We’ve all spent hours on the internet looking for flight deals, trying to figure out an airfare pricing system that seems to make no sense. But while the prices appear random, they’re actually a carefully calculated result of the airlines’ dynamic pricing, using a strategy called airline revenue management. The pricing decisions are made by an algorithm in real time. In order to maximize revenue, it adjusts fares by using information including past bookings, remaining capacity, average demand for certain routes and the probability of selling more seats later.

Ticket prices drop and rise very regularly because it’s in the airlines’ best interest to make sure people can afford to fly with them, while still earning enough money to justify the costs of operating the journey.

Factors that affect pricing can include:

• Type of travelers on a route

If a route is used a lot by business travelers, airlines will first try leisure travelers to fill up seats by offering lower prices. As the flight date nears, they may increase prices, because business travelers usually book at the last minute using their corporate credit card.

• How many tickets have been sold 

If seats aren’t filling fast enough, airlines might be tempted to sell off more seats at lower prices. Any last-minute buyers will be charged higher rates, as they probably really need to be on that flight and won’t be deterred by the cost of the ticket. Those high fares will help the airline to cover the costs of the journey.  

• Bookings and cancellations in real-time

The software used by airlines today adjusts prices in response to real-time supply and demand. For example, if some bookings are canceled close to the flight date, the system will probably respond by offering those seats at low prices to ensure they get filled. 

Once you understand the basics of ticket pricing, it’s a lot easier to find the best deals online.