Airfares are baffling and it’s almost impossible to get a grasp of how they work. It’s easy to understand certain things, like the concept of seasonal rates and the fluctuations that occur over school holidays, and just as easy to get to grips with the differences between economy, business and first class.
However, when it comes to how airlines subdivide these sectors into different groups and arrive at myriad different prices for what is, essentially, the same seat, it is mind-boggling.
In fact, how do airlines calculate prices in a world where exchange rates and oil prices fluctuate daily? And why don’t airfares decrease when these factors do?
This question was put to three major players in the local airline arena, namely our very own national carrier South African Airways; their chief competitor British Airways; and arch-rival Virgin Atlantic — using the popular route between London and Johannesburg as a benchmark.
Before speaking to them I dissected their websites in an effort to come up with some ammunition for the anticipated stock replies.
A phantom holiday and business trip were used to gauge responses on the airlines’ online booking systems. The “phantom” departure date in all cases was October 1, with a return date of October 15 for a pseudo-holidaymaker in economy class and October 5 for a virtual company director in business class.
The “best fare” option was searched for in all cases and then the country of origin was switched to the United Kingdom to find out what the price would be in good old pounds.
The exchange rate was checked against www.oanda.com and found to be R11,54 to £1 at the time of inquiry.
This is what I discovered:
SAA (www.flysaa.com), October 1 to 15 from Johannesburg to London return, economy class cost R7 001, including airport/departure taxes.
October 1 to 5 from Johannesburg to London return, business class cost R20 860, including taxes.
October 1 to 15 from London to Johannesburg return, economy class cost £555 (about R6 401), including taxes.
October 1 to 5 from London to Johannesburg return, business class, cost £2 274 (about R26 242), including taxes.
This means that passengers booking economy class tickets online from London to Johannesburg got their tickets for R599 cheaper than those booking the reverse route at the same time.
Business class passengers, on the other hand, paid an extra R5 382 to travel from London to Johannesburg if they booked online on the date of inquiry.
The business class fare from Johannesburg to London was almost three times that of economy, whereas from London to Johannesburg it was a little more than four times the economy fare.
British Airways (www.british airways.com) October 1 to 15 from Johannesburg to London return, economy class cost R8 945, including airport/departure taxes.
October 1 to 5 from Johannesburg to London return, business class cost R30 274, including taxes.
October 1 to 15 from London to Johannesburg return, economy class cost £645 (about R7 441), including taxes.
October 1 to 5 from London to Johannesburg return, business class, cost £2 924 (about R33 740), including taxes.
This means that economy passengers booking tickets online from London to Johannesburg got their tickets for R1 504 cheaper than those booking the reverse route at the same time.
Business class passengers, on the other hand, paid an extra R3 466 to travel from London to Johannesburg if they booked online.
The business class fare from Johannesburg to London was more than three times that of economy, whereas from London to Johannesburg it was more than four and a half times the economy fare.
Virgin Altlantic (www.virgin atlantic.com), October 1 to 15 from Johannesburg to London, return, economy class cost R6 225, including airport/departure taxes.
October 1 to 5 from Johannesburg to London return, upper class cost R23 054, including taxes.
October 1 to 15 from London to Johannesburg return, economy class cost £654 (about R7 548), including taxes.
October 1 to 5 from London to Johannesburg return, upper class, cost £2 914 (about R33 628), including taxes.
This time, economy passengers booking tickets online from London to Johannesburg paid R1 323 more for their tickets than those booking the reverse route at the same time.
Upper class passengers travelling from London to Johannesburg were also worse off paying a whopping R10 575 more than their South African-based counterparts if they booked online.
The business class fare from Johannesburg to London was almost four times that of economy, whereas from London to Johannesburg it was almost four and a half times the economy fare.
As you can see it’s a curious state of affairs and passengers’ bafflement is well-founded. How is it possible that such anomalies exist on the same route for the same days, flights and distances, using the same in-flight services?
I tried to find out from the horses’ mouths. British Airways spokesperson Stephen Forbes tried to explain how it works.
“As you note, airline pricing is incredibly complex because an airline seat is such a perishable commodity. When check-in closes that seat can never be sold again,” says Forbes.
“The product is mobile in that it can be sold in various markets anywhere in the world. It is subject to daily, weekly and seasonal fluctuations.
“A good general rule of thumb is that the cheaper a ticket the more restrictions there are, for instance minimum and maximum length of stay, changes to the booking and cancellations, to name a few. The more flexibility you require the more you pay. These factors determine the booking class most suited to you (as opposed to the cabin you fly in).
“Depending on the restrictions or flexibility required there are various booking classes in each cabin. This is why two people sitting next to each other in economy can have paid different prices for their tickets.”
Forbes says another factor governing prices is how far in advance you book and pay for your ticket.
“Generally the longer in advance you do this, the better the price. Fares are appropriate to the market. This is why fares booked from the UK are different to fares booked from South Africa.
“The reason for the anomalies noted on the website in September/October marks the start of the summer season, when demand on the UK/South Africa route begins to peak. Consequently the fares are higher,” said Forbes.
“When there is a shortage of seats, prices go up. When there is less demand, they come down. Typically, periods of lower demand or ‘troughs’ are when airlines offer specials. Tour operators are able to offer better fares because they block-book a portion of seats ahead of time. As they buy large volumes of seats in advance, the airlines offer them a discount.
Forbes moved on to the subject of competition. “We try to lead the market,” he said. “We have a sophisticated revenue management system and don’t generally find it necessary to get into ad- hoc price competition.”
Although approached for comment, SAA did not respond. Virgin Atlantic’s manager for South Africa, Mike Higgins, has been taking advantage of his airline’s (much) cheaper flights, hopping to and from London for the past couple of weeks, rendering him unavailable for comment. Watch this space for Virgin’s explanation at a later date.
Domestic disturbance
Looking at the three major domestic routes between Johannesburg, Cape Town and Durban using the arbitrary dates of October 1 for departure and October 8 for return in economy class, we checked out Kulula, Nationwide, SAA and Comair on each of their websites and took an average price for the number of flights offered on the required dates. Here’s what was found:
Kulula (www.kulula.com)
Johannesburg to Cape Town — R1 190; Johannesburg to Durban — R640; Durban to Cape Town — R640. The prices included airport taxes and VAT. Kulula is the “no frills” arm of Comair, which is operated by British Airways.
SAA (www.flysaa.com)
Johannesburg to Cape Town — R1 355; Johannesburg to Durban — R762; Durban to Cape Town — R1 352.The prices included VAT and airport taxes.
Nationwide (www.nationwideair.co.za)
Johannesburg to Cape Town — R1 568; Johannesburg to Durban — R930; Durban to Cape Town — R1 223. The prices included VAT and airport taxes.
Comair (www.comair.co.za)
Johannesburg to Cape Town — R1 589; Johannesburg to Durban — R1 396; Durban to Cape Town — R1 222. The prices included VAT and airport taxes.
How do our four airlines come up with such varying prices? Perhaps they need to give us a simple explanation. Watch this space!