646.

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