Why Your Airplane Ticket is So Expensive
**Understanding the Rising Costs of Airfare: An In-Depth Look at the Airline Industry**
Traveling has undergone significant changes over the past two decades, particularly in the airline industry, where ticket prices have steadily increased, often leaving consumers puzzled. The consolidation of airlines has played a pivotal role in this phenomenon. In the United States, the landscape has narrowed to just three major airline alliances—American, Delta, and United—following a series of bankruptcies and mergers. This trend is mirrored in Canada with only Air Canada and WestJet dominating the market, and in Europe, where a few key players like Air France-KLM, British Airways IAG, and Lufthansa control the majority of routes. As competition dwindles, airlines have less incentive to keep prices low, resulting in higher fares for consumers.
Several factors contribute to the rising costs of airline tickets. The price of jet fuel has skyrocketed, increasing from $1.37 per gallon in 2017 to a staggering $6.49 per gallon in 2024, a fivefold rise that airlines have largely passed on to passengers. Additionally, taxes and security fees have surged, often making up a significant portion of the ticket price—especially for flights into cities like London, where fees can account for almost half the fare. The aftermath of the 2008 recession saw airlines reduce routes and flight frequencies to maximize passenger revenue through fuller planes. This trend intensified during the COVID-19 pandemic, as airlines laid off staff and grounded aircraft, leading to a reduced supply of flights just as travel demand surged again. This imbalance between supply and demand has allowed airlines to maintain higher ticket prices.
Airlines employ sophisticated pricing strategies driven by dynamic pricing models and artificial intelligence (AI) to maximize revenue. By analyzing historical booking data, consumer behavior, and external factors such as major events and weather, airlines adjust ticket prices in real-time. This means that prices can fluctuate dramatically within short periods, often based on the percentage of seats sold on a flight—a metric known as the load factor. For travelers seeking to navigate this complex pricing landscape, flexibility is key. Booking in advance and being open to varying travel dates can help travelers secure the best fares. While the era of cheap flights may be behind us, understanding the intricacies of airline pricing can empower consumers to make informed decisions and avoid overpaying for their tickets.
By grasping the nuances of ticket pricing and the factors that influence costs, travelers can strategically plan their journeys and potentially save money on airfare. For those looking to delve deeper into finding cheaper flights or utilizing airline credit cards for rewards, resources and guides are available to assist in mastering the art of budget travel.
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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Book Your Trip: Logistical Tips and Tricks
Book Your Flight
Find a cheap flight by using
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Book Your Accommodation
You can book your hostel with
Hostelworld
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World Nomads
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InsureMyTrip
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Medjet
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Why Your Airplane Ticket is So Expensive
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