Understand How Airlines Set Their Prices in the First Place

• Airline pricing is a complex, unpredictable matter driven by competition, demand and inventory. The airlines call it "yield management." All of the majors feed their available seats and prices into four central reservation systems that are owned by various airlines. The systems are Apollo, Sabre, WorldSpan and Galileo. Airlines then change their prices based on demand. If a certain flight is selling well, the price will increase. If another flight has no takers, the fare will drop until the airline gets some. As a result, fares and inventory are changing every minute.
  
  So why is it so hard to keep track of the prices? Some reasons:
  
  * Internet travel sites and travel agents use the central reservation systems, which are updated periodically during the day. The four are not updated at the same time, which explains why different searches may yield different results.
  
  * The systems also may use different algorithms to search for the lowest fares, which subsequently provide varied fares.
  
  * Demand explains why it is cheaper to fly on a weekday (when fewer people are traveling), at odd hours or on days other than major holidays.
  
  * Airlines change their prices based on competition. If one airline flying the New York-Miami route drops its rates by 20 percent, chances are, all airlines will drop their rates, to avoid giving the discounter a competitive advantage.
  
  * Fare differences can exist for the same route on different airlines because of other factors. For example, if one airline has the market share for that route, it may not need to lower fares to attract passengers.
  
  * To complicate matters, all of this happens at the speed of light. Prices for a specific flight can go up or down even as your travel agent is getting your credit-card information from you, so your cheap ticket can be whisked out from under you. And your fare is never guaranteed until you have paid. That's the gamble. Fortunately, it can work both for you and against you.
  
  * Airlines also use inventory to their advantage and to lure the unsuspecting flier. They apportion seats on each flight into several price ranges and set aside a certain number of discounted tickets. Naturally, the lowest fares draw your attention to advertisements. Of course, by the time you call (unless you are quick on the draw) those seats will be gone. Inventory brings us back to demand. If there is low availability and high demand, you will have to wait for a cheap fare. But that does not mean you should give up on a trip that is very popular. Sometimes, airlines will change their fares or open up more discounted seats, depending on how sales are going.
  
  Because of all of these factors (competition, inventory and demand), it is essential to look around and comparison shop. Whether you use the Internet or a travel agent, you will come up with a wide range of prices. The challenge is to know how to make the cheap fares yours.