Saturday, September 30, 2017

Airline pricing economics: Here's why you get your ticket for less

Flying is becoming more and more common in India. It is not a luxury but a necessity for people who want to get to their destination in the shortest possible time. This is possible because flying is much more affordable today. This affordability will continue to drive demand.

Numbers tell the story. In 2016, around 10 crore passenger-trips were undertaken domestically, and another 5.5 crore passengers flew on international routes. In contrast, 13 crore tickets were sold for AC coaches in Indian Railways.

Even as more people choose to travel by air, airline pricing continues to confound them. So, passengers must be aware of when to buy, what they buy and how to handle any changes to take the surprise out of pricing. Airline pricing, driven by dynamic market forces, is highly sophisticated and focused on profit generation. In India and globally, prices are fully deregulated but are closely monitored to prevent any anti-competitive practices. As prices can be a source of anxiety for passengers, a few things will help demystify airline pricing for travellers to make better choices.

When to book: Air travel is a perishable product: once the flight takes off, the seat cannot be sold. That’s why airlines seek to fill the plane as quickly as possible. That’s why passengers are advised to buy as early as possible to get the cheapest tickets.

Airlines sell their seats in buckets and open their bookings many months in advance. As the lowest buckets with the cheapest tickets are sold out, airlines move the ticket pricing up to the next bucket. Airline capacity is more or less fixed for six months at a time. A demand surge will make an air ticket more expensive.
30/09/17 Deep Kalra/Economic Times