Pricing Strategies by European Traditional and Low Cost Airlines: Or, When is it the Best Time to Book on Line?

Abstract

It is often assumed that the airlines’ fares increase monotonically over time, peaking a few days before the departure. Using fares for about 650 thousand flights operated by both Low-Cost and Full Service Carriers, we show several instances in which the monotonic property does not hold. We also show that the volatility of fares increase in the last four weeks before departure, which is the period when the airlines can formulate a better prediction for a flight’s load factor. Finally, especially within the last two weeks, Full Service Carriers may offer lower fares than those posted by Low Cost Carriers.