Flight Price Structures

[Randel]

How do airlines come up with prices?

Looking at business flights today on Qantas. Perth to Queenstown - April next year. $1642, 7hour 10 min total flight time. (around $232 per hour in the air)

I thought this is not badly priced.

I have to travel Perth to Adelaide reasonably often to see family. Thought I would check business flight prices around the same dates.

$1082, 2 hours 45 flight time ($441 per hour in the air)

Is this normal for shorter flights to be dearer in business? Or is it because the first leg PER to ZQN is overnight and considered a cough time to fly?

Is it a demand thing?

Although I regularly book economy to Adelaide and use points to upgrade.

I would have thought they would prefer someone pays in $$ than points?

As a matter of interest I checked PER to LAX.
Business $8906, 17hours 55 min flight time = $507 per hour of flight time.
First Class Sale - $6939 = $395 per hour of flight, (and in 1st class).

So I guess the NZ flights are just well priced? Or is Air NZ causing some competition - they were a little dearer.

Or is it because no-one wants to go to NZ, and their government is subsidising us

 

[aikman]

You probably don't want to see how much Qantas charges for the 55 minute Sydney to Canberra flight.

 

[levelnine]

It's all about demand and supply.

Routes with regular business class passengers (as aikman says — CBR to SYD is a notorious one due to all the politicians/top public servants flying business class) have more demand and therefore command a premium price tag.

Routes with lots of competition have more supply and therefore command a cheaper price tag — a good comparison is Australia to Europe vs Australia to US. Much cheaper to fly to Europe due to the wide range of competitors. There's only a handful on the US route.

 

[Forg]

Yeah airlines have quite complex algorithms for pricing … normal passengers #’s on a route, how many people have bought tickets, how many have searched, links with other popular routes, sales including by other carriers … the supply:demand calcs can be seen working when you search for the same airfares twice from the same PC and the prices go up the 2nd time as the algorithm thinks “they looked twice they must be interested”.

Pricing on stuff like cars is fiddled according to what makes the most profit overall; eg. it only costs 2% more to build the top-of-the-range car c/f the base car, they know most buyers don’t want to be seen in the base car, they know having the base car makes it seem like the car-range is ‘cheaper’, so the base car is priced with very little (if any) profit and then they make an absolute killing on the mid & upper spec models. But that stuff’s fixed, the prices are set & the margins are set & they stay the same for months.
But airline ticketing … that’s really complicated, and it varies so much that the algorithm is definitely allowing individual flights to run at a loss. For example there’s no way EasyJet turns a profit on a 9-pound ticket from London to Inverness. I imagine it’d have to be designed so they couldn’t run at a loss overall, but it’d be hard to gaurantee that!