It’s time for another Ask Cranky post, and this one focuses on my favorite topic: airline pricing. (Note: I’ve cleaned up the language in the email a bit for clarity.)
I have a question for your Ask Cranky section that I would love for you to take a look at. My question is specific to the price differences of one-way fares versus roundtrips on international itineraries. To help demonstrate, I’ll provide an example with some screenshots.
As you can see in the first screenshot, the roundtrip cost of London to Miami on Virgin Atlantic is $823. In the second screenshot, a one-way from London to Miami on the same outbound flight as the quoted roundtrip is $2,306. That’s a huge difference.
I do understand that it is likely that the one-way is a flex ticket and in a different fare bucket than what the roundtrip is based on. I just can’t understand why airlines are not offering the one-way as a normal fare. I have found similar results with international roundtrips vs. one-ways on more Google searches with several airlines (American, British Airways, United, Air Canada, Delta, Aer Lingus), including those originating in the US and those originating in European gateways other than London. Only a handful, like TAP, Aeroflot and Turkish, offered prices that could be deemed reasonable for the one-way. Comparably, on domestic flights, I find that 9 out of 10 times a one-way will price at or around half of the comparable roundtrip.
I am hoping that you can shed some light on why this is the case for international one-ways, and specifically why airlines fail to offer “appropriate” fares to those looking to make only a one-way booking. Thank you for all the interesting content you provide to us readers.
You are not alone in wondering about this, Jeremy, but can I hazard a guess to say that you’re on the younger side? The reason I ask is because this used to be far more commonplace even in domestic markets, but it has started to fade away over time thanks to competitive pressure. But I suppose I should back up.
After deregulation, the airlines really poured gas on the fire in trying to improve revenue management. What they realized was that they liked all these full-fare-paying passengers that filled about half their airplanes, but they also knew that once that airplane pushed back from the gate, an empty seat was a permanent lost opportunity. How could they keep those business travelers paying full fare but then sprinkle in lower-paying leisure travelers to fill those empty seats? They created fences.
Or not. Of course, these aren’t real fences that keep the leisure travelers separate from the business travelers. Instead, these are artificial fences that force each category to buy their own respective fares. The primary fences that were used were somewhat intuitive. Business travelers tended to book at the last minute, fly during the week, make changes and get refunds as plans changed, and mix and match airlines to get the option with the best schedule. So, to get a low fare, the airlines instituted long advance-purchase requirements, required a roundtrip purchase with a Saturday-night stay, and made tickets non-refundable. Those rules would keep business travelers paying high fares while leisure travelers who didn’t mind the restrictions could fly for less.
The plan was a smashing success. Airlines filled a lot more empty seats, and they made a ton more money on each flight. This became the norm in the 1980s and 1990s, but business travelers were naturally grumpy about this. After all, they were now flying on airplanes that were more full (and not with respectable business travelers) yet they were still paying a ton of money. (The companies themselves grumbled about the latter.) Something was bound to give.
And “give” it did with the advent of low-cost carriers. Revenue management techniques could be used to thwart some of these upstarts (that killed People Express), but it wouldn’t work for all. Little Southwest stabilized and grew rapidly after its rocky start in the 1970s. With it, the airline brought low, one-way fares that travelers loved. For awhile, the legacy airlines tried to resist matching those fares, but eventually they realized (some far too late), that they couldn’t or they’d lose too much traffic. The floodgates opened, and now there is so much low-cost competition within the US (and elsewhere) that one-way pricing has become the norm. Now it’s rare to find a roundtrip fare that’s more than double the one-way domestically, but when you do, it’s not usually to the extreme you see on long-haul flights.
For long-haul, the same scenario is replaying a couple decade later. Low-cost carriers never successfully penetrated the long-haul world during this time. The dynamics were such that it was just too challenging, so the old fare structure stood. It’s only in recent years that we’ve seen more airlines try to make the low-fare, long-haul project work. That’s why you now see low one-way pricing on airlines like Norwegian. Newly-converted TAP Air Portugal is now using the same model as a way to make people consider accepting a Lisbon stop. Airlines like Aer Lingus and Aeroflot aren’t really low-cost airlines, but they are trying to exploit an opportunity the same way as TAP. Nobody wants to add a connection in Dublin or, even worse, Moscow, when flying between the US and Europe. Offering low one-way fares is a way to steal that traffic when a price-sensitive consumer is interested.
So, what you’ve seen, Jeremy, is a dinosaur. If someone wants to fly one way to Florida, then Virgin Atlantic (with Delta) is betting that it’s a less price-sensitive business traveler. Eventually, however, that meteor is going to hit the Earth and those dinosaurs will disappear. On shorter routes, airlines have already adapted, and they’ve been able to use more sophisticated revenue management techniques to allow them to still get premiums without having those fixed, artificial fences in place. They’re going to have to do the same on the Atlantic, but until that time, they’ll keep extracting everything they can until it’s no longer an option.