It’s been over a decade since I’ve regularly seen roundtrip coach fares to Southeast Asia for under $600. Now they seem to be popping up all the time. Sometimes they’re even under $400. Here are a few since the beginning of August:
- San Francisco – Vietnam for $386 roundtrip
- Los Angeles – Tokyo for $374 roundtrip
- New York – Bali, Thailand, or the Philippines for $453 roundtrip
I don’t even bother posting fares to Europe unless they’re under $500… preferably under $400. Here are some of the ones we’ve seen since the beginning of August:
- New York – Paris, Amsterdam, or London for $299 roundtrip
- New York or Chicago – Amsterdam for $412 roundtrip
- Several US cities – Vienna for $380 roundtrip
- New York, DC, Chicago – Germany for $437 roundtrip
I’ve pointed out that we’re seeing:
- Economic challenges and greater uncertainty. There’s Brexit and terrorism, and that’s all on top of issues faced by Portugal, Italy, Ireland, Greece and Spain.
- New competition from low cost carriers. Norwegian and Wow Air, for instance, are driving down transatlantic fares.
- Low fuel costs. Airlines are competing aggressively and are able to make money in lower revenue environments.
Copyright: zhukovsky / 123RF Stock Photo
But there’s something else going on here. Airlines have a hard time telling the difference between business and leisure travelers and charging them different prices when there are now so frequently discount fares that don’t require advance purchase, fares that no longer require Saturday stays, etc.
As I explained when discussing the move to greater a la carte pricing and lower rewards for loyalty,
[I]t used to be that airlines would forecast demand for full fare tickets and they would forecast demand for leisure tickets, and those were treated as distinct – but in a world where there are discount fares with no advance purchase requirements that simply isn’t true anymore. People only buy more expensive tickets when less expensive tickets aren’t available.
In the past they segmented customers based on fare rules. Now they’re moving to segmenting customers based on the product those customers want to buy.
Airlines are doing their best to figure out how to price in a way that picks up the cheap leisure travelers who won’t buy at a higher price, without offering tickets to price inelastic business travelers for less than they’d otherwise be willing to pay — and the old ways of doing it don’t work anymore.
It turns out that this explains why we’re seeing super deep discount fares available for very short periods of time as Joe Brancatelli explains:
It wasn’t too long ago that airlines launched sales that lasted for weeks, sometimes months. No more, says Jack Foley, director of global sales and guest services for Aer Lingus of Ireland. “Now airlines offer much shorter sales with much deeper discounts. That allows us to sell ‘excess’ capacity quickly without filling up the seats we can sell later at higher prices.” And if airlines guess wrong and there are still too many seats chasing too few buyers? They unleash another flash sale and promote it through social media.
When an airline offers a $350 fare to Asia for some months in the future, they’ll sell tickets quickly. Mostly they’re picking up travelers who wouldn’t otherwise have purchased tickets, or at least wouldn’t have bought them for awhile and might have purchased later on a different airline.
But by making the fares available only for a short period of time they aren’t giving up sales at a higher price to people that would be buying tickets anyway. If the sale fares were available for the next week, anyone searching for tickets would get the prices. By limiting their availability, there’s a quick rush while few tickets would normally have been sold.