Why Your Airfare is So Expensive
In recent years, the airline industry has seen significant changes that have directly impacted ticket prices, making air travel more expensive and less predictable. The consolidation of airlines has played a crucial role in this trend. With the rise of major alliances such as American, Delta, and United in the U.S., and similar consolidations in Canada and Europe, competition has dwindled. This lack of competition means airlines have less incentive to keep fares low, as fewer options often lead to higher prices. Additionally, the soaring cost of jet fuel—rising from $1.37 per gallon in 2017 to $6.49 in 2024—has forced airlines to pass these costs onto consumers. Coupled with increased taxes and fees, especially for international flights, these factors have led to a significant rise in airfare.
The dynamics of airline pricing are complex, driven by competition, supply, demand, and fuel costs. Airlines utilize sophisticated dynamic pricing models, often powered by artificial intelligence, to adjust ticket prices in real-time based on various factors, including booking trends and special events. This means that ticket prices can fluctuate dramatically, often within a single day, as airlines strive to maximize their load factor—the percentage of seats filled on a flight. As demand increases, so do prices, and vice versa. The pandemic further exacerbated these trends, as airlines reduced their capacity and staffing, leading to fewer flights available when travel resumed, allowing them to maintain higher fares despite growing demand.
For travelers looking to navigate this challenging landscape, flexibility is key. Being open to different travel dates and times can help in finding more affordable options. It’s advisable to book flights well in advance and to keep an eye on fare trends, as airlines often release lower fares three months ahead of travel dates. Understanding the intricacies of airline pricing can empower travelers to avoid overpaying for tickets in this new era of air travel, where cheap fares are becoming increasingly rare. For those eager to learn more about securing budget-friendly flights and maximizing travel experiences, resources such as travel guides and credit card strategies can provide valuable insights.
I’ve been traveling for close to twenty years
. In that time, the airline industry has changed a lot. The
use of points and miles
has become widespread, round-the-world tickets have gone the way of the dodo, airlines have consolidated, and there has been an explosion of budget airlines.
Over the last few years, the cost of airline tickets has steadily risen. They get more and more expensive while their prices often seem illogical.
Since ticket pricing is an arcane and misunderstood subject, I want to take some time to explain why your airplane ticket costs what it does.
A Look at the Airline Industry
Ticket prices have increased over the decade for several reasons. For starters, the industry has consolidated a lot over the last few decades. Thanks to bankruptcies and mergers, there are now only three major alliance airlines (American, Delta, and United) in the United States. And, with the recent bankruptcy of Spirit and the merger of Alaska and Hawaiian, there’s even less competition outside the Big 3.
In Canada, there are only two major airlines – WestJet and Air Canada.
In Europe, Air France–KLM, British Airways IAG, and Lufthansa control the bulk of the market. (Though, thankfully, in Europe, there are lots of budget airlines to choose from.)
As airlines have partnered up, merged, or gone bankrupt, there is little incentive to provide low fares to win your business. After all, when only one or two airlines are flying a route, airlines know you don’t have much choice. Less competition means higher prices.
Secondly, the price of airline fuel has increased tremendously. Back in 2017, jet fuel cost $1.37 per gallon. In 2024, it is $6.49 per gallon! Airlines have simply passed that fivefold increase on to the consumer.
Thirdly, airline taxes and security fees have increased a lot, adding to the cost of your ticket. Ever fly into London? Half the ticket price is made up of fees and taxes!
Finally, demand fell following the 2008 recession, and to compensate, airlines reduced both the number of routes they offered and the frequency of their flights. Fuller planes mean more passenger revenue and fewer costs for the airline.
That trend greatly accelerated during COVID. When COVID shut down global travel, airlines mothballed many of their older planes and laid off many of their staff. When travel restrictions were lifted and more people started flying again, they didn’t have enough planes or staff to return to a pre-COVID schedule. This decrease in the supply of flights, coupled with the surge in demand for travel, meant that airlines had little incentive to lower prices.
According to Rick Seaney of
Farecompare.com
, “Before 2008, things were in favor of the passengers. After the 2009 crisis, the scale of justice tipped towards the airlines.”
Taken together, a consolidated airline industry that is facing more costs is simply less likely to generally offer lower fares.
How Airlines Determine Pricing
Prices go up and down for many reasons. There are four major factors that drive prices are competition, supply, demand, and oil prices.
Together, those four things affect something called “the load factor.” Airlines want to fill their planes and maximize profits, and they do this by calculating a plane’s load factor. Essentially, this is the percentage of seats sold on a flight. They want this number to be as high as possible.
To get the highest possible load factor, airlines will constantly change prices based on the four categories above in order to get people to buy tickets.
Airlines use dynamic pricing models and artificial intelligence (AI) to figure out the maximum value they can get for each seat. Have you ever wondered why airlines seem to callously raise their prices after a big event spikes demand? They aren’t. The AI is. All it sees is sky-high demand and adjusts accordingly to its programming. More demand = higher prices.
These advanced computer systems constantly compare booking trends to past sales history, major events, concerts, sporting events, weather, and competitor behavior. They can look at consumer searching and booking behavior and process lots and lots of data and change prices on the fly (no pun intended) in hopes of getting the best price possible.
All of this is why one day a flight may cost $100, then $400 the next, and then back to $100 the day after that. As people buy seats on a flight, airlines raise prices, and when demand falls (at a certain price point), they lower prices until fewer and fewer seats are available, then they will raise prices again. It’s a delicate balance designed to ensure maximum revenue. It’s why prices are cheapest for 5 AM flights, more expensive over the holidays, and through the roof during peak season or if there’s a major sports event in town.
After all, you can’t add more seats to a plane, so all they can do to raise revenue is charge higher fares!
It’s also why prices might change in seconds. It’s not because they are tracking your cookies, it’s because the AI is responding to real-time changes in seats. Think about it. How many booking companies are out there? Lots! All of them are reserving seats. Millions of people fly each day and, with limited routes, it’s easier to fill planes, so the AI doesn’t need to discount fares as much as it had to in the past.
On a US domestic flight, there might be 10–15 different price points. If the load factor is low and demand is low, an airline will increase the availability of cheap fares. If the load factor is high and demand is high, the airline will raise prices.
As Rick said, the airline is advantaged now.
But it’s not impossible to find a cheap ticket. There are many, many ways to find cheap airfare. To avoid being the person who paid the most for their ticket, the main thing to do is to be flexible.
Airlines are constantly changing prices to increase revenue, hoping to get people into the highest price buckets possible. “About three months before, airlines start to manage those bottom price points,” Rick says. That means airlines begin to look at historical trends and current seat sales to figure out whether they will release those really rock-bottom fares or keep prices high.
If you’re booking inside a month, you’re playing into the airline’s hands. When your dates are no longer flexible, you’ll pay whatever they charge.
To find out how to navigate this system and get a cheap flight, check out these articles I wrote:
How to Get Cheap Flights
How to Use Airline Credit Cards for Free Flights
How I Search for Airline Tickets
The days of cheap airfares are long over. They aren’t coming back, and the prices you see now are the new normal for airline tickets. They are simply going to cost a lot more, especially if you don’t find the sweet spot when prices are their lowest.
But by understanding how tickets are priced, you can avoid being the person who pays the most.
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Why Your Airfare is So Expensive
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