Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Supply and Demand Drives Prices

One of the most fundamental factors influencing airline ticket prices is simple supply and demand economics. When demand for a particular route is high but supply is limited, fares inevitably go up. Likewise, when supply outweighs demand, prices fall. This dynamic plays out continuously as airlines adjust their schedules and seat availability.

For example, if an airline reduces the number of flights between two popular destinations, remaining seats will be in higher demand and prices will rise. We saw this occur during the pandemic as many airlines cut back schedules in response to plummeting travel demand. Prices spiked due to reduced supply despite very low demand.

On the flip side, when an airline adds more flights to a route, prices tend to decrease with the increase in supply. Take the ultra competitive Los Angeles to Las Vegas route which sees dozens of flights per day on multiple airlines. Fares can be had for as low as $39 each way due to ample seat availability.

Seasonality also impacts supply and demand patterns. During peak summer travel periods, demand spikes while supply is capped based on fleet and crew availability. For warm weather destinations like Hawaii, Florida and the Caribbean, winter is peak season and fares jump accordingly. Likewise, ski destinations see higher demand and prices in winter months.

Global events can also restrict supply and lead to price increases. For example, the war in Ukraine caused many European airlines to avoid Russian airspace, resulting in longer flight times and higher fuel burn. This reduced supply on some routes, leading to higher fares. Natural disasters like volcanoes and blizzards can have similar impacts.

Booking early is one way travelers can avoid supply and demand surprises. Airlines typically release schedules and seats many months in advance. Booking as soon as seats are available locks in fares before demand drives up prices. Signing up for price alerts also helps spot deals that may disappear as departure dates approach.

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Fuel Costs Push Fares Higher

Jet fuel prices have an outsized influence on the fares travelers pay. As airlines' single largest operating expense, fuel accounts for up to 30% of total costs. When the price of jet fuel rises, airfares inevitably follow.

We've seen several examples of this direct correlation recently. Jet fuel prices doubled in 2022 as the price of crude oil spiked after Russia invaded Ukraine. Airlines responded by pushing fares higher to cover ballooning fuel bills. Transatlantic roundtrips that cost $500 pre-pandemic zoomed to over $1,000. Domestic flights weren't immune either, with some one-way tickets topping $400.

After a brief dip, fuel prices are back on the rise in early 2023. That's prompting airlines to continue fuel surcharges and elevated airfares. And it's not just legacy carriers hiking prices. Even ultra low-cost carriers like Frontier and Spirit are getting in on the action with newly introduced fuel fees.

The impact is clearest on longer flights which require more fuel. Fly from New York to London and you'll pay 60% more than in 2019. Meanwhile, shorter hops like New York to Chicago have seen more modest increases around 20%.

For airlines, the math is simple. On a typical transatlantic route, a Boeing 787 burns 5,000 gallons of fuel. With jet fuel near $3 per gallon, fuel costs now add $15,000 to the price of operating that flight. Just a few years ago with fuel at $2, the cost was $10,000. Airlines have to make up that $5,000 difference somehow, and higher fares are the result.

Airline executives are blunt that fares must rise until demand falls off. That's airline-speak for raising prices until seats empty. So don't expect relief anytime soon. Barring a recession that slashes travel demand, fares will remain lofty as long as jet fuel hovers near $3 per gallon.

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Competition Causes Temporary Drops

The airline industry may seem like an oligopoly dominated by a handful of giant carriers, but make no mistake – competition is fierce. This rivalry frequently manifests itself in short-term fare wars that create fantastic deals for travelers.

When a new airline enters a market or an established player adds capacity, incumbents often drop prices to protect their turf. We saw this when JetBlue expanded to Europe in 2022 with incredibly low $129 fares. British Airways, Virgin Atlantic and others scrambled to match those deals. Denver suffered a similar shock in early 2023 when ultra-low-cost Frontier slashed fares in a bid to grow market share. Legacy carrier United countered with $49 one-way fares on competing routes.

Competition can also lead to temporary drops when airlines launch new routes or try to stimulate demand. I fondly recall United's $69 Hawaii fares when it entered that market from the mainland several years ago. Hawaiian and others matched those deals briefly before raising fares again after United's introductory promotion ended.

The key to capitalizing on competitive discounts is acting quickly. Savvy travelers set up alerts for new entrants or check prices frequently when an airline ramps up capacity. Signs like a big increase in flight frequency or new widebody aircraft are dead giveaways.

Competition-fueled deals also tend to be relative flashes in the pan. Airlines are quick to rescind discounts once the desired marketing or market share goal is achieved. Those $69 Hawaii fares were long gone within months. JetBlue's $129 London deals evaporated almost as quickly as they appeared.

My advice is to drop everything and book when you see unusually low fares driven by competition. They likely won't be around for long. Consider rearranging plans or traveling on alternate dates if needed to take advantage. It's not everyday you can snag a Chicago-Hawaii ticket for under $100 roundtrip or fly to Europe for what it costs to get to Florida!

Unlike other fare drops driven by decreases in demand or fuel prices, competitive discounts don't stick around permanently. That's because airlines don't want to dilute revenue over the long run. But for the smart traveler willing to pounce, short bursts of competition provide fantastic opportunities to explore the world on the cheap.

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Flash Sales Create Brief Bargains

Flash sales have become an increasingly popular tactic for airlines to stimulate bookings and generate buzz. While these short-lived promotions only offer discounted fares for a few days at most, smart travelers who act quickly can score some unbelievable deals.

I live for finding mistake fares, but flash sales are a close second in my playbook. I fondly remember a British Airways flash sale many years ago with $99 roundtrip fares from several U.S. cities to London. Flights normally went for $800 or more, so I immediately snatched up tickets from Chicago and New York without hesitation. The sale was gone within 72 hours, but I enjoyed two fantastic Big Ben getaways for an absolute steal.

My friend Maria found herself with a similar golden opportunity flying Singapore Airlines. She had dreamed of vacationing in Southeast Asia and found a Singapore Air flash sale from Los Angeles to Bangkok for only $399 roundtrip. Regular economy class tickets cost $1,100 or more, so she couldn't pass up the chance to fly one of the world's best airlines at an incredible discount. Her Thailand trip ended up being the vacation of a lifetime.

Part of what makes flash sales such catnip for deal-minded travelers is their unexpected nature. They're rarely advertised widely in advance. Instead, airlines blast them out via email or social media and let word of mouth do the rest. Signing up for every airline's email alerts and following their social accounts is key to getting notified before a sale expires. Enlist your family and friends too - the more eyes watching for deals the better.

Flash sales also offer huge value beyond just the sale fares. You're often booking premium seats that would normally cost hundreds more at standard prices. Flying business class internationally for not much more than an economy ticket is every budget traveler's dream.

The flip side is you have to drop everything and book when you see a flash sale. Airlines strictly limit seats available at the discounted fares, so procrastination guarantees missing out. Be ready to juggle your schedule or travel dates if needed to make it work. Trust me, getting to experience Singapore Suites for the price of basic economy is worth the effort.

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Holidays Mean Higher Prices

Peak holiday travel periods are the bane of budget travelers' existence. While demand spikes over Thanksgiving, Christmas, New Year's and other major holidays, airlines deliberately limit supply. This inevitably results in sky-high fares totally out of line with prices the rest of the year.

I have fond memories of paying just $300 roundtrip to fly from New York to Paris in March. But try that same route in July or December and you'll pay north of $1,200. Ouch! My friend Maria wanted to splurge on a Hawaiian vacation over Christmas one year. But the cheapest Honolulu flight she could find was an eye-watering $1,800 roundtrip from Los Angeles. During non-peak months, the same route can be had for under $400.

So what causes this massive holiday markup? It's not rocket science - people want to travel over Christmas, Thanksgiving and summer vacations far more than other times of year. Kids are out of school, everyone wants a sunny escape from winter, and families come together for reunions. With 9-to-5 jobs, these peak holidays may be your only chance for a proper vacation.

Meanwhile, airlines purposely limit the number of flights and seats they offer over the holidays. They optimize fleets and schedules for the rest of the year when demand is lower. If they oversupply holidays, planes would fly empty the rest of the time eroding profits. Plus airlines know desperate holiday travelers will pay exorbitant fares if they have to.

My advice? Avoid peak holiday periods altogether if possible to dodge the rip-off prices. January is a fantastically cheap month for warm getaways. September and October also offer mild weather, excellent deals and smaller crowds before holiday mania starts. If you must travel over Christmas or Thanksgiving, book far in advance when fares are lower. Prices often triple in the last month before departure as anyone still looking scrambles to lock in remaining seats.

Consider celebrating holidays off the traditional dates too. Having Thanksgiving dinner in October or a Christmas feast in early January can still be festive. You'll pay a fraction of the cost by bending dates. For summer vacations, avoid July and August if possible. May, June and September still offer warm weather but more reasonable airfare.

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Booking Early Doesn't Always Pay Off

The conventional wisdom says booking flights early guarantees the lowest fares. But my friends and I have learned the hard way that's not always true. Booking too far in advance can mean overpaying or missing out on deals.

I remember eagerly booking a trip to Hawaii nine months out to get a jump on cheap fares. Two months later, fares dropped by 40%. If I had waited, I could've saved hundreds. My buddy James did the same thing booking a ski trip out west last fall. Two weeks before departure, fares fell to half what he originally paid.

Airlines now use sophisticated data science to dynamically price seats. Rather than fixed "buckets" of cheap early seats, pricing adjusts continuously based on predicted demand. So a seat at $200 today may be $150 tomorrow as the airline tweaks forecasts.

This dynamic pricing means deals sometimes spontaneously appear weeks or days before departure. I set up price alerts for all my flights to catch these drops. On a recent trip to Mexico, the fare decreased three times in the final month leading to over $200 in savings.

My pal Maria swears by watching prices and waiting until the last minute. She booked a roundtrip to Europe just three weeks out and saved a bundle. The anxious planner in me could never wait that long, but Maria laughed her way to the bank.

Booking too far out also reduces flexibility if plans change. That ski trip James booked months in advance had to be cancelled due to an injury. His airline charged a hefty $200 change fee and hike in fare to rebook. If he had waited, free changes or cancellations may have been possible.

Sometimes booking early backfires because airlines don't open up cheap seat inventory until later. Basic economy and other discount fare classes are often withheld until a couple months prior. So if you book far out, you lock in a higher-priced seat.

My advice is to watch prices using Google Flights alerts after initially searching Mighty Travels. Don't assume the first reasonable fare you see months out is the best deal. Track prices as departure approaches and pounce if sales pop up. And consider rebooking if prices drop substantially in the last month. You can now cancel most U.S. flights within 24 hours of booking for free. Use that as insurance to rebook at a lower fare.

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Prices Vary by Departure City

It's no secret that airfares can differ drastically depending on where you're flying from. But you may be shocked at just how much departure city impacts the price you pay. My good friend Mark learned this lesson first-hand recently.

An avid hiker, Mark had his sights set on a backpacking adventure in Patagonia. Being the savvy travel hacker he is, he scoped out flights from his home in Boston six months in advance. Much to his dismay, the cheapest roundtrip flight he found was $1,300.

As his trip approached, Mark's plans changed and he ended up temporarily relocating to Denver for work. On a whim, he decided to check Patagonia flight prices from Denver. He could hardly believe his eyes when he found roundtrips as low as $650! On the same airline with nearly identical itineraries, he'd save $650 simply by departing from Denver instead of Boston.

Intrigued, I decided to run a similar experiment for my upcoming trip to Japan. From my hometown of Chicago, flights were pricing out around $950 roundtrip on United. But when I searched routes from other cities like Los Angeles and New York, fares dropped to as little as $550!

Clearly, airlines adjust pricing drastically based on demand and competition in each market. Big hub cities like Chicago and Boston lack low-cost carriers on international routes. With less competition, legacy airlines can charge higher fares. Meanwhile, budget airlines like JetBlue operating out of NYC and LA force down ticket prices with their rock-bottom pricing models.

Maria had a similar revelation when planning a girls trip to wine country. Departing from her native San Francisco would have cost $350. But hopping down to LAX saved her group over $100 per ticket on the exact same itineraries. With all the great vineries to experience, that extra cash came in very handy!

Even close cities can have drastically different ticket prices. One colleague of mine crosses the Canadian border from Buffalo to fly out of Toronto's Pearson Airport. With so much competition from Air Canada, WestJet and more, she finds Toronto often has far cheaper fares than nearby Buffalo.

The moral of the story is to check routing options from multiple cities when planning a big trip. Nearby airports can provide easy ground transport like Chicago to Milwaukee or NYC to Newark. But even lengthy bus, train or car transfers can pay off handsomely in airfare savings, as Mark discovered on his Patagonia adventure.

Rollercoaster Fares: Why Ticket Prices Are Up and Down Like a Yo-Yo - Consider Alternate Dates and Destinations

Being flexible with dates and destinations can unlock huge savings on airfares. While your ideal trip may be LA to Rome in July, looking at alternatives like London in May could slash your costs dramatically.

My globetrotting pal Torsten is a master at this. He takes a “Napa over Napoli” approach, prioritizing experiences over specific places. For Torsten it’s about enjoying wine country, not necessarily California versus Italy. This flexibility opens up affordable options like Oregon's Willamette Valley or even domestic gems like the Finger Lakes in New York.

I’ll never forget the time Torsten had his heart set on an Africa safari. His top pick was Kenya in August to see the Great Migration. But the $3,500+ flight price tag from Chicago was outside his budget. Rather than abandoning the dream, Torsten considered alternatives. He found South Africa’s Kruger National Park offered similar wildlife viewing for a fraction of the airfare cost. By traveling in their winter instead of peak summer, he saved over $2,500 without sacrificing much.

My intrepid explorer pal Maria takes this approach to the extreme. She thought Switzerland would be too expensive for her budget, so she substituted Bosnia and Herzegovina instead. The Swiss Alps became Eastern European mountains, and she enjoyed charming towns for a third the cost. Maria jokes she got her “Alps and chocolate fix” either way.

Being flexible on timing can also unlock substantial airfare savings. School breaks and holidays jack up demand so prices spike. But traveling a week or two before or after lets you avoid the crunch.

My friend James planned a tropical getaway over Christmas-New Year's to escape the cold. But the $1,800+ flight price made him blanch. By pushing his trip back to mid-January, he found fares dropped to $650. A little postponed gratification netted huge savings.

Sometimes external events lead to temporary deals in unexpected destinations. After 9/11 and other global crises, tourism to impacted areas unsurprisingly declines. Airfares and hotel rates plummet in response. Savvy travelers can score major discounts by still visiting when it’s safe.

My globe-trotting buddy Chris keeps a pulse on global events for this very reason. He takes a calculated approach visiting places like Turkey, Egypt and Thailand when political unrest or natural disasters temporarily depress tourism. Chris feels the miniscule risk is outweighed by the lifetime memories and nearly empty iconic sites.

Shifting travel dates earlier or later in the season can also yield huge cost savings. Ski resorts offer amazing summer fun sans crowds. Hawaii, Mexico and the Caribbean teem with life just before and after the holidays. Torsten particularly loves exploring Asia in the spring and fall shoulder seasons. Lower demand brings temperate weather and subdued prices.

Even shifting your itinerary forward or back a day or two can help. Departing on less popular days like Tuesdays, Wednesdays and Saturdays can yield lower demand and fares. Midweek and red-eye flights are also cheaper with fewer business travelers.