It would be nice to say it’s a simple explanation, but airlines are complex.
It’s happened to us all at some point. We’ve shopped for airfares online, found the flight and fare we want, and hesitate for just a moment—perhaps to confirm an accommodation or double-check the dates—and the fare disappears. Yes, it’s a frustrating occurrence that feels like an unamusing sleight-of-hand, but it’s a common occurrence in the fun and zany world of airfares.
So, what gives? Why the magic tricks? It would be nice to say it’s a simple explanation, but airlines are complex. So, let’s start at the beginning.
A Little History
Before U.S. airlines were deregulated in 1978, service and fares were set by a government agency called the Civil Aeronautics Board (CAB). The CAB awarded routes to a limited number of airlines, and told the airlines how much they could charge on the route on a cost-plus basis, meaning airlines told the CAB their operating costs, and the CAB set fares at a markup, at an amount expected to produce a specific profit margin for the airline.
During this period, there was generally one set fare per route between two cities, which was always available (as long as the flight didn’t sell out, which was rare), refundable, and expensive.
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Fares didn’t immediately drop right after deregulation either. For one, deregulation came into effect at the beginning of a historic period of inflation, but there were other, more practical reasons that kept fares high: airline operating structures don’t exactly turn on a dime. Airlines pretty much kept doing what they were doing—pricing-wise—until somebody disrupted the marketplace.
In 1985, American Airlines did exactly that, by introducing nonrefundable fares. Up until then, airline tickets were basically monetary instruments—they entitled the bearer to transportation between two cities on any flight the airline operated between them, and they could be cashed out for face value even if passengers missed the flight.
Passengers missing flights cost airlines a lot of money, because an unoccupied airline seat can’t be sold once the flight departs. American introduced nonrefundable fares in response to that problem. They began offering discounted fares, but the catch was that if you couldn’t make the flight that you bought the ticket for, you were out of luck.
And even then, fares were still high. The average one-way domestic airfare in 1985 was $112.50. Sounds like a steal, until you adjust for inflation. Adjusted to 2023 dollars, that’s $317.09 today, 12% more than the $283 average domestic fare reported at the end of 2022.
Offering nonrefundable fares turned out to be a boon to American’s bottom line in 1985. By offering lower fares in exchange for a restriction that kept passengers from no-showing and made revenues on each flight more predictable, the airline also saw a boost to sales when lower fares made air travel affordable to more travelers.
Yield Management
Following the nonrefundable fare experiment, airlines refined the practice. They found that different travelers had different price sensitivity based on when they booked and how long they stayed, so they created different fares with different rules to increase revenue. Because airlines needed to sell many different fare types for the same flight, they introduced “booking codes” or “fare classes” to help stratify the fare types.
When booking an airline ticket, the fare you see displayed has two components: the published fare, and the inventory associated with that fare. When fares change on the website, it’s because one or both of those two things has changed—either the inventory is no longer available, or the fare is no longer published.
Inventory can disappear for a number of reasons. Most commonly, it’s another passenger (or an airline agent in a reservations center or at the airport, or a travel agent) grabbing that seat before you—and in the airline world, the only time a fare is guaranteed is after the ticket has been purchased (or for the limited number of carriers that allow holds, a hold confirmation has been received).
But airlines can also adjust inventory to get the most profitable “mix” of fare types on the flight—and this is something that’s literally done behind the curtain. Airline inventory—the number of seats allocated to each fare class—is one of the most proprietary and closely guarded secrets an airline has. Consumers also have no way of knowing when an airline will adjust inventory, because nowadays there’s usually a computer doing a lot of the work, adjusting inventory based on sophisticated demand forecasts.
Airlines can also cancel the fares associated with inventory, and they do that for a number of reasons. Sometimes the fares were part of a limited-time sale, or they were matching another airline’s limited-time sale. Airlines also file fares multiple times per day—sometimes driven by their own internal revenue strategies, sometimes in response to other carriers’ fare changes. Again, there’s no way for consumers to know if or when this will happen (except in the case of annual fare sales, which airlines like to run around the same time each year for comparison purposes).
What to Do
So how can travelers lock in a fare if they need time to confirm the rest of their travel plans?
“Book first, sort details later” is a good maxim when booking travel that has multiple moving parts. The good news is that U.S. consumer protection laws require airlines to allow passengers to either hold a reservation and guarantee the fare for 24 hours, or refund a ticket without penalty or fees within 24 hours of purchase.
The rule applies to most tickets except for last minute purchases (in that case, the exact window can vary slightly by airline—the Department of Transportation gives airlines up to seven days prior to departure, but many carriers apply to the rule to close-in bookings—be sure to check the carrier’s rules when shopping). Simply cancel the reservation within the option period, and the carrier will refund it to the original form of payment.
While frustrating and confusing, the system is designed for airlines to generate the best financial results by filling their aircraft with a competitive mix of fares, which ultimately makes air travel much more affordable than the one-high-fare-fits-all system in place just a few decades ago.
