Why Do Two Flights Cost Less Than One? (Ask Cranky)

It’s time for another episode of Ask Cranky. I’ve received this question in many different forms ever since my days doing airline pricing, so I thought now would be a good time to answer it.

Why is it cheaper for me to fly from Fairbanks, Alaska to Denver than it is to fly from Fairbanks to Seattle? What happens if we just don’t get back on the plane after the layover in Seattle?

Kim

There’s nothing worse than trying to figure out airline pricing. After 3 years on the inside, I understand it, but it still makes my head hurt. This question, however, about why two flights cost more than one or why longer flights cost more than shorter ones is pretty easy. It’s actually just economics – supply and demand.

Back in the days of regulation (prior to 1978), pricing was pretty straightforward. There was effectively a price per mile. While that may make sense from a cost perspective (sort of), it doesn’t make much sense from a revenue perspective. So after deregulation, the airlines really started to try to maximize revenue. Crazy idea, I know. Let’s look at these two market to illustrate my point.

Fairbanks to Seattle is a monopoly forAsk Cranky Alaska. They fly it nonstop and nobody else does. What’s more, only one other airline even offers fares on that route, and its Delta with a connection in Salt Lake that only goes a few times a week and requires serious backtracking.

So Alaska can really set the pricing in this market to be the most lucrative for them without having to worry about serious competitive threat.

Meanwhile in the Fairbanks to Denver market, it’s a very different scene. Yes, Frontier recently announced seasonal nonstop flights a few times a week, so they can charge a premium. But the competitive landscape puts serious pressure on fares. Alaska can offer several connections per day over Seattle while Delta can offer its connections over Salt Lake as well. This may not be the most competitive route in the world, but it’s certainly more competitive than the Seattle market.

Making problems even worse is the market size. Fairbanks to Seattle is a much bigger market than Denver to Fairbanks. So if Alaska lowers fares in Denver, it may be able to fill up a few seats with connections via Seattle whereas those seats might have gone empty otherwise. And that brings us to the next question – why not just buy a ticket to Denver and get off in Seattle?

If you have a one way ticket and no checked bags, then you can do that and you probably won’t get caught. It’s called hidden city ticketing, but the airlines don’t allow this. So, there’s always a chance you’ll get caught and then made to pay the difference between what you paid and the full walk up fare. (You don’t want to do that.)

If you have a checked bag, then you obviously have a problem. It will go on even if you don’t. And if it’s a roundtrip ticket, there are other problems. If you don’t show up for a single flight in your reservation, the rest of your trip is canceled. So you might be tempted to buy a ticket from Fairbanks to Denver roundtrip. The problem is that once you miss that flight to Denver, your return will be canceled as well and then you’re in trouble. I wouldn’t recommend it.

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33 Comments on "Why Do Two Flights Cost Less Than One? (Ask Cranky)"

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David SF eastbay
Member

Trying to work out why it costs more to fly a shorter distance will never be truely known to mankind….lol

But the airlines like to make everything they do as complicated as possible and they loose billions a year doing it.

Ryan
Guest

David SFeastbay wrote:

Trying to work out why it costs more to fly a shorter distance will never be truely known to mankind….lol

Well on one hand it actually is more cost effective to fly longer routes. The more short hops an airplane makes in a day the more airport fees they incur as well as paying for all the employees who ground handle that plane while it’s on the ground. But obviously that’s not enough to explain the difference in fares.

David Z
Guest

This is probably simplifying it, but they essentially boil down to two reasons: supply and demand, and competition.

As for the why-two-flights-costs-less-than-one thing, I tell them it’s like buying things wholesale or bulk. The airlines want to sell and fill their seats as much as they can, so they sell them at a “wholesale” or “bulk” rate.

Then I add that prices depend on a variety of factors like market demand, competition, etc. But they all boil down to making money. (which everyone wants to do, of course…)

Not that people have to like it, anyway. :)

Ed Casper
Guest

Cranky wrote: There’s nothing worse than trying to figure out airline pricing. After 3 years on the inside, I understand it, but it still makes my head hurt.
————-
Maybe that’s part of why the airline industry as a whole can’t figure out how to be consistently profitable and provide a reasonable return on invested capital.

Miniliq
Guest

“Hidden city ticketing not allowed by airlines” — Is that a consequence of deregulation?. I remember in the days of regulation I would pore over the International OAG to find and book a “hidden city” beyond my intended destination (but at the same price) in order to get the extra miles, which I then used to detour coming or going to explore more cities for no extra cost. I saw many parts of Europe that way.

Dan
Guest

I think hidden city ticketing was actually an effective technique back in the days of paper tickets. These days, with e-tickets, it’s way too easy for computers to track whether or not you’ve boarded a flight on your itinerary.

FBKSan
Guest
Fairbanks also sees Minneapolis service, in addition to Denver and Salt Lake. All of those cities offer reasonable connections to Denver but none are a good way to get to Seattle. And they’re all seasonal, when demand is higher, canceling out additional supply. I love Alaska Airlines, but the stranglehold they have on Fairbanks is terrible. The Fairbanks over Anchorage premium is consistently $250-300, regardless of season, since AS is the only reasonable way to get to Anchorage (or Seattle) and connect onward. A related question, if you’re willing: Why is it that airlines price codeshare tickets lower than the… Read more »
Robert Milk
Guest

I am encountering three flights cheaper than one flight between RIC and BIS. I have seen the leg between MSP and BIS leg more expensive than the RIC-DTW-MSP-BIS on Delta.

Ron
Guest
Back in the days of railroads, companies would offer competitive prices between major cities (where two or more railroads provided service), but had very high prices to intermediate stops where they had a monopoly. Legislation put a stop to this with a requirement to the effect that a segment cannot be priced higher than a longer trip that fully contains that segment (I think this was in the late 1800s, can’t look it up right now). I think this was seen as a way to force competitive pricing for stops where one could not realistically expect service by more than… Read more »
jaybru
Member
There’s probably no hope in this matter (hidden-city, round-trips cheaper than one-way, etc.) until every pricing analyst who knows what we’re talking about here dies off, or the entire airline industry goes bust! Take your bets which comes first! I subscribe to that strange idea that I shouldn’t have to pay more than have to. I won’t tell you how to come up with these nutty fares, so don’t try to stop me figuring out how to use them, your idiotic, customer-unfriendly rules notwithstanding. Like if you (the airline) are stupid enough to offer me a $664 one-way transcon fare,… Read more »
James
Guest
Back in 2000-2001 I had a friend that flew DEN-SNA frequently on United- (all personal travel.) DEN-SNA fares were consistently $325 and higher. However UAL fares to SNA from ABQ, MCI, STL hovered around $250, and of course connected through Denver. He explained to me that he would purchase a paper ticket at one of the local UAL offices, (for a paper ticket fee,) and show up to “connect” at the DEN gate with the DEN-SNA ticket ready, then take the SNA-DEN flight back a few days later – leaving the 1st and 4th flight portion unused. He was never… Read more »
Zach
Guest

@ David SFeastbay:
Looks like they’re “loosing” a lot!

Zach
Guest

@ Ed Casper:
Or you know, it’s because consumers want everything as cheap as possible and have no sense of costs (operating or otherwise) and feel that every step taken by airlines to raise ancillary revenue is a “slap in the face.”

MathFox
Guest

@Zach,

If airfares would make more sense to the average consumer, (Why can fares for the same economy class seat vary a factor 5 or more? Why is it cheaper to book a longer trip with a change of flights? Why are returns cheaper than one way tickets?) people would be less inclined to “game the system”. Gaming the system would be less profitable too.
If the airlines had a system with sensible fares, gaming would not lead to any profit to the consumer.

Darren
Guest
Airfares would end up going up for connecting passengers (or flights would go away becasue fares would decline to unprofitable levels) if airlines were required to price local traffic less than or equal to the price of connecting traffic, or if airlines were required to sell every ticket at a price that covers fully allocated costs. The irony is that the consumer, on average, benefits from a supply/demand driven pricing structure that prices trips as O&Ds versus flight legs and allows many customers to fly at fares that are below-cost. You actually encourage more competiton, if say, Alaska can compete… Read more »
Rob
Guest

Thanks for this article. I recently had this come up with a Delta TLH-MEM itinerary, where if I flew on to BNA and drove back to MEM, I would’ve saved 150 bucks. Of course, when I asked Delta, I received auto-answer drivel. This answers my question perfectly, and I have to realize that in the big picture it’s actually more profitable for Delta for me to fly to Memphis on US Airways through Charlotte. Which is what I ended up doing. Ha!

jgjohnson2
Member

So I get off in Seattle (No checked luggage) CF says I “might get caught, and made to pay the difference”. Huh? CAUGHT? MADE? Are there airline bulls on the prowl? How does that work?

Ron
Guest
CF wrote: All pricing is done on an origin and destination basis so it has nothing to do with segments. And why is this so? Is there some regulation mandating this, or do the airlines just choose to do it this way? I see this can create a problem with long-distance non-hub flying. For example, LAX–PIT is only operated by United (yes, I know that’s odd; US Airways recently dropped the route and United picked it up). Now if United charges a nonstop premium, they lose the ability to compete with other carriers on the connecting traffic; if they want… Read more »
Ed Casper
Guest
Ed Casper wrote: “Maybe that’s part of why the airline industry as a whole can’t figure out how to be consistently profitable and provide a reasonable return on invested capital.” CF replied: “I tend to think it’s more an issue of lack of capacity restraint historically. Over the past couple years they’ve done quite well keeping capacity down and that will go a long way to making this industry work.” Cranky, I believe you’re quite correct. My comment was meant to be a bit facetious but I also suggested that I thought airline pricing was PART of the problem. Capacity… Read more »
Gary
Guest
CF wrote: “f you have a one way ticket and no checked bags, then you can do that and you probably won’t get caught. It’s called hidden city ticketing, but the airlines don’t allow this. So, there’s always a chance you’ll get caught and then made to pay the difference between what you paid and the full walk up fare. (You don’t want to do that.)” Actually, this varies by airline. It’s actually really interesting reading to peruse airline Contracts of Carriage. United, for instance, does NOT prohibit throwaway ticket, though most carriers do. They also prohibit Hidden City Ticketing… Read more »
A
Guest
CF wrote: I tend to think it’s more an issue of lack of capacity restraint historically. Over the past couple years they’ve done quite well keeping capacity down and that will go a long way to making this industry work. On recent flights where the airlines have cut capacity I’ve noticed CRJ’s with more empty seats than the 320’s flew with just a couple years ago. Ticket prices are also 2x as high today as they were a couple years back. Now, I know there is demand for that route, just at a much lower ticket price. The question is,… Read more »
Dan
Guest
A, I would think that for your system to work, the airline would have to have the ability to cancel under-sold flights. (If you think about it, say you have a day that is just under-sold in general, and every single flight gets down-guaged one grade. When you get to the bottom, your smallest aircraft are used on routes other than the ones they were initially assigned, so what equipment would you use to fill that? Since there’s a finite limit as to the number of airframes that you can swap, your only option at that point would be to… Read more »
bhamric
Member

Another issue to remember when trying the “hidden city” trick. If you decide to attempt to carry on your luggage at the gate and the plane is 1-too small for carry on luggage (in the world of rj’s that is a real possibility) or 2- too full of other peoples carry on luggage to accommodate yours and you are forced to check it at the gate it will continue to your final ticketed destination NOT the city you are using as your “hidden city”.

Gary
Guest

@Brian, I’ve never had a problem short-checking a bag when gate-checking.

Sara
Guest

I have another question for all of you flight experts

Why is that usually a one-way ticket from A to B costs more than a round trip flight?

Name
Guest

So, I’m looking at Baltimore to Lubbock, Tx flights. It seems that buying a tickets on SW is $550, but getting two tickets, for Dallas first, would only be about $380!

Scott
Guest
This is a classic airfare question that can be boiled down to a simple enough answer: Supply versus demand. Nonstop routes are a gamble for airlines because they require consistent demand for travel on that exact route. This isn’t usually a problem on popular cross-country routes or for flights to major cities, but on less compelling routes?say, for example, Boston to Indianapolis?demand could be an issue. So if an airline is going to offer nonstop service on a secondary route, it needs to charge more to account for the risk. Connecting routes solve that problem by funneling all that traffic… Read more »
Tuula Westra
Guest

I am flying from FL to Helsinki for my vacation, for $ 1387, a person is returning with me to FL for a prize of 2033 one way. Is there an explanation for this?

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