Leisure passengers usually book months in advance, so airlines tend to start the prices for these seats relatively high. It then adjusts the prices according to market response.
For typical business routes, airlines will start with low prices to fill a minimum capacity, then increase prices steeply as corporate passengers tend to book last minute.
What ticket prices aren’t actually focused on is a ticket’s combined cost, including taxes and fuel. According to Mann, it’s technology that determines the price you see online instead.
“Technology has allowed some airlines to create a ‘basic economy fare’ with limited amenities to compete with minimal service, low cost carriers,” he said.
That’s because the lower fare allows full-service carriers to appear on the first page of search engines such as Google Flights.
But it’s not just airlines that are using artificial intelligence (AI) technology to their advantage.
Consumers now have access to sites that monitor fares, using their own algorithms and past data to predict the lowest price a seat will reach, then alert their customers.
The threat airfare search websites pose to airlines’ dynamic pricing system even saw United Airlines suing the website Skiplagged, which helps passengers find loopholes for cheaper tickets.
Originally published at CNBC