Monday, September 15, 2014

Airline seats, the earlier the cheaper?

When looking for flights, we always expect to find the cheapest fare. Generally, the fare is getting increasingly expensive with the departure time approaching. However, it seems that the best time to book a flight varies from time to time since the airline companies sell their tickets early in the market to attract more consumers with fewer seats available and increase the fare later for the last-minute travellers.

For those who travel a lot, they are very familiar with the different booking class and the fare price. And there is a fare class upgrades probabilities.

I once took the Emirates flight from Dubai to Beijing, and had my fare class upgraded by airline. The airline did not have sufficient economy seats and upgraded my flight to replenish the business class that the passenger did not show up, and it allowed the passenger on the waiting list to get a seat. The unpredictable change is largely depended on the seats inventory management and sales strategy.

I bought the flight one month before departure and the fare is already higher than average. However, after my flight upgraded, the value of my seat is higher than my actual costs. And compared to the passengers who bought the tickets two month in advance, I gained a great benefit.

Airline fare depends on market velocity and various consumers’ demand. Although it’s a very appealing way to attract more potential passengers with their economy classes upgraded, the airline is also under huge risks to lose more customers. In fact, the empty seats are of no value after the flight departure, and the airline needs to cut down the cost inventory including ordering costs and inventory carrying costs. Airlines are very likely to reduce the inventory carrying costs by selling a lower fare in advance and therefore increase the value of the seats.

By identifying different booking class, the airlines are able to target various passengers with different needs. And the fare is more likely to be sold out with either full prices or discount prices. From the consumers’ perspective, it’s better to book earlier, but it’s not always right time to get the cheapest fare at the very beginning. Suppose you are booking a flight for a coming trip, what time will you choose to book a flight considering the airline’s seats inventory strategy?