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Why do airlines consistently change prices?
There used to be a time when life was simple. An airline would charge a fare related to the distance of your intended trip, and everyone would pay the same fare for the same trip. Although this sounds wonderfully simple, it stifled competition. Our friends the Civil Aeronautics Board (CAB) not only used to regulate where airlines could fly, but also the fares charged. All that changed in the late 70s when U.S. airlines deregulated. Any airline could fly where it wanted (within the U.S. with a few exceptions) and charge whatever price it could to remain in business.
Pretty soon however some smart people at the airlines realized that the price a passenger is willing to pay varies considerably, given the purpose of a trip, the affiliation of the passenger, the time before the flight departs, and the day of the week travel is intended. These same people also found that the simple economic law of price and quantity being determined by demand applied equally in the airline business as well as nearly every other business. By this time the computer age had dawned and these new-fangled machines were put to use to find ways to maximize revenues based on the market demand. The end result is a suite of real-time decision support systems that continuously monitor demand for a particular flight against a forecast and revenue target and continually adjust available fares to manage demand and maximize revenue. Because fares are now related to market demand at a point in time, fares nowadays bear scant resemblance to distance traveled, and it is very unlikely that you will be seated next to someone who paid exactly the same fare as you. Perhaps the passengers that get their clocks cleaned are the people who lose all sense of Airplane Etiquette when they find that their seat neighbor paid less than half what they did!!

Then, because airlines openly publish millions of fares on a daily basis, smart airlines simply monitor their competitors' activities and make the decision to match or partially match the competition's fares. Hence the appearance that everyone has the same fare. Then, one could argue, life is simple once more; every who is in the same demand category at the same point in time, pays the same fare.


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