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How airlines set airfare prices and how to buy them cheap

You can do more to save on airfares than just go online and hope for the best. How airlines set ticket prices, when and where to look for great deals. CBS.

Photo: IStock

“Airlines aren’t in the business of filling seats—they’re in the business of making money and getting as much as possible on an entire flight,” said Scott Keys, founder and CEO of Going, a website that helps consumers find the best deals on travel.

In practice, this means that airfare prices fluctuate dramatically from the time they are initially set to the time the flight departs.

“Airfare can change 10 times a day or more as you plan your trip,” said Hayley Berg, lead economist at travel app Hopper. “What leads to changes in these prices is how many seats were booked on a flight, how many seats were booked in the previous year, and at what prices.”

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Business travelers and tourists

Since business travelers tend to be less flexible in their schedules than tourists, airlines tend to charge higher prices for workgroup itineraries, such as last-minute trips to commercial-oriented cities.

“Last-minute flights to business-type destinations like New York, Los Angeles, San Francisco tend to cost more,” Keys said.

Travelers usually book trips in advance and look for ways to save money. Airlines know that these customers are more price sensitive because they are spending their own money rather than flying with company money.

“Therefore, a flight to Hawaii in six months with a connection booked by a tourist with less willingness to pay will be cheaper than in six days,” Keys explained.

That's why it's generally better to book trips months in advance, when airlines know the people buying tickets are tourists, rather than days in advance, when airlines usually inflate prices.

When to watch and when to book

According to travel experts, timing is everything.

“The most important thing you can do to get cheap flights is to get the right time to book,” Keys said.

This is especially true when you have little to no flexibility about when and where you travel. To get the best prices, start looking for domestic flights one to three months in advance and two to eight months in advance of international flights. During this period, the likelihood of cheap flights is the highest.

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When booking trips on public holidays or other busy times of the year, these times may be extended even further.

“So think of it as a window rather than a specific time, and your chances are going to be very good during that time frame versus before or after,” Keys said.

Flexibility is important

If for some reason you missed a great time to book your flights, use whatever flexibility you have in your schedule to your advantage - the day of the week you choose to fly can be just as important as where you go heading.

If you fly on a Tuesday or Wednesday instead of Thursday or Friday, Berg says you can save an average of about $90 on a domestic flight and between $130 and $140 on an international ticket.

“These savings come from off-peak flights only,” she said.

Flip the booking process

If possible, be flexible about your destination.

“Traditionally, consumers decide where and when they want to go and then look at how much the flights cost,” Keys said. “Having set prices as the last priority, it’s no surprise that we get some pretty expensive flights.”

To save money, turn this process on its head. First, look at cheap flights from your home airport. From these directions, choose the most interesting. Then choose the dates that suit your schedule.

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“By setting prices as a top priority, you will eventually be able to get cheap flights and take three or four vacations for the same price you paid for one,” Keys said.

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