The Never-Ending Story of Airline Fare Changes

You’ve probably given up wondering how many angels can dance on the head of a pin. But if you travel much at all, you’ll find yourself confronting a question almost as befuddling: How exactly does airline pricing work?

It’s all very complicated, you often read. Fares change thousands of times a day. It certainly is complicated, and for about a decade now, fancy computer software has been involved. For a deeper look at how airlines set their prices, we take you now to a black glass building next to Washington Dulles International Airport. This is the headquarters of the Airline Tariff Publishing Co., or ATPCO, a.k.a. air fare central.

ATPCO is a for-profit corporation, jointly owned by 29 airlines, including all the major U.S. players. To change a fare, its 600-plus participating airlines worldwide must send their adjustments via telecommunication or fax to the ATPCO system. Then ATPCO informs its paying subscribers, who then inform the world.

So when you hear that fares change thousands of times daily, that’s not strictly true. Instead, airlines maintain thousands of fares concurrently and change them up to three times each weekday, at 10 a.m., 12:30 p.m. and 8 p.m., Eastern Standard Time. On Saturdays and Sundays, there’s a single round of fare changes at 5 p.m.

And then, of course, the game begins again, with all the airlines assessing their own sales volume and their competitors’ moves. Since most airlines open flight bookings about 331 days before departure, the selling price of each seat could change roughly 805 times before takeoff.

“We are the vehicle for getting the fare into the marketplace,” says ATPCO President Michael Ferrier. “It’s not going to be sold until it comes through us.” (On international flights, prices can be changed four times daily, but those fares are adjusted under a different set of restrictions.)

Neither ATPCO nor the federal government places any limit on the number of fares that can be offered on a single flight.

There are the class distinctions, of course--different fares for first, business and coach, if it’s a three-class flight--and then there are different fares within the same class.

Unrestricted tickets are the costliest seats in coach, almost always sold to business travelers. Cheaper coach fares go to those who buy in advance. Travelers pay more if there’s no Saturday stay-over (to separate deep-pocketed business travelers from price-sensitive leisure travelers).

But that’s not the end of the different fares. Say Airline A prices its 100 cheapest coach seats at $60 on the midnight Burgville to Villeburg flight, then discovers that Airline B is advertising seats on the same route, flying about the same time, for $50. Odds are that Airline A will drop prices. But Airline A probably won’t change all its $60 fares to $50. Instead it will probably mark down 10 or 20 or 30 of the 100 cheapest seats to $50, and leave the rest at $60. Thus, once the $50 seats are sold out, the price jumps back to $60, but the airline can say that it had seats available at $50. If the price battle escalates further, Airline A and Airline B could each end up with 10 seats at $40, 20 seats at $50 and 70 seats at $60--tickets with identical restrictions.

The carriers won’t tell the public exactly how many seats are available at a specific price. But under federal law, said Delta Airlines spokesman Jackie Pate, once a price is advertised, at least 10% of the tickets in that segment of the market must be sold at that price.

Airline insiders call the price categories “buckets.” It’s common on a Boeing 737, with about 100 coach passengers, to have seven “buckets” on sale at one time. (Airlines also grant various discounts for seniors; government employees; and corporations, tour operators and ticket consolidators who buy tickets in large volume.)

As the departure date draws nearer, airlines use computerized formulas to assess trends in supply and demand, adjusting prices and the number of seats offered at each price, a constant adjustment known as “yield management.”

United spokesman Joe Hopkins compares the various fares to box-office prices paid by theatergoers--front row, balcony, last-minute discount and so on. For a less genteel parallel, think of the ticket scalpers who stand outside the theater, constantly adapting to market conditions.

Some airline industry insiders say fare changes most often start on Friday afternoons so that sale starters can see how a gambit works through the weekend (when sales volume is lower, thus making a price change less risky), then hold firm or retreat on Monday.

Many travel agents and ticket discounters have a broad understanding of all this and can often find better fares than a consumer who dials up airlines’ ticket offices. Meanwhile, to lure computer-savvy travelers who’d rather not rely on a travel agent, several online companies (such as https://travelocity.com and https://www.expedia.com) run Internet sites that compare air fares and take bookings. By one estimate, 6.7 million people used the Internet to make reservations in 1998, up from 5.4 million in 1997.

Airlines themselves, eager to save the expense of travel agent commissions, offer special discounts via their Web sites. United, for instance, moves unsold inventory by posting weekend specials each Wednesday. And Delta earlier this month took the bold move of adding a fee of $2 per round-trip fare on all tickets not bought through its Web site.

By now, you may be ready to surrender and make all future journeys by land. But keep in mind that the competition that created this dizzying system is the same market force that has reduced prices dramatically since airline deregulation in 1978.

Reynolds travels anonymously at the newspaper’s expense, accepting no subsidized trips. He welcomes comments, but cannot respond individually. Write Travel Insider, Los Angeles Times, Times Mirror Square, L.A. 90053 or e-mail chris.reynolds@latimes.com.