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Airfare can fluctuate drastically -- learn how to keep an eye on airfare.

Airfare can change hourly. [© Jupiter Images, 2009]
© Jupiter Images, 2009
Airfare can change hourly.

The cost of airfare can fluctuate up and down without warning. The price to fly from Dallas to San Francisco may cost twice what it did two months ago and drop back to the lower fare a month later. Rapidly changing airfares can be a big hassle to frequent business or casual travelers, but if the timing is right travelers can save a bundle.

While many people would agree airfares have generally increased along with prices everywhere else, the exact amount is uncertain. For example, in September 2008, the Associated Press reported that while overall fares rose six to 11 percent in 2008, fares actually dropped in some major cities like New York and Phoenix. Some who follow the airline industry suggest that may not be accurate, claiming certain surcharges may not be counted. Sometimes what seems like a bargain isn't quite such a buy once all the taxes and fees are added in. Either way, estimating airfare and finding the best price can be a challenge.

Airfares were at one time subject to heavy regulation from the Civil Aeronautics Board (CAB). But in the 1970s the public and politicians insisted the CAB was making fares too high and the airline industry should be free to let the open market determine the pricing. The Airline Deregulation Act was signed into law in 1978. Experts believe that airfares have dropped as much as 30 percent (inflation adjusted) since the law was enacted.

What Determines Airfare?

Several factors can determine airfares, but most air travel authorities cite competition as the number one factor. If there are a number of carriers flying out of a particular airport, the airfare is reduced. This is because all the airlines are competing for a limited number of passengers. Throw a discount carrier in the mix and the competition is even greater. Paying for the perk of last-minute booking and a refundable or changeable ticket is also going to increase the airfare. Gas prices have an impact on the fares as well.

The season plays a big role in determining airfare, especially during holidays when travel demand is at its peak. Based on the standard economic theory of supply and demand, the demand is high and people are willing to pay more. The least expensive day to fly is often on the actual holiday itself, such as Thanksgiving Day or Christmas Day.

The airports can play a role in airfares. Many airports, especially the larger airports, place surcharges on the airlines to fund upgrades to their facilities, and the airlines tack those onto the airfare. These fees are often referred to as Passenger Facility Charges. Some may not know that actual total airfares are never as advertised. The posted price won't include the numerous fees and taxes like fuel surcharges, airport facility charges, 9/11 security fees and baggage fees among others.

Finally, many of the larger "legacy" airlines like American, Delta and United have a tiered fare structure that usually includes three classes: First Class, Business and Coach. Airfare is determined based on the level of services and amenities the passenger receives.

There are airlines, however, that directly try to offer lower fares than the major carriers and also impact the airfare charged by the competition. These "low-fare carriers," like Southwest and JetBlue, usually offer the same fare on all seats (no first-class or business sections), operate from smaller airports and keep their flights' stops in a straight line - known as a "point-to-point" schedule. They use these cost-cutting measures to pass the savings on to their passengers. The mere presence of a low-fare carrier in a city can make airfares drop in that area.

Finding Cheap Fares

Non-stop flights are sometimes the most expensive, especially with long-distance flights, as airlines follow the belief that passengers will sacrifice cost for not dealing with layovers. Also, airfare for one-way tickets, last-minute travel or for refundable tickets is almost always higher. This is why a passenger in one seat could possibly have paid hundreds less than the passenger in the next seat. Bargain hunters will often have to accept flights that involve at least one extra stop along their path. This is often very inconvenient when flying on an airline that doesn't fly a point-to point schedule, as passengers may see their flight travel in the opposite direction before turning around to their destination. Many people simply choose the low-fare carriers and stick with them.

Save Money on Airfare

Passengers will often save money by booking fights in advance. Twenty-one days is usually the standard minimum time needed to get a good discounted airfare. Travelers often get better deals if they stay over a Saturday night and if they travel on Tuesday or Wednesday.

Frequent travelers, especially business travelers, like to use "frequent flyer" programs, in which they use one airline or a credit card that will record their travel miles and give them discounted or free flights after logging a certain amount of miles. Frequent flyer members can also often take advantage of last-minute specials offered by the airlines especially for them.

It is not recommended that travelers let travel agencies do the work for them as that just throws another fee into the mix; the traveler doesn't have to pay this out of pocket, but one can bet it will be added in somewhere. It is better for travelers to do their own booking online at the airline's Web site or at some other discount site. Kiplinger recommends the following sites for locating the best airfare:

  • Kayak.com searches 140 sites at one time and directs the consumer to the best deal on airfare. It also allows travelers to compare airfare on dates up to three days before the selected departure date and three days after the selected return date; it often possible to locate a better deal by being flexible in the travel dates. Kayak works well for both international and domestic travel.
  • Farecast.com takes the traveler's desired flight itinerary and forecasts the likelihood of the price going up or down. This helps the traveler to know if the ticket should be purchased today or sometime down the road.
  • Airfare Watchdog lets users know when the airlines are having what is known as a "fire sale." Airlines periodically liquidate seats at incredibly low prices that mean bargain airfare for travelers. This site even picks up on the low-fare carriers and smaller airlines.

The truth is that airfare used to be a mystery, but with tougher competition, companies tightening their wallets on business travel and a savvier consumer, the mystery is unraveling. Even in today's market, people will continue to fly, but with a little research, they can do so with the confidence that they saved some money along the way.

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