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
When I first started seeing deep discount international fares popping up a few months ago, I worried they were mistake fares that might not be honored by the airline. But they’re not.
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.
Hi,
Loved your article about pricing. It seems these days we are in a very complex battle with the airlines to see how can outsmart the other when it comes to getting the best deal. I still think taxes play a huge part, especially in places like the UK where taxes for an international flight can sometimes make up as much as 70% of the cost.
How can Ryan air manage to operate an airline for 10 euros a seat but the us domestic carriers charge $500 in economy round trip?
Well, Gary, you’re leaving out the strong dollar. Currency rates are one of the biggest reasons that there are so many “cheap” international airfares offered by foreign airlines. Those fares aren’t as cheap in other currencies.
I think it’s interesting that the legacy carriers have maintained only selling one way tickets to Europe as full fare tickets. Someone must be buying them but they are losing some leisure purchasers and it’s hard to believe they are selling too many. In the current environment, I bet one of them cracks on this.
@brteacher against the euro and pound (and Canadian and Australian dollars) sure, but these are historically low fares from US airlines also and to places like Japan where the dollar is weaker than it was a year ago and weaker than 10 years ago (so while up compared to say 2011-2012 this doesn’t seem satisfactorily explanatory).
Just got summer airfares for next July LAX-Rome for $720 r/t on AA/BA metal. It isn’t the sub-$400, but it is west coast, high season…a bargain! $40 base fares plus plus…
Interestingly, all of these sales have reduced my impulsive airfare shopping. I’m now numb to the sales, kinda like Hillary email scandals. Nothing makes me lose interest faster than the words “Hillary” and “email” in the same sentence.
Now I only go somewhere when I want to. Not sure what kind of customer that makes me….
i i i i i … me me me me me…
stop trying to brag about yourself.
Yea what about the impact of terrorism in Europe? Is that a real effect?
I think the airlines are getting exactly what they should have expected when they began dismantling their frequent flyer programs. In the past, if you heard about a $500 airfare to Europe on a carrier you never heard of, you wouldn’t pay too much attention to it. Since the loyalty program kept you loyal to your chosen carrier, you were willing to pay extra to earn miles, upgrades, recognition, etc. Now, why bother to be loyal – you hardly get any miles which aren’t as valuable as they used to be (more miles to redeem for an award that is worth less than in the past), no upgrades because they are charging for those now, etc.
The airline’s policy of “customers should buy exactly the flight product they want” is working and if there isn’t any future reward for staying loyal, cost becomes the only differentiator and so now that $500 ticket on the no name airline gets my attention – and my business.
@ Credit
Because Ryanair is not an airline…
Their business case is to buy cheap boeings (or to have a very good price from boeing) and sell them after a few years to other airlines that will buy them with a price higher than the one Ryanair has paid to boeing. This is one important source of profit for Ryanair: almost one third of its profit.
Ryanair is also a “fake” marketing organsation to promote tourism… If you are an airport in continental europe, Ryanair will ask you to pay let say 20 euros per passenger they bring to the airport or somathing like 100 000 euros per month for “advertising” services. Most of those amounts are unsustainable for the airports, so the tax payers pay it in reality!
Sure the legacy were subsidied in the past, but now it seems the local tax payers subsidy Ryanair. It is the other important source of profit for Ryanair: almost another one third of its profit.
And of course Ryanair ask you the airport not to charge them any ground services fee.
The airports need then to make their profit by selling the passenger anything in the airport oe get subsidy fromthe tax payer.
Ryanair will not make any profit if it did not have those two big sources of income. They do not care about the passengers, they care about what they got from the airports (local tax payers) and the price they get to re-sell the used boeings.
Now to be fair, too much airports have been built in continental europe that do not attract airlines and Ryanair is often the only carrier willing to go there (after the airport has “accepted” Ryanair conditions).
Guess why Ryanair does not fly to Francfort, Paris Charles de Gaulle or Orly, Geneva!
I like the current state of flash sales but wish the travel windows would go further out in the schedule. I’m sure this is supply and demand.
Gary:
What role do you think the changes in frequent flier programs have had? For example, on a long distance flight I used to almost earn enough for a saver economy domestic round trip. Now those cheap long distance fares earn barely anythinng for a leisure, non-status flier like myself. I think this would help incentive the airlines as it is less risk for them awarding tons of miles on ultra cheap fares (at least the big three US).
@bob, thanks so much for that info in Ryanair. Having flown them, I’m a “never-againer” but that info is very interesting.
@Nathan Yes, the impact of Terrorism is a “real effect”. We were in Paris a few weeks ago, and the lack of tourists was shocking. The Metro was uncrowded, it was easy to obtain last minute reservations at trendy tourist focused restaurants, and we heard very little English spoken on the streets. Come to think of it, we didn’t hear all that much Italian or German either.
I’m can’t vouch for the source, but my neighbor tells me tourism in France is down by 20%, and based on my experience I’d say that’s probably a rather conservative estimate. Which is especially surprising when you consider the strength of the dollar, and the super low leisure airfares, both of which ‘should’ be flooding France with American visitors.
Sadly, the Eiffel Tower is now surrounded by 6 foot high fences, and you have to go thru a security check just to get near it. Actually going up in the elevator involves a second TSA style screening. Kind of dampens the magic of being there.
@Jeff Hall changes in frequent flyer programs aren’t driving pricing decisions for tickets. Fuel is the much much bigger factor.
So sorry to hear that about the Eiffel Tower. I’m headed to Italy soon and hope it will be uncrowded there too!
Gary, can you add your take on how premium cabins factor into this? There are far fewer good deals, business class seems to be fixed at $4000 RT overseas (or more) no matter where you go. How is capacity in premium cabins? Are they doing OK there?
Are there any good deals (like under $400) from Europe to the U.S. round trip or one way? Thank you for your response…
@Everyone: adult daughter in Europe now, has been flying all over the continent for the past 7 weeks (mid-July). I had been advising her to book flights in advance, but she is getting much better deals 3-5 days out. Shockingly low prices, too and not Ryan!) From what I can see, the airlines are offering extremely low base fares–like, $45 from BCN to TXL with carry-on only. Or, $15 more gets one checked bag. For a total of $65, just $5 more, the pax gets a checked bag, refundable airfare, priority boarding and advance seat assignment up front. She says the planes are flying half empty.
Not only that, tourism is way down. She is in Paris now and says the xenophobia is rampant. There is what we in the USA call politically-incorrect profiling: she went to an upscale restaurant last night and was asked for ID (as was everyone else) before entering the building. Today she went to a cafe and was told she could not bring her laptop inside, it was considered a security threat. Only tablets and mobiles phones allowed. Every place she has been, except Lisbon, has a large number of (seemingly homeless) migrants, many women and children. She has been to Europe several times over the past 10 years and she has never seen it like this before.
Lastly, when she left the USA on her AA flight MIA to MAD, she had an aisle seat, middle of the plane, 4 across. The 3 seats to her right were all empty (naturally she slept). Normally unheard of during peak summer season.
just a quick text about the $10 Ryanair seat comment… Only some of the seats are $10. Try booking a last minute fare on Ryanair and you’ll pay a couple hundred euros. Search out a few months and yeah you’ll get 10-40 euro seats. The 10 euro seats mostly being direct flights to/from UK.
Gary,
another brilliant post. congrat and keep up the good work!
I think it’s a giant experiment to see what the correct formula/strategy is going forward in light of the changes to loyalty programs, healthy economy in the US and terrorism in the EU. I predict continued instability – not sure to call this the “new normal” just yet.
@Cindi Anderson: just bought open jaw business on BA tlv-bos/sfo-tlv for july and august for $2674! up to now they have been running ~$3400 with an occasional sale of $3200!
@KimmieA You say: “the xenophobia is rampant. There is what we in the USA call politically-incorrect profiling”. Then the only examples you give are entirely counter that claim: “was asked for ID (as was everyone else).” The only way this could be profiling would be if they are “profiling” humans. 😉
I didn’t see anything of that sort in Paris. Women in burkas went thru the Eiffel Tower security checks as easily (and as slowly, due to the lines), as everyone else.
@RobertHanson, didnt want to go into detail, there was the unsaid (between the lines). My daughter is caucasian, American. She is used to going out at night and being ID’d for age. In the US she sees bouncers at a club turn away unattractive customers, they don’t make it into the club. In Paris she has seen nightclub customers turned away–according to the French people she is with–because of “ne pas d’Arabs” based on name/ID. She is finding two distinct groups among the French: those with open minds and compassion, and those with the xenophobia. She says the xenophobia is worse in Austria, and Germany is experiencing it, also. When she was in the St Germaine (wealthy) arrondissemont she noticed it, but now in Belleville, a cultural melting pot and working-class neighborhood, she sees no animosity and everyone there appears to be mixing and mingling quite well. Whatever the reality in Europe, here in the US many people have shown concern over security concerns for my daughter. These people say they wouldn’t be going to Europe right now. (Ironic, look at the domestic crime here). That attitude does affect tourism.
Gary,
Any chance we will see some fare sales by one of the majors trickle down (or up) to business class? I know DL would rather hand the seats out for free to airline employees/friends/family than discount J, but what about other airlines? We would really pounce on a good business fare to most anywhere.
Barry