The ticket price formation is a big secret and a great business. There are a lot of factors which influence it.
Every ticket price sold has a simple formula:
- The ticket price itself - the money which goes to the airline company to make a flight
- Commission - the money which is given for the company which has sold the ticket.
Imagine simple situation which was possible 20 years ago or even now. I am a travel agent, and I know the ticket costs 100$. You are coming to me and asking for it. I will sell you it for 150$ and will earn 50$. I have just illustrated how any business works.
Airline companies
Let's name an airline company, for example, Lufthansa. They know that the particular ticket costs 100$ (I will use this ticket and price to illustrate how the price changes). On their site, they are willing to sell it for 150$. You will ask why? The answer is simple. They need additional money (50$) to operate the site and to promote it through the ads. As a result, the customer who has opened the site can buy the ticket for such high price.
Ticket selling sites
Such sites always are Accredited Agents by IATA (international organization for civil aviation). So they have right to create tickets (with layovers) and sell them to you. There are plenty of them. Let's name it SuperTickets for later use. The site knows that Lufthansa is selling the ticket for 150$. They decide to sell it for 145$ to win the competition and provide the better price for the customer. The income also covers the site maintains and advertisement budgets.
Aggregators
The sites like SkyScanner are only aggregators. They can not issue a ticket and sell it! They only ping all airlines (SkyScanner often shows direct links to Lufthansa site for instance) and ticket selling sites for prices and show it to users. SkyScanner does not do it voluntarily; they have an agreement with each website and airline. So when you buy our ticket for 145$ via SkyScanner and our SuperTickets, the revenue of SuperTickets will be 45$ but they will divide it with SkyScanner by some fractions for example 50/50 (actual amounts differs a lot and are covered by commercial secret).
Everything together
And here is the place where the magic begins. Aggregators like SkyScanner have an enormous amount of traffic, and all tickets sites know it. Imagine that there is a company EasyTicket which sells our ticket for 130$. EasyTicket and SuperTickets both are present on SkyScanner. As a result, SuperTickets will always lose the competition to EasyTicket and will sell nothing. They decide to make a discount and sell the ticket for 120$, but they are not willing to lose a profit from selling it for 145$ from their site. So they make this discount only for customers who came from SkyScanner. Their price will be the lowest, and they will start to sell a lot of tickets while earning much less only 20$ (but they also should give 10$ to SkyScanner). The interesting thing that if you will omit the SkyScanner and will go directly to SuperTickets, the price will be 145$.
The things are a little bit more complicated in real life because one-day SuperTickets will be selling so many tickets from Lufthansa so they will be able to buy the same ticket from the airline for just 98$ and they will be able to drop their prices even lower.
We have covered only the simple case because the ticket price also depends from which location you are trying to make a booking. I was able to drop the ticket price once from 280EUR to 60EUR just by changing my location via VPN.
Answering you questions
- Are these discrepancies a result of outdated data, or particular deals between various third parties that result in a complex array of prices for the same flights? - The data is always updated in real time. The sites are trying to maximize their revenue while winning as much competition as possible to others. They are always trying to find the balance between selling many tickets and earning more money on the single reservation.
- Do price comparison websites make deals with SkyScanner? - yes each site present on SkyScanner has the deal with it and pays some percents earned from each reservation.
- Who makes these deals? Google Flights appears to search the airlines directly and have none. - Each site tries to drop prices as much as possible which results in sales. The airline company has a small right of monopoly because it is their flight, but there are plenty of sites which sells tickets. They know that if you would like to fly with Lufthansa, you will probably go to their site. Google Flights provide no competition as it only shows direct links to the airline. No competition - no reason to drop prices - no discounts.
- What is going on behind the scenes here that I am missing? - I think I have already covered it a lot.
