Next month, I’m moving from California to Maryland. Since I’m not planning to return any time soon, I checked the one-way fare between Los Angeles and Baltimore.
While a roundtrip, 21-day advance ticket costs $366, a one-way – and I’m not making this up – is $603.
Most frequent travelers are well aware that one-ways are significantly more expensive than roundtrips, even though you’re only going half as far. But many don’t know why.
Part of the answer is a pricing system that’s so complicated the airlines actually hire PhD’s, some of whom are rocket scientists, to sort it out. These propellerheads do nothing but tinker with lofty algorithms to predict seat availability and maximize the earnings on each passenger. In carrier lingo, this form of arithmetic profiteering is called yield management.
These calculations help the airlines conclude, among other things, that it’s sometimes profitable to sell one way tickets nearly twice the price of roundtrips. One reason is that advanced purchase roundtrip fares come with so many restrictions that they can afford to overbook the flights-in essence selling some seats twice-because if ticketholders so much as sneeze in the wrong direction, they’re off the flight.
The one-way fare, on the other hand, is completely unrestricted. The airline doesn’t care if I use the ticket tomorrow or 21 days from now.
Bob Moss, a travel consultant based in Belmont, Mass. says the fare difference between the 21-day advance roundtrip and the one-way is “an effort to separate the leisure traveler from the business traveler.” Airlines know business travelers are willing to fork out top dollar when they need to get somewhere-and they are the likeliest to purchase one-way tickets.
“Business travelers aren’t always sure of their return plans, so with few exceptions one-way fares can be used only for much higher priced-walk up fares,” he notes.
Leisure travelers balk at paying high prices for flexibility. And they don’t usually take one-way vacations.
The one way/roundtrip price disparities are just one example of the labyrinthine pricing system. Witness, too, the volatile fares that can change every five minutes. Apart from maybe the Chicago commodities exchanges, I’m hard-pressed to come up with any industry that prices its product the same way the airlines do.
I put the question of pricing to the people at the Sabre Group, the nation’s largest reservations system. Sabre practically invented yield management. Responded a spokeswoman: “We can’t comment on pricing. That’s up to the individual airline.”
“Frequent travelers have become victims of algorithms,” says J. Ogden Hamilton, a former travel agency owner and consultant based in Bloomington, Ind. “I can’t find a real-world example of this kind of pricing happening anywhere else.”
It’s totally screwy. Think of it as going to the grocery store to buy potato chips. On one shelf, a package of chips for $5. On the other, a two-for-one deal on the identical package. Cost: $2.50. But in order to buy the cheaper product, you have to agree to wait 21 days to eat it and to consume both packages completely. Otherwise the manufacturer could sue you and the grocery store for violating its contract.
That’s the view from this side of the ticket counter. But to the airlines and their shareholders, algorithms are their allies. Consultant Nick Bredimus explains that in the early days of the aviation industry, there were only one-way fares. When computers were introduced into the pricing equation, carriers were able to track seat inventory more effectively and predict who might show up for a flight and who wouldn’t.
Technically, then, a 21-day advance fare like the one I booked is both a discount and a gamble-a discount from the full fare and a gamble by the airline that my plans will change and I won’t take that flight. I’m not about to suggest that airlines should turn off their computers and go back to handwriting tickets, but I do think carriers can do something to rein in unreasonable fares.
“You see some anomalies [in pricing] but you can’t figure out why they exist,” says Bredimus.
Well, maybe it’s time for airlines to be more accountable to their customers, to use more common sense instead of complex formulas to determine how much they sell their tickets for. Idealist that I am, I think it’s possible to make a profit and serve your passenger at the same time.
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