Airline pricing, I don't get it

[poke53281]

Sorry if this has been discussed before.:confused:

I want to travel LHR>PHL in October

USair want £511 direct on the date I want...
However, I have found that LHR > EWR would cost only £460 via PHL on the same transatlantic aircraft on the same date/time as the £511 flight.

What if i was to book the LHR>EWR and not get on the 2nd leg ? I take it my ticket will be voided ?

How is this possible how can it be cheaper to fly 2 legs than 1 ?

Thanks

[ExXB]

Questions been asked and answered many times before - a search should give you some interesting reading.

However the $0.99 version is that pricing is NOT cost plus reasonable profit. The perfect price is the price that will sell.

Each market to US (LHR-EWR and LHR-PHL in your example) is independent. In pricing EWR, which they don't fly non-stop, they need to put their price in relation to what the competitors are doing in the same market. BA and CO/UA both serve this non-stop and a number of other carriers do so one-stop. Realistically to price a one-stop market you have to be lower than the non-stop carriers and at or around the price of the one-stoppers. So US calculates that at this point in time the right price LHR-EWR via PHL should be £460.

They do a similar analysis on the LHR-PHL market, looking at the prices of both their non-stop competitor and all the one-stoppers. I would guess that while they can be higher than the one-stoppers they probably can't be higher than BA. The right price for them now is £511.

If they priced EWR via PHL at (at least) £511 they wouldn't get many, if any, sales. Their revenue management people will decide if it's better to get £460 (split over two flights) or nothing and have the seats go empty.

Hope this helps.

Edited to add: Noticed I didn't answer your other question.

Assuming you are travelling return I would NOT recommend that you miss an intermediate flight. Most airlines will cancel the remaining flights on your booking. If you are going only one way, and are not checking a bag, you might be able to get away with it. But check US's conditions of carriage - it will tell you what their policy is on this.

[Revnetwork]

ExXB beat me to it. Nice reply :ok:

[PAXboy]

Agreed, good reply. The other part of the pricing system is that: You were quoted $460 for the one-stop route today. But tomorrow, you might be quoted $465 or $450. There are limits as to how low they will go but the price may change a lot - or not!

You are correct that, if you take the dog-leg ticket and jump off at PHL, you will have broken your contract with them and the rest of the ticket will evaporate. Not worth it.

[ExXB]

The other part of the pricing system is that:
I did say it was the $0.99 version, now if you want the £0.99 version or even the CHF0.95 version ... ;)

[EmadIV]

Airline prices also vary greatly with time (not in your question but just adding). From my experience prices are higher when it's the season for flying — i.e. during summer.

[PAXboy]

Hi poke53281, meant to say: Welcome to the forum. :)

In your thread title is the answer:
Airline pricing, I don't get it
That's the whole point - you are not supposed to understand and, if you DO, they will change the system. :hmm:

There are many versions of this explanation floating around but here is one at random: Buying Paint Airline Style :p
(http://www.tysknews.com/LiteStuff/buying_paint.htm)

[EmadIV]

you are not supposed to understand and, if you DO, they will change the system.
True words ;)

[jabird]

Can I add a layer of complication in here?

NYC-PHL is a very short sector, and iirc, CO now code share with Amtrak. EWR has its own station, but in their infinite wisdowm, Amtrak's fasters Acela trains don't stop there.

However, if you had a LHR-EWR-ZFV routing, where 30th St station was the final destination, you may be priced for the 'inconvenience' of an indirect routing, whilst the flight itself is still direct. If you actually wanted NYC, could you then bin the ral sector - after all, booking systems are completely different, and they don't take your luggage.

Just a thought, not something I'v ever really got behind the small print on.

[esa-aardvark]

I heard that some airlines plant a thing called a 'large saved object' (hope that is the correct name) like a cookie, and use it to
store your details. This enables them to quote you a higher
price when you return. I have a plugin which deletes these things, and as far as I could check the story is true.

Also some airlines will give you a higher price depending on
where in the world you seem to come from. That case occurred
to me in the past, ie local currency price changes to the same
number in ££££'s

john

[PAXboy]

esa-aardvark I have heard the rumour about your first point but have yet to hear 100% confirmation.

Your second point is undoubtedly true and I have seen that myself. It is the same problem that computer software priced in USD can become the same number but with GBP in front of it.

[Rwy in Sight]

I have heard also that constantly checking a fare for a specific flight, pushes the cost up, since the reservation system considers there is a large demand for that flight.

I am curious to know if it is true.

Rwy in Sight

[ExXB]

I have heard also that constantly checking a fare for a specific flight, pushes the cost up, since the reservation system considers there is a large demand for that flight.

I am curious to know if it is true.

Rwy in SightI would say that a large number of 'looks' without buying would send the opposite message: "There is something wrong with your prices!"

The suggestion that prices could differ based on your place of residence - this is contrary to European law (for sales in any EU country). A large German airline with a big bird on its tail was warned by the Commission for doing something like this (actually prohibiting sale of some low fare categories outside of the country of origin, which resulted in higher prices). The Commission made sure all other EU airlines were aware of this.

[Espada III]

This is precisely the reason why LOCOs do so well. No stupid rules (well there are stupid rules not as illogical as full service airlines)!

I wonder what would happen if EasyJet or Ryanair started selling through tickets with a change at one of their European hubs? That would drive several other midsize airlines out of business.

[PAXboy]

From the start of the 1990s onwards, friends of mine in the US (DTW-LHR) found their flights consistently cheaper than the reverse. That was buying with BA through agencies and then online.

[ihatechewinggum]

On a related note, if anybody can advise...

I have to travel MUC-JFK and return JFK-LHR later this year. I booked a return on BA, MUC-JFK-MUC with the intention of not flying the last sector LHR-MUC. (The fare BA were asking for MUC-JFK-LHR was nearly double...) I'll most likely travel with hand luggage only, so in theory there's nothing to stop me walking out of T5 on the return, but is it a good idea? Does anybody know if I'll have my miles or TPs deducted, or perhaps the previously mentioned "large saved object" will come back to bite me next time I book with BA?

It seems like a waste of time to complete the itinerary and book a one way MUC-LHR. But technically, I suppose I'll be breach of contract if I don't..?

[Hotel Tango]

If one doesn't fly the last leg there's little an airline can do about it. There are are a number of valid reasons why this could happen such as one suddenly feeling unwell and deciding not to take an onward flight. I often used to book return long haul Business Class with KLM from BRU via AMS because it was considerably cheaper than departing from The Netherlands. On the return I'd terminate my trip in AMS in order to get home much quicker. This even worked with checked baggage. On arrival at AMS I would go to the transfer desk and state that I was unable to continue my trip and could they off load my bag in AMS. Never had a problem.

You are not breaking any contract whatsoever if you choose to forfeit your last sector due to "unexpected" circustances. What you can't do is not show for any leg before the last one or you will find that subsequent legs have been cancelled as per the fare rules.

[MathFox]

One can book an "open leg" ticket with many airlines for half of the sum of the two return fares... An open leg is a flying from place A on one continent to B on another, and then flying from C on the same continent as B back to A. Or a ticket from A to B (on another continent) and back to D (on A's continent.) Certainly worth to investigate if you're planning to do some ground travel.

Another issue with online reservation systems is that a fare will be held for someone from the moment a website makes a formal offer till the payment is done... Some people bail out of that process and that could mean that some low-priced seats reenter the pool. If they were the last available for that fare it will mean that visible quotes showed higher fares in the mean time. (It's also possible that a "yield manager" sees weak sales and throws a dozen of bargain seats in the market.)

Yes, Airline pricing is incomprehensible.... confusing the competition seems important! :E

[WHBM]

I have to travel MUC-JFK and return JFK-LHR later this year. I booked a return on BA, MUC-JFK-MUC with the intention of not flying the last sector LHR-MUC. (The fare BA were asking for MUC-JFK-LHR was nearly double...)
....But technically, I suppose I'll be breach of contract if I don't..?
Happens thousands of times a day, and carriers factor it into their overall no show calculations for overbooking percentages. So while you are doing this the carrier is already factoring it into sellng the seat on that final sector for a second time.

You won't be in breach of contract because in the (very few) cases which have come into legal contention, the Unfair Contract Terms Act has been applied and such contract "terms" have been held to be a nonsense and set aside.

[PAXboy]

'Open leg' tickets A-B-C, rather than A-B-A are also known as 'Open jaws' routing.

Irrespective of the benefits to the pax, one of the benefits of the Internet - to the cariers - is that they now know what everybody else is charging! Their systems can automatically interrogate (or humans can look) what their competitors are charging on the same, or related routes.

If you see that the other carrier on the same route, say, has put their price up by £10 or £100 do you:-


Hold your price down to catch more bookings
Put your price up to catch more money

:*

[ExXB]

From the start of the 1990s onwards, friends of mine in the US (DTW-LHR) found their flights consistently cheaper than the reverse. That was buying with BA through agencies and then online.

You misunderstood. I wasn't saying that the prices have to be equal in the opposite direction. I was saying that a ticket sold in the EU had to be the same price regardless of where it was purchased in the EU.

That big-birded airline was selling tickets from FRA to LHR at a fixed price, but this fare category was not available if purchased in the UK or in France (for travel from FRA to LHR).

Directional pricing, on the other hand, is the norm, not the exception. I'll be happy to explain, but that's going to cost you CHF10 (or GBP10 if purchased in the UK) :hmm:

[ExXB]

Happens thousands of times a day, and carriers factor it into their overall no show calculations for overbooking percentages. So while you are doing this the carrier is already factoring it into sellng the seat on that final sector for a second time.

You won't be in breach of contract because in the (very few) cases which have come into legal contention, the Unfair Contract Terms Act has been applied and such contract "terms" have been held to be a nonsense and set aside.

WHBM. That is not correct. While many lower courts have considered the contract terms to be 'unfair' this has not be sustained on appeal. More recently the Highest German Court suggested that airlines 'sequential and complete' use of coupons provisions were vague and suggested that while airlines were within their rights to require S&C use the passengers should be given the option of paying for the right to use their coupons out of sequence, or incompletely. Do a fare quote on LH on-line and you will now see an option in the process to use your coupons out of sequence, or not use some at all. Of course the price will be different.

Lets face it. The airline has a price for every conceivable journey you may wish to take. It is not your right to substitute the price for the journey you take with the price for a journey you are not taking. Nothing different than switching price tags in a shop.

Practically speaking, it is unlike that the airline will charge you if you don't use the last coupon. But if you make a practice of this they will cotton on and can refuse your bookings in the future.

[jabird]

Directional pricing, on the other hand, is the norm, not the exception.

And so it should be, as they are rendering a different service to a completely different market, which may be prepared to pay much more or less, depending on local economic conditions, not to mention +/- x% for currency differences.

Exactly the same is true for UK rail fares - I have been charged a couple of £ more for London-Coventry RTN as opposed to Coventry-London RTN, even when in this case, the legs (off-peak) could be taken in the same time slot. As for peak demand into London in the morning, it is much greater than in the other direction - walk up fares don't always reflect that, but advance fares should.

And there have been cases of people with advance tickets alighting, e.g. in Exeter when they are ticketed to Penzance (from London), and being levied a £150 surcharge for breach of contract.

I think the concept of passengers breaching contract sounds so odd when operators fail to deliver the service as specified so often (delays, canx, re-routing, lost bags etc) - but a lot of the time the contract exempts them anyway.

Low cost airlines also seem to get away with a few subtle differences too in different directions, but I think a lot of this is down to currency calculations - Ryanair famously working on 1:1 parity £ to € for a while (when it suited them of course).

Were LCCs to make significant inroads into the long haul market, maybe this pricing anomalies would start to get ironed out, but I think we know the economies of doing so are stacked against them.

[twb3]

Another option would be to look for a low fare LHR-BWI (Baltimore-Washington International) and continue to Philadelphia on Amtrak from BWI airport station. There is a free shuttle from BWI airport terminal to the rail station, and journey times from there to Philadelphia 30th St. Station are 1hr20min to 1hr31min...and the Acela trains do serve BWI airport station.

[jabird]

twb3,

Yeah, but is that not just a daily 767 with BA? I've never known it be a good way in for low fares - CO will give you the Amtrak leg as part of a ticket.

And I bet the cheapest routing to BWI is LHR-PHL-BWI anyway ;)

[jabird]

Yeah, but is that not just a daily 767 with BA? I've never known it be a good way in for low fares

I correct myself - no PHL-BWI anyway, obviously too short.

Also - try searching LON-BWI, then LON-WAS. Even though BWI is a WAS airport, search on its own, and I get £368 rtn (20-27 Mar), but for WAS, cheapest is £387 - both connections, not direct.

So that's another anomaly for you.

[TJW]

I once attended a talk by someone working for Amadeus, a software company that specialises in software for the travel industry. ("Selected Challenges from Distribution and Commerce in the Airline and Travel Industry", by Francois Laburthe, CPAIOR 2008)

Unfortunately, I seem to have lost my notes, but from what I remember, a key point was that the reservation systems not only calculate with the known fare classes, but subdivide these classes further many times over. Each of these subclasses has its own price tag and may only be available within a given time window, i.e., a certain number of ticket for a given class and a given price may be available so many days before the flight between hours x and y (yes, the price may depend on the time of day). Whether a certain price is quoted to you then depends on, among other things, the time the request was made, whether the system thinks you're a business traveler or not, whether the system thinks that it will be able to sell seats in this class at a higher price at some later point, etc.

Here are two excerpts from the talk's abstract:Airlines are increasingly moving towards complex commercial policies, with numerous fare classes potentially available on a given flight and where the decision of the actual availability of a fare depends on many characteristics of the request (end-to-end journey, channel through which the request is arriving, membership to loyalty program tier, ...).
and:Revenue management systems include a forecaster (estimating the future potential sales of tickets from now till the day of departure) and an optimizer (defining the appropriate inventory controls from the forecasted demand). Modern airline revenue management systems include end-to-end availability logic which states that an itinerary should be available for sale if its yield to the airline is greater than the sum of the opportunity costs on each segment of the trip. Moreover, this network logic is often furter tailored by means of fare modifiers which further restrict the availability in cases of hints that the request is originating from a business traveler.
Note the statement about "end-to-end availability logic". That means that the longer trip will be available at a lower price if the expected yield is higher than what the system expects to earn from selling tickets for the individual segments.

[PAXboy]

Most interesting TJW.

This 'fine slicing' of prices is also seen in the mobile phone (Cell) market. They started with three tariffs and now there are dozens. When I renew my contract I have often been told, "That tariff is no longer available" So a tariff that worked well for me, balancing minutes and messages and so on - is removed. Possibly because it was too nice for me?

Utility companies now do the same for electricity and gas.

One objective is ensure that you can never find the same tariff/fare again and that there is little or no direct comparison with the competitors. For, if the fare/tariff is different to all others - then it is more difficult for price comparisons to take place. Of course, many of the differences are in the small print - which do not usually get read. These might be about refunds, rerouting etc.

So, all you can do is look at the price that is presented on the screen at the time you want/need to book and decide if that is acceptable to you. Trying to chase down savings of £/$/€10 or 50 will drive you mad and waste more time than it is worth.

[TJW]

I think the pricing policies of airlines and utilities are related phenomena, but not quite the same. In both cases, what used to be simple pricing rules have been replaced by byzantine schemes in order to maximise revenue.

With utilities, I agree that one of their goals seems to be to make comparisons of different tariffs as difficult as possible by altering the T&Cs ever so often. The price that is quoted up-front seems to be stable over time, but it's near impossible to work out what you'll pay in the end unless you chose an "all-inclusive" option. So the moving target here are the T&Cs.

It's different with airline ticket pricing. Here, the moving target are the ticket costs, not the T&Cs (unless you consider cases as Ryanair, where new chargeable extras are introduced every so often). The revenue management systems are designed to extract as much money as possible while still making the sale. Request for single seat coming in during office hours? Must be business traveller, so quote higher price. Request for adults+children during evening? Family, so quote lower price, unless system still expects to sell seats at higher price to business travellers, or it's late booking, or some of the myriad other rules applies.

As someone working in planning&optimization, I find these problems and the question of how to solve them algorithmically highly interesting. As a customer, I find it highly annoying, and agree that it just drives you mad trying to hunt down the best bargain. Similar to driving across town to buy milk that is fractionally cheaper. Also, and in my opinion most importantly, training your customers to be bargain hunters does not make them loyal customers.

[SeenItAll]

Just to add another observation related to the baggage issue. On flights to the US, even if you checked your baggage through to a final destination beyond your first entry point into the US, you will have to claim your baggage off the belt at your first entry point and pass customs. Ordinarily, you would then immediately return the baggage to the airline at a recheck desk -- but there is absolutely nothing preventing you from keeping it with you and walking out of the airport. So you needn't worry about not being able to check baggage if you were planning on skipping this last leg.