Why don't airlines offer last minute empty seats cheap?

Imagine that you manage to sell all those seats 100% of the time.

Wouldn’t that mean that you’re undercharging the market if that were the case? If the supply is meeting the demand perfectly, then it means you’re either incredibly lucky, or much more likely it means that you’re undercharging the market.

Also, there is a second factor. The airline industry is not a very fluid or a very efficient market. For instance, not all airlines are allowed to use the same airports. And some airlines go bankrupt, only for the government to bail them out. Many of the pricing decisions airline executives make today are just a continuation of what their predecessors have done before.

One exception are the low cost airlines, like Southwest or JetBlue in the US (or Easy Jet and Ryan Air in Europe), but the market for gate leases or preferential-use leases is not very fluid or transparent, so it’s not like the most efficient airlines are always going to win.

Many people buy fully refundable flexible tickets because they are not sure of their travel plans until a day or two (or less) before the flight. Such tickets are about three to four times the price of the cheapest ticket in the same class of travel.

If you are going to sell very cheap tickets a few hours before departure, many people holding full flex tickets will now have concrete travel plans at this stage. Therefore, they can buy your super discount last-minute deal tickets, if available, and then refund their refundable tickets.

It is important to emphasize that this strategy has no risk to the flexible ticket purchasers. If the cheap tickets don’t show up, they still have a guaranteed seat. If they do show up, then they lose nothing by switching to the cheap ticket at that stage. (On a return ticket this logic still applies at least half the time; and usually full flex tickets can be bought as two one-ways for a similar price.)

So for the sake of getting a few hundred dollars out of some last minute pax, which to be honest will probably only be marginally profitable after you take into account the extra fuel, airport handling costs, et c., you have maybe lost thousands and thousands of dollars from a few bright flex ticket purchasers, who needed flexibility and were willing to pay for it; but you effectively allowed them to get it for cheap.

There are several factors going on.

Airlines have whole departments dedicated to revenue optimization, and to figure such things out.

Among the factors that play a role here:

• Last minute fliers tend to be in some kind of urgent situation, and thus are more willing to pay higher fares.
• Airlines already have a contingent of people to fill empty seats: employees and other non-revenue passengers often get these seats free on a standby basis.
• Overbooking. Empty seats are much rarer today than in the past.
• Security concerns. Nowadays, last-minute fliers are inherently terrorism suspects. Especially if they pay cash.
• Last minute deals often aren’t all that attractive for the flying public because most people going on vacation need a round trip with a guaranteed return date anyway.
• Airlines do offer steep discounts for last-minute flights, but manage to segregate them from those passengers willing to pay higher fares. For instance, some airlines offer bereavement fares if you can show that you are going to a family funeral. About 30 years ago, when empty seats were more ubiquitous, at least one airline offered 30-day standby tickets to international tourists. You could use it for unlimited flights within the USA, but only on a standby basis.

There are many things that airlines used to do that they can no longer do because customers have so much more information than before. 30 years ago, what people presented themselves as doing pretty well matched with what they were doing. But over the years, folks have learned (and shared with others) how pretending can save a lot of money:

• one way ticket too expensive? Buy a return and throw away the last leg
• tickets cheaper A-B-A than B-A-B, and you do it a lot? nested returns
• discount for staying Saturday? Add a fake leg home-somewhere Sunday morning, lowering the price of the whole thing, and throw away the fake leg
• frequent flyers get free upgrades? Never buy business, you can count on a upgrade

On the matter of last minutes, imagine that a regular ticket A-B on Sunday at 8pm costs $300. The last minute is $100. A fully refundable totally flexible ticket is $1000. The same prices hold for the 6pm, 7pm, and 9pm flights. Someone who makes that flight every Sunday can buy the refundable 9pm, then show up in time for the 6 and roll the dice repeatedly. At a time of day when empty seats are common, they will travel for $100 maybe 9 times out of 10. The tenth time they use their refundable ticket, which they otherwise cancel. They are paying $2000 for 10 trips, saving $1000. (You wouldn’t spend those extra hours in a an airport to save that money? You’re not that guy. He would be in a hotel at the other end anyway.) The airline has gained nothing – the empty seat that got used up those 9 times turned back into an empty seat on the 9pm each time. They’ve just used up staff and computer time changing stuff around for no reason other than to give $1000 of revenue back to the customer.

You may think that you would do something that would bring money into the airline if these seats were available. And maybe you even would. But the “gaming the system” behaviour of people who fly every week, over 100,000 miles a year (that’s 2,000 miles a week every week, and there are people who do double and triple that) far outweighs what infrequent travelers decide to do.

Some airlines actually do, that is in their higher end classes economy plus or business as upgrades.

Also last minute bookings do occur often where people who need to travel immediatly are willing to pay a lot. This, and that empty seats provide less take-off weight, airlines rather have one premium full fare paying customer than 10 cheap last minutes.

It has been a while that I checked but at some airports you have travel agencies that offer same day departures. Some years ago one existed and was called L’tur where you could book same day departure tickets. I don’t know if they still exist though, but it might be worth checking at the airport for similar services