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There are lots of empty seats out there. Why aren't airlines selling them cheap on the day of the flight?

I've seen a few anecdotal answers to this question. A lot of the answers come down to "cannibalization." If flyers know a flight will be available for cheap last minute, then they won't purchase a more expensive ticket ahead of time.

This makes some sense. But so does the idea that customers would still be willing to pay a premium for a guaranteed seat on a plane (the price of flying is fairly inelastic. See: business travelers). And selling empties would contribute significantly to the bottom line.

Is fear of cannibalization the real reason flights don't sell expiring inventory? If so, is there evidence to support this fear? Or is there another reason altogether why airlines don't make last minute seats available?

closed as too broad by Maître Peseur, Gayot Fow, Dirty-flow, Mark Mayo, VMAtm Jun 8 '15 at 12:34

Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. Avoid asking multiple distinct questions at once. See the How to Ask page for help clarifying this question. If this question can be reworded to fit the rules in the help center, please edit the question.

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    How do you know a seat is going to be empty? A friend of mine is some sort of consultant who often travels at two/three hours' notice. He pays a lot for his tickets. Cheapening the tickets would be throwing away a lot of income short notice travellers are presently wiling to pay. – Calchas Jun 6 '15 at 16:24
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    The airlines I tend to fly on, especially trans-Pacific are packed like sardine cans (sometimes with a similar ambiance). There's nothing left to sell. – Spehro Pefhany Jun 6 '15 at 17:42
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    Some airlines do sell them cheap at the last minute, but normally only as part of holidays. Look at BA's Hello Weekend for one example – Gagravarr Jun 6 '15 at 18:12
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    A cheap ticket means majority of the ticket is going to be spent on fuel anyway. – Ayesh K Jun 7 '15 at 19:26
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    the very simple answer is "otherwise, those with very expensive refundable tickets would just refund those tickets and fly cheap" – Fattie Jun 8 '15 at 5:55
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There are many things that airlines used to do that they can no longer do because customers have so much more information than before. 30 years ago, what people presented themselves as doing pretty well matched with what they were doing. But over the years, folks have learned (and shared with others) how pretending can save a lot of money:

  • one way ticket too expensive? Buy a return and throw away the last leg
  • tickets cheaper A-B-A than B-A-B, and you do it a lot? nested returns
  • discount for staying Saturday? Add a fake leg home-somewhere Sunday morning, lowering the price of the whole thing, and throw away the fake leg
  • frequent flyers get free upgrades? Never buy business, you can count on a upgrade

On the matter of last minutes, imagine that a regular ticket A-B on Sunday at 8pm costs $300. The last minute is $100. A fully refundable totally flexible ticket is $1000. The same prices hold for the 6pm, 7pm, and 9pm flights. Someone who makes that flight every Sunday can buy the refundable 9pm, then show up in time for the 6 and roll the dice repeatedly. At a time of day when empty seats are common, they will travel for $100 maybe 9 times out of 10. The tenth time they use their refundable ticket, which they otherwise cancel. They are paying $2000 for 10 trips, saving $1000. (You wouldn't spend those extra hours in a an airport to save that money? You're not that guy. He would be in a hotel at the other end anyway.) The airline has gained nothing - the empty seat that got used up those 9 times turned back into an empty seat on the 9pm each time. They've just used up staff and computer time changing stuff around for no reason other than to give $1000 of revenue back to the customer.

You may think that you would do something that would bring money into the airline if these seats were available. And maybe you even would. But the "gaming the system" behaviour of people who fly every week, over 100,000 miles a year (that's 2,000 miles a week every week, and there are people who do double and triple that) far outweighs what infrequent travelers decide to do.

  • It would be trivially easy for an airline to make last minute seats unavailable to people who bought a refundable ticket for the same flight. Isn't the answer that they sell standby tickets for cheap? – Dean MacGregor Jun 7 '15 at 16:48
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    So I buy my refundable ticket on United and play chicken on American. Or whatever combination exists eg WestJet and AirCanada. People will game. – Kate Gregory Jun 7 '15 at 16:51
  • This is a clever trick that is unfortunately not working anymore. – Ayesh K Jun 7 '15 at 19:22
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    @AyeshK - Willing to elaborate? – Jirka Hanika Jun 7 '15 at 19:24
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Some airlines actually do, that is in their higher end classes economy plus or business as upgrades.

Also last minute bookings do occur often where people who need to travel immediatly are willing to pay a lot. This, and that empty seats provide less take-off weight, airlines rather have one premium full fare paying customer than 10 cheap last minutes.

It has been a while that I checked but at some airports you have travel agencies that offer same day departures. Some years ago one existed and was called L'tur where you could book same day departure tickets. I don't know if they still exist though, but it might be worth checking at the airport for similar services

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    So for example if there are 10 empty seats and 10 potential last-minute passengers, one of whom is on a short-notice business trip and willing to pay $2000, whereas the other 9 are people wondering what to do with their weekend, who are willing to pay $150, then it makes more sense to set the last-minute price at $2000 rather than $150. If the other 9 were willing to pay $250, then it might make sense to sell all 10 seats. Even better would be to find a means of price-discrimination, e.g a Dutch auction, so that everyone pays whatever they're willing to, but that's hard to set up. – Steve Jessop Jun 6 '15 at 14:22
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    ... however, standby tickets are one such means to get price-discrimination, since last-minute travellers who want to specify what flight they're on pay more than people who are willing to fill empty seats if/when they arise. – Steve Jessop Jun 6 '15 at 14:24
  • @SteveJessop For people wanting a weekend break, they normally need hotels too. Last minute cheap flights+hotels is a thing with at least some airlines, eg BA's Hello Weekend offers – Gagravarr Jun 6 '15 at 18:13
  • @Gagravarr: yes, on occasions where it makes sense to the airline to offer last-minute deals (in whatever form), then offer them. I'd expect you don't notice so many empty seats on those flights: they've been sold. – Steve Jessop Jun 6 '15 at 18:24
  • @SteveJessop: Since airport fees, baggage handling fees, fuel etc. etc. all have a significant per passanger price it is probably even better to have 1 person paying $2K rather than 9 person paying $250 – yankee Jun 8 '15 at 11:26
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There are several factors going on.

Airlines have whole departments dedicated to revenue optimization, and to figure such things out.

Among the factors that play a role here:

  • Last minute fliers tend to be in some kind of urgent situation, and thus are more willing to pay higher fares.
  • Airlines already have a contingent of people to fill empty seats: employees and other non-revenue passengers often get these seats free on a standby basis.
  • Overbooking. Empty seats are much rarer today than in the past.
  • Security concerns. Nowadays, last-minute fliers are inherently terrorism suspects. Especially if they pay cash.
  • Last minute deals often aren't all that attractive for the flying public because most people going on vacation need a round trip with a guaranteed return date anyway.
  • Airlines do offer steep discounts for last-minute flights, but manage to segregate them from those passengers willing to pay higher fares. For instance, some airlines offer bereavement fares if you can show that you are going to a family funeral. About 30 years ago, when empty seats were more ubiquitous, at least one airline offered 30-day standby tickets to international tourists. You could use it for unlimited flights within the USA, but only on a standby basis.
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    "Nowadays, last-minute fliers are inherently terrorism suspects. Especially if they pay cash." The hell..?! – Lightness Races in Orbit Jun 7 '15 at 2:13
  • @LightnessRacesinOrbit: Oh yes; see e.g "Many security advocates argue that paying cash should trigger automatic secondary security procedures" - slate.com/articles/news_and_politics/explainer/2010/05/… – timday Jun 7 '15 at 9:40
  • I buy a few "last minute" (say less than five hours to go) tickets, no one has ever found it interesting. – Calchas Jun 7 '15 at 12:04
  • @timday: Triggering secondary security procedures is a long way from calling someone a terrorism suspect. Unless you want to suggest that people going through primary security procedures (i.e. everyone) are also. I concede that, at a certain level of abstraction, and in the context of personal air travel, we're all terrorism suspects until ruled out as being terrorists ... but as social terminology it seems inappropriate. – Lightness Races in Orbit Jun 7 '15 at 13:53
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    @LightnessRacesinOrbit When it's done on the basis of some behavior someone has concluded as a policy matter is suspicious, rather than by random selection, it's entirely fair to accuse those policymakers of suspecting people of terrorism. – Random832 Jun 7 '15 at 18:44
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Many people buy fully refundable flexible tickets because they are not sure of their travel plans until a day or two (or less) before the flight. Such tickets are about three to four times the price of the cheapest ticket in the same class of travel.

If you are going to sell very cheap tickets a few hours before departure, many people holding full flex tickets will now have concrete travel plans at this stage. Therefore, they can buy your super discount last-minute deal tickets, if available, and then refund their refundable tickets.

It is important to emphasize that this strategy has no risk to the flexible ticket purchasers. If the cheap tickets don't show up, they still have a guaranteed seat. If they do show up, then they lose nothing by switching to the cheap ticket at that stage. (On a return ticket this logic still applies at least half the time; and usually full flex tickets can be bought as two one-ways for a similar price.)

So for the sake of getting a few hundred dollars out of some last minute pax, which to be honest will probably only be marginally profitable after you take into account the extra fuel, airport handling costs, et c., you have maybe lost thousands and thousands of dollars from a few bright flex ticket purchasers, who needed flexibility and were willing to pay for it; but you effectively allowed them to get it for cheap.

  • Fully refundable tickets are actually not always an option for business travellers. For instance, tourists or business visitors to the USA (except for US citizens) must have a non-refundable round-trip ticket as a condition for their visa. I think many other countries have similar rules. – Kevin Keane Jun 9 '15 at 6:53
  • @KevinKeane I have never seen this requirement. Do you have a source? If you book at late notice, or when the flight is filling up, the airline will often only sell you a refundable flex or semi-flex ticket. Moreover many arrangements with large corporates allow full flexibility on all longhaul tickets. – Calchas Jun 9 '15 at 7:39
  • @KevinKeane Well I did find cbp.gov/sites/default/files/documents/CBP%20Form%20775.pdf which looks like a typical template agreement between a carrier and the US, in support of your position. All I can say is that I have entered the US on at least one occasion this year on a refundable ticket under the visa waiver program, and I have four more partially refundable tickets to the US! I will report back here if I am denied entry. :) – Calchas Jun 9 '15 at 7:44
  • Funny you found that, because I was going to point you to the same document. This document is mandatory for any airline that wants to carry visa waiver passengers. In practice, the requirement is actually at the discretion of the admitting officer at the border (and the airline, who risks a $3000 fine per person). Most cases are clear-cut bona fide visitors, and they don't even look at the ticket. It only becomes an issue if somebody already looks suspicious. – Kevin Keane Jun 10 '15 at 15:34
  • @KevinKeane Thanks. I suppose most visitors on full flex tickets are pretty obviously visitors, and the 3k fine is covered by the ticket price. But either way, that is all the airline will sell me sometimes, I don't usually need the flexibility! – Calchas Jun 10 '15 at 15:39
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Imagine that you manage to sell all those seats 100% of the time.

Wouldn't that mean that you're undercharging the market if that were the case? If the supply is meeting the demand perfectly, then it means you're either incredibly lucky, or much more likely it means that you're undercharging the market.

Also, there is a second factor. The airline industry is not a very fluid or a very efficient market. For instance, not all airlines are allowed to use the same airports. And some airlines go bankrupt, only for the government to bail them out. Many of the pricing decisions airline executives make today are just a continuation of what their predecessors have done before.

One exception are the low cost airlines, like Southwest or JetBlue in the US (or Easy Jet and Ryan Air in Europe), but the market for gate leases or preferential-use leases is not very fluid or transparent, so it's not like the most efficient airlines are always going to win.

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