Why aren't airline seats cheapest right before departure?

Hello Everyone,

I get the current Airline business model, the cheapest tickets are the ones purchased far in advance (usually). This benefits the airline, they can determine in advance how much fuel they need, they can cancel the flight if there isn’t enough passengers, how many meals they’ll need, etc.

However, once that plane pushes from the gate those unused seats are now worthless. If you want to purchase a ticket at the last minute prepare to pay a high price. Wouldn’t it benefit the airline to come up with some way to sell unused seats just prior to takeoff at a low price to encourage people to fill up those seats?

Yeah, it might cause people to always wait until the last second, but there would be no guarantee of an available seat. I just find it strange that you have a perishable product that gets more expensive the closer it gets to being no more.

I think the idea is that it pits the airline’s desire for $$$ against the passenger’s desperation to fly. A passenger who really needs to fly ASAP will be in a vulnerable position and willing to fork out money, whereas the airline is more “meh” about leaving seats unfilled. Also, IIRC, business executives are often the type of people who fly at the last moment on little notice, and such people will usually be furnished with plenty of money to pay for expensive tickets.

That, and also the opposite, as you mentioned - airlines don’t want to reward a strategy whereby people deliberately hold out until the last moment before buying cheap tickets. If so, everyone would wait until the last moment and that would make it difficult for airlines to plan or anticipate, and would cause a flurry of booking which would be a headache at the last minute. They want to reward people for doing things far in advance; don’t want people gaming the system.

As with hotel room pricing, they have sophisticated models for people’s behavior. You already hinted at the answer. On a single iteration it may be sensible for them to just try to fill the plane at any price. But customers would learn from that. If they always lowered prices sharply at the last minute, a lot of people would tend to just wait in future. And demand is not completely elastic, they are not guaranteed to sell all the seats however low they drop their prices.

Fifty years ago it used to be possible to turn up at a cruise port and look for bargains on ships leaving the next day - often cabins would be sold with 90% discounts. Of course, this was pre-internet and you had to gamble the cost and trouble of travelling there and schlepping round the agents against the possibility of nothing being available.

These days, cruises have a different model, and prices do tend to fall as the sailing date gets nearer. The downside is that popular cruises are sold out early and on less popular ones, the only cabins available might be those in aquarium* class.

*Aquarium class is cabins so low down that they will see fish through their windows.

Admittedly, I don’t fly a lot. But, I can’t remember the last time there was an empty seat.

Apparently, the airline’s model is successful.

Depends on the time of the year, destination and flight time.

Taipei gets quite cold during the winter months and a short two hour flight to comfortably warm Manila solves that problem. Many people would fly down on Friday and return Sunday, but the airlines had to get the planes back to Taipei. I would spend a few weeks in the Philippines while on Winter break from the university and make sure to return on a Saturday flight. These flights might have less than a dozen passengers on a plane that carries over 100 people.

The same thing might happen on NYC to Caribbean destinations during the Winter.

In economics this would be an example of a “perverse incentive.” The airlines would, in effect, be telling us not to buy tickets in advance because they’ll be cheaper the day of the flight. Play this out, and everyone waits until the last minute, so the airplane leaves full of passengers who all bought the cheapest seats.

Now let’s look at what happens when you can get a cheap seat if you show up 15 minutes before the flight leaves, but the airline has already sold all the seats for that flight. Then you have X number of passengers milling around the airport, going from airline to airline (assuming more than one airline flies to that destination) looking for a flight with last-minute seats available. Anyone who’s ever had their flight canceled at the last minute due to bad weather knows that scenario all too well. And the airline gets a reputation for advertising seats at prices that aren’t available. That might be acceptable for the backpacking through Europe crowd, but that’s a pretty small segment of the flying public.

Can’t you still fly standby? That’s a way of flying cheap at the last minute, that doesn’t provide a perverse incentive to wait for the last minute.

Not really. Unless you work for the airlines, you can’t just get a “standby” ticket. For most people, what “standby” means is that you already have a ticket, and are trying to get on a flight other than the one you originally booked. This may either be voluntarily (for which a fee may apply) or involuntarily because your flight got cancelled or you were bumped. It’s not really a way to save money.

If you encourage people to book early, as is the current practice, then the airline has money in the bank well in advance of having to “spend” that money. The lower price is made up by the late notice business travelers who don’t have a choice when they fly and whose tickets are often paid for by their employer.

The last flight I flew on as a passenger wasn’t booked until the morning of the flight as my employer wasn’t sure if or when I would have to travel.

Keep in mind that if flights far in the future aren’t selling as well as the airlines would like, they can lower prices then, weeks before it becomes “last minute” in order to grab the people who will fly for a lower cost but not a higher one. This is presumably what happens when you see airlines making promotions for certain flights that have to be very specific times.

Another function that is not an entire explanation but that does play into it is the fact that not all ‘coach’ seats are considered identical by the airline. The ones in an exit row may be more expensive, for example, and another big one is whether a ticket is considered refundable or not. ‘Coach’ class, to the airline, is a bunch of different ticket types in the same seating area but different costs as they’re different contracts.

The other piece which is pretty obvious is that a lot of people use search engines that sort through all the different kinds of available tickets and find the very cheapest available, and a lot of people buy based only on that preference.

Now, a few months before takeoff you can tell your search engine that you require a fully refundable ticket and the price will typically jump up a lot. If you’re doing the same thing on a last-minute ticket it often will not change the price at all - all that was left were the fully-refundable tickets with the higher price so you were buying that already. The airline didn’t change the price of the expensive fully refundable tickets, they just ran out of the cheap tickets.

Of course, to some degree the airline simply designs the price structure with the search engine cheapest buyers in mind, but you are actually getting something for that more expensive ticket, in some cases at least.

A good article on airline inventory here.

Also note that airlines routinely overbook flights, expecting a few last minute no-shows. And if everyone shows up and there aren’t enough seats to go around, the airline will start asking for volunteers to give up their seats, by offering incentives if you go later. This can sometimes be as much as the full fare for the seat. My wife volunteered to get bumped and got on another flight only an hour later, but also got a free ticket for another flight. So that’s a 100% discount.

So you can see how overbooking and rewarding people for taking the next flight is similar to offering steep discounts for last minute travel, but the airline maintains a lot better control over prices and the expectations of their customers.

And if no one volunteers to be bumped, they can just pick out people at random and tell them to get off the plane and they’ll be on a later flight, no incentives required. They don’t like to do that, but they can and will if they have to.

I remember back in the day - the 1990s probably - when your airline ticket from A to B on a given date was usable on any airline flying that route on that date.

I’d have meetings in Minneapolis that I could never be sure when they’d end, so id book a departure around 5 or 6 PM for the flight home. As long as there was an available seat I could present it at the gate and they’d endorse it over to the flight and airline I was to fly. So I could show up for a 1 PM departure on USAir with my 5 PM Delta ticket and it was all good. It didn’t matter that I had paid $200 for the ticket and USAir’s going rate was $350. I’d earn airline miles on the airline I flew, and since I was a USAir junkie at the time that was good too.

Wha? I’ve NEVER heard of this, and I’m of middling age. Are you sure you’re not confusing the 1990s with the 1970s?

I didn’t start flying for business until the 1980s, and I remember being able to do it, at least for a few years. IIRC, it was limited to the pre-deregulation “legacy” airlines: American, Continental, Delta, TWA, United, USAir and maybe one or two others.