One-way flight much more expensive than double-way: what is the official airlines' explanation?

I have never come across any attempt to communicate directly on this on the airlines’ side. Many consumers probably do not really notice and those who do either have good reasons to pay for premium tickets (e.g. business travellers who don’t pay for their tickets and enjoy the perks) or simply accept they have to play the game to get cheaper fares.

It also seems that many passengers are extremely price-sensitive. You hear many people complain about low-cost carriers, their arbitrary rules, huge surcharges for everything from checking in luggage to printing a boarding pass, use of remote airports, impossible departure times, lack of free food, etc. I have done it too. And yet, next time around, many of them are not ready to shell out €100 more on a short-haul flight on a legacy airline and fly low-cost again.

If people decide on price anyway, what would be the point in doing things any other way? A more transparent pricing strategy or any attempt at explaining it clearly would be pointless if it means you simply lose passengers to the competition because your tickets are slightly more expensive.

You have to take into account the fact that the airline industry has not generally been hugely profitable in recent years and would not sacrifice its margin anyway. So if one-way prices on legacy airlines were to go further down, some other prices would have to go up, everything else being equal. Charging more for flexible one-way tickets is a way for airlines to compete on other markets.

Finally, one-way vs. two-way is really just the tip of the iceberg. Airlines also price their tickets based on the competition on a specific connection and many other factors. That’s why you can often find bargains on legacy airlines, even for one-way tickets or widely different prices for seemingly similar flights. And why crazier tricks like “fuel dumping” can sometimes work.

At the same time, they still do everything they can to sell more expensive tickets as well (in exchange for flexibility, premium service, frequent-flyer miles, etc.) Those are the main reasons why people still buy one-way tickets. Another incentive is that if you regularly book flights you do not intend to take and the airline notices it, they might cancel your frequent flyer account or something like that.

It is a matter of “willingness to pay” and market price segmentation, which ultimately comes down to supply and demand.

By the way, the pricing of a product has nothing to do with the cost of manufacture; this only applies for commodities. For all other products, a good pricing strategy will involve estimating the demand/price graph for the consumer group in question and optimising the price-volume point to yield maximum profitability, either through very high prices (but few sales), a very high sales volume (at dirt cheap prices), or more likely, some combination of the two that comes out on top of either end. Of course there is a question of supply costs underneath that, but it is not the primary concern of the pricing analyst.

Okay so that’s all very simple. But hang on: obviously different people will place a different valuation on the same products. How can you charge one person more than the next person for the same product? (Even though the two people have different valuations of it?) That is called market segmentation.

Business travellers [I am not talking business class, I am talking about those travelling for work] can, in general, afford to pay a lot more for their tickets but there aren’t enough of them to fill up the plane and run a profitable operation. On the other hand you have very price sensitive leisure travellers who will spend hours hunting down a fare that saves them ten Euro cents. You could lower the price for everyone, but then you are leaving money on the table from those who are willing to pay more for your product.

So how do you sell the same product to two different groups of people at two different prices?

The current way to apply price segmentation to the market is a mixture of flexibility on the ticket; advance purchase requirements; and minimum stay.

Business travellers often (not always) require a good deal of flexibility on the ticket. If my meeting in Paris finishes early, I want to go home early and see my family. If my meeting in San Francisco next week is delayed by a few days, I don’t want to get there early and waste time, when I have work to do in my office in England. Obviously, if I am a holiday traveller, I don’t care, I have no meetings, I will just find the cheapest ticket that lets me sit in the sun. Therefore, flexible tickets are considerably more expensive.

Advance purchase follows the same rules. Perhaps tomorrow a client will call me and ask me to come to Osaka on Monday morning. Most people do not go on holiday at the drop of a hat.

Finally, the important one: minimum stay requirements. I do not want to stay away from home at the weekend. No one pays me to work on the weekend? However, if I am on holiday, I probably will be willing to stay for a Saturday night if the price is a lot different.

Therefore, tickets that enforce a minimum stay (of say three days), or more likely a Saturday night, are much much cheaper than tickets that do not.

However, if you price one way tickets at the same price as a discount return, you enable all the restrictions I have mentioned to be defeated by the purchase of two independent, one way tickets. Therefore, one way tickets are inevitably priced at the far top end of the pricing spectrum, to prevent their use in this way.

One way tickets should almost never be purchased by anyone, except those with substantial corporate discounts. There is almost always a cheaper way of doing what you want.

Now the LCC market has shaken this up particularly within Europe and domestic flights within the United States. BA, for instance, now sells European fares at the price of a half-round-trip. However in the business class cabin this logic is not applied. I am aware that AF is sticking to its guns and refuses to sell discounted oneway European fares.