Skip to main content

Why So Few Last Minute Airline Deals?

I travel semi-regularly. I probably fly about about ten round-trips per year. Fortunately, it's reasonably affordable, because I'm always able to get great fares. When someone asks me for advice on finding good fares, I say three things. 1) don't travel on peak days (Friday and Sunday) 2) don't travel during peak seasons (Thanksgiving, Spring Break, etc.), and 3) book early.

(from mikecogh on Flickr)

Booking early is so much more important than a lot of people realize. It's almost never better to wait until the last minute, and there's good reason for it. Now, a lot of people would say, "isn't it in the airline's best interest to sell a seat at any price rather than to let it go empty during the flight?" The answer is no; and here's why:

Imagine two customers. Casual traveler will only fly if he get get a really incredibly low fare. The most he's willing to pay is $100. If he can't get that fare, he'll just stay home. Business traveler, on the other hand, got called by a client who is in the middle of a major emergency. She needs to be at the client's office tomorrow and is willing to pay whatever it takes.

Let's imagine it's the day before, and the airline prices the fare at $100 to "fill all the seats." Both travelers buy the fare, and the airline earns $200. Now let's say the airline instead charges $500. Casual traveler stays home, business traveler buys the fare, one seat goes unfilled, and the airline earns $500. Charging a really high last-minute fare is obviously more lucrative than offering a really low fare to fill the seats.

Now, this basic example might be oversimplifying the reality of the air travel market, but even in aggregate, the principle holds. If the airline were able to fully engage in price discrimination, they would charge casual traveler $100, business traveler $500, earn $600 and have no empty seats.

Of course, airlines already do this by offering the low fare to anyone who buys it in advance. But price discrimination is extremely difficult to do at the last minute, especially these days, when the internet makes fares extremely transparent. They might be able to dump some of them off on the gray market (ie. Priceline, Hotwire) but they won't advertise a super low fare.

Comments

Popular posts from this blog

In Praise of Southwest's 'C' Boarding Group

A few weeks ago I saw a tweet from someone complaining that their Southwest Airlines boarding pass had been assigned A20 (meaning they would be at least one of the first twenty passengers to board the plane). Apparently this person though they should have been assigned a higher number, less their flight experience be considerably spoiled.

Despite the complaints, Southwest has resisted demands to assign seats on its flights, a decision which I personally applaud. I'll admit that I was skeptical when they rolled out the newest boarding procedure, assigning both boarding groups and a line number; but in hindsight it seems like one of the best operational decisions they've ever made. If nothing else, it effectively eliminated the infamous "cattle call" whereby fliers were getting to airports hours in advance and sitting in line on the floor as if they were waiting for the midnight showing of the new Star Wars movie.

When I was an intern at Southwest Airlines last winter, I…

So You Want to be a Southwest Airlines Intern?

My personal website must have pretty decent SEO - because in the past year, I've received about two dozen emails from aspiring Southwest Airlines interns looking to draw on my experience in search of their own dream internship. In the past two weeks alone a few new emails have already started rolling in...

(from flickr user San Diego Shooter)

If you've found your way here, you might be hoping for the silver bullet; a secret tip that will propel you above the competition. Unfortunately, I do not know any inside secrets. I can only share my experience as an internship candidate about two years ago and, rather than responding individually to future emails I anticipate to receive, I hope that potential interns will find the information posted here valuable.

Understand: Southwest Airlines is a very unique company. The corporate culture at Southwest is truly unlike that of nearly every other company. But you probably already knew that, since it now seems mandatory for every management,…

Good Advertising

The blogosphere seems to be one fire over Microsoft's new "Lauren" TV commercial. Frankly, I don't see what the commotion is about.



If the critics are correct, then "Lauren" is actually Lauren De Long, a Screen Actors Guild eligible actress; and apparently, if you look close enough, she never even enters the Apple store.

Even if all of that is true, it doesn't refute the fact that Apple's laptops are significantly more expensive than most PCs. It isn't a lie that Apple doesn't sell any 17-inch laptops for less than a grand. The advertisement doesn't make any reference to the quality of the machines (or contest any of the claims made in Apple's "I'm a PC" commercials) or provide any good reason to buy one other than price.

As far as I can tell, after years of horrible commercials and a series of flops, Microsoft seems to finally have hired an ad agency that put together a decent advertisement. It's not likely to persuad…