http://www.latimes.com/travel/la-tr-yie ... &cset=true
Finding the right time to lock in airfares takes strategy -- and luck
By Eric Lucas, Special to The Times
June 18, 2006
I don't gamble — except when I'm buying airline tickets. Then I make bets constantly, trying to guess when it's the best time to put down my money. Will I get the cheapest ticket three weeks ahead? Three days? Three months? Roll the dice, baby.
The airlines are doing the same thing — in reverse. They're asking this: How long should they maintain high seat prices on a flight to receive the greatest revenue? If a plane isn't completely booked, should they drop prices to fill empty seats? When do they increase prices again, selling the last few seats to last-minute travelers? Or do they price the last few seats ridiculously low, trying to eke out a few more dollars instead of letting them go empty?
It's revenue management, but for consumers it's like playing blackjack. Do you stand pat on 18 or take a card?
You can buy a ticket for $299 and wind up next to someone who bought a seat a week later for $189. And, with capacity dropping, costs increasing and demand soaring, the arena is changing. Once upon a time, the best time to buy was three to four weeks before a flight. Probably. But now? It's anyone's guess.
"Buy as early as possible," says Ray Neidl, an airline industry analyst at the New York office of Calyon Securities, a global investment firm. "Load factors are becoming high year-round. Airlines are grounding old planes. Supply and demand principles are starting to operate. I've got some business trips coming up this summer, and I'm probably going to book way ahead, just to be sure I can get a seat."
Even so, you can find last-minute bargains. I'm active in two frequent-flier programs and get weekly e-mails offering me the chance to fly somewhere tomorrow for just $129 round trip.
What are the airlines doing?
Trying to maximize revenue.
"It's an art, not a science," says Laura Sorensen, formerly director of revenue management for Milwaukee-based Midwest Airlines. "There is no universal blanket formula to figure out the best time ahead to buy a seat or, from the airlines' point of view, the best way to price a seat."
The airlines use complex computer programs to track what's happening in their markets. These revenue management systems capture booking information every night and process it with formulas that include expected revenue, labor costs, fuel price trends, competitors' prices, travel history on that particular route and so on.
The next morning, each airline's algorithm burps out information, software adjusts the prices automatically, and revenue managers study that.
"You can slice and dice this data ad nauseam," Sorensen says. "More than two weeks out, it's a very fluid environment, and airlines re-price almost daily."
They also step back and look at overall patterns. Midwest analyzed weekly patterns and discovered its planes were usually full on Sundays, so it stopped offering sale prices on those flights. Passenger loads stayed the same, and revenue increased.
The airlines aren't managing the revenue from each seat but rather from each plane or their entire operation.
"It's a myth that the goal is to get the most from each passenger," says John Heimlich, chief economist at the Air Transport Assn., a Washington, D.C.-based trade group. "The idea is to get the greatest revenue across the airline's entire network."
That's why, for example, you might sit next to someone on a flight from John Wayne Airport in Orange County to Chicago who paid $29 for that seat, while you paid $329. But she's flying on to Heathrow, you're stopping in Chicago, and the airline charged her $999 for the flight to Europe.
So, how can travelers approach the ticket-buying casino sensibly? Here are a few overall principles to boost your understanding and make your gambling more informed:
Last-minute bargains are sheer dumb luck. If it were predictable, why would anyone buy ahead of time? Thus, standby fares, which were never common, have disappeared entirely. "That just amounted to training customers to wait till the last minute," Sorensen says.
The airlines are in a big enough fiscal pickle. They don't want to make the same mistake carmakers made with rebates, which became so ubiquitous that consumers ultimately refused to buy cars without them. That's why airlines offer last-minute deals only to Internet shoppers and only for certain markets. If you really need to go somewhere, waiting until two days beforehand is like, as the Chinese say, waiting for a roast duck to fly in your mouth.
Flexibility is your best tool. Although the object of revenue management is to get the most from the entire operation, each flight is an individual entity within that strategy. Some planes are full; some aren't. If you can fly the night before — or land at JFK instead of Newark, N.J. — you could save money.
If you're buying from a reservations agent by phone, ask him or her to check prices on different flights or alternate airports. Tuesdays and Wednesdays are the least popular travel days. "If you can fly those days, you're in the driver's seat on prices," Sorensen says.
Use the plus-or-minus-one-day search option that many airlines offer online. Many also offer full-day schedules that allow customers to weigh cash against convenience.
Two weeks is a pivotal point, just like 18 in blackjack. Most airlines hold back a percentage of seats on their planes to sell to last-minute business travelers. This could be up to 20% of the plane; it goes up for grabs at two weeks, at much higher prices. Even though most airlines have dropped the old two-week advance purchase requirement, if you buy later than that you're unlikely to get a better fare, especially in the current travel boom.
Business travelers complain about the premium placed on last-minute seats, but revenue managers don't buy it. "We could have sold that seat to someone two months ago. We saved it for you. Why shouldn't you pay more for that?" Sorensen says.
Know the route and the market. If it's a popular business-travel route, such as LAX to JFK, buy early — period. If you're flying to Vegas for a weekend at the casinos, last-minute demand from business travelers is lighter, and leisure travelers probably won't pay the same kind of premium price for a late purchase. You are more likely than you would be on a business route to find a deal in the two weeks before your trip.
Use what data you can. The airlines are never going to reveal their advance-booking inventory — that's why you can't get a seat assignment until you've bought the ticket — but you can try to construct your own. Start tracking prices for a trip you're going to take about three months out. When you see fares heading up — they usually move in $5 to $20 increments — it's probably time to buy. Most frequent travelers already do this in some fashion.
That's why a group of Seattle entrepreneurs is beta testing a website that will use data mining to predict whether fares are going to increase or decrease on a given route.
Farecast,
http://www.farecast.com , uses pricing history for its prediction and accompanies its results with a degree of certainty and a catalog of routes and prices by vendor. Right now, it's covering only Seattle and Boston as gateway airports, but the company plans a national rollout this year.
"A lot of frequent travelers shop multiple sites multiple times when they're going somewhere," says Farecast President Hugh Crean. "Our software does that thousands and thousands of times. Our mission is to empower air travel customers with better information."
The process is like a game of blackjack. You have information the airline doesn't: your plans, price points and level of need. But the airline has more information than you. It knows how close to full the plane is, how its overall revenue looks for the current quarter and how much fuel it has hedged at $1.50 a gallon.
When you press "Purchase," you're taking a card. The more you know, the better your choice is likely to be — but it's still a gamble.
(Wit side note:) I have already booked my Delta SkyMiles ticket for December to San Jose. The only flights I could get out of ATL were Dec. 7-12. All others required using double miles (SkyChoice). Don't put it off. For $50 you can always put the miles back into your account if you need to cancel the flight.
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