Why Your Airplane Ticket is So Expensive

I have been traveling for almost twenty years. In that time, the airline industry has changed a lot. The use of points and miles has expanded, worldwide tickets have gone the way of the dodo, airlines have consolidated, and budget airlines have exploded.

Over the past few years, the price of airline tickets has increased steadily. They become more and more expensive while their prices often seem illogical.

Since ticket price is such a strange and misunderstood topic, I want to take a moment to explain why your plane ticket is worth it.

A look at the airline industry

Ticket prices have increased over the decade for a number of reasons. For starters, the industry has consolidated tremendously over the past few decades. Thanks to bankruptcies and mergers, there are now only three major alliance airlines in the United States (American, Delta, and United). And, with the recent bankruptcy of Spirit and the mergers of Alaska and Hawaii, there is even less competition outside of 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 majority of the market. (Though, thankfully, in Europe, there are plenty of budget airlines to choose from.)

As airlines merge, merge, or go bankrupt, there is little incentive to offer lower fares to win your business. After all, when there are only one or two airlines flying a route, the airlines know you don’t have much choice. Less competition means higher prices.

Secondly, airline fuel prices have increased dramatically. In 2017, jet fuel cost $1.37 per gallon. In 2024, that’s $6.49 per gallon! Airlines have only passed on a five-fold increase to customers.

Third, airline taxes and security fees have increased dramatically, increasing the cost of your ticket. Ever flown into London? Half of the ticket price is made up of fees and taxes!

Finally, demand dropped after 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 revenue for passengers and lower costs for the airline.

This trend accelerated during COVID. When COVID shut down global travel, airlines scrapped many of their older aircraft 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 crews to go back to the pre-Covid schedule. This reduction in the supply of flights, coupled with increased demand for travel, meant that airlines had little incentive to lower prices.

According to Rick Ciani of Farecompare.com, “Prior to 2008, things were in favor of travelers. After the 2009 crisis, the scale of fairness tipped toward the airlines.”

Taken together, a stable airline industry facing high costs is generally less likely to offer low fares.

How do airlines set prices?

Prices go up and down for many reasons. The four major factors driving prices are competition, supply, demand and oil prices.

Together, those four factors affect something called the “load factor.” Airlines want to fill their planes and maximize profits, and they do this by calculating the aircraft’s load factor. Basically, it is the percentage of seats sold on the flight. They want this number to be as high as possible.

In order to achieve the highest possible load factor, airlines will constantly change prices based on the above four categories to get people to buy tickets.

Airlines use dynamic pricing models and artificial intelligence (AI) to determine how much they can get for each seat. Have you ever wondered why airlines raise their prices wildly after a major event increases demand? They are not. AI is All it sees is sky demand and adjusts accordingly to its programming. Higher demand = higher prices.

These advanced computer systems constantly compare booking trends with past sales history, major events, concerts, sporting events, weather and competitor behavior. They can look at customers’ search and booking behavior and process tons of data and change prices on the fly in hopes of getting the best price.

All of this is because a flight can cost $100 one day, then $400 the next, and then back up to $100 the day after that. As people buy seats on flights, airlines raise prices, and when demand falls (at a certain price), they lower prices until fewer and fewer seats are available, then they raise prices again. It is a delicate balance created to ensure maximum revenue. That’s why prices are cheapest for 5 a.m. flights, more expensive during holidays, and through the roof during peak season or if there’s a big sporting event in town.

After all, you can’t add more seats on a plane, so they can charge higher fares just to increase revenue!

This is why prices can change in seconds. It’s not because they’re tracking your cookies, it’s because the AI ​​is responding to real-time changes in settings. Think about it. How many booking companies are there? A lot! All of them are reserving seats. Millions of people fly every day and with limited routes, planes are easy to fill, so AI doesn’t need to discount fares as much as in the past.

On a US domestic flight, there can 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 the demand is high, the airline will raise the prices.

As Rick said, the airline is now profitable.

But finding a cheap ticket is not impossible. There are many ways to find cheap airfare. To avoid being the person who paid the most for their ticket, the most important thing is to be flexible.

Airlines are constantly changing prices to increase revenue, hoping to get as many people as possible at the highest prices possible. “About three months in, the airlines start to manage these downward prices,” Rick says. This means that airlines start looking at historical trends and current seat sales to determine whether they will continue to really rock bottom fares or keep prices high.

If you’re booking within a month, you’re playing into the airline’s hands. When your dates are no longer flexible, you’ll pay whatever they charge.

To learn how to navigate the system and get a cheap flight, check out these articles I’ve written:

The days of cheap airfares are over. They’re not coming back, and the prices you’re seeing now are the new normal for airline tickets. They’ll just cost a lot more, especially if you don’t find that sweet spot when prices are at their lowest.

But by understanding the cost of tickets, you can avoid being the person who pays the most.

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