Optimal purchase timing in the airline market

• Published in: Journal of air transport management 2014-08, Vol.40, p.137-143
• Main Authors: Domínguez-Menchero, J. Santos, Rivera, Javier, Torres-Manzanera, Emilio
• Format: Article
• Language: English
• Subjects: Airline market; Isotonic regression; Lag time; Savings rate
• ISSN: 0969-6997; 1873-2089
• DOI: 10.1016/j.jairtraman.2014.06.010

This paper presents general patterns in airline pricing behaviour and a methodology for analysing different routes and/or carriers. The purpose is to provide customers with the relevant information they need to decide the best time to purchase a ticket, striking a balance between the desire to save money and any time restraints the buyer may have. The study shows how non-parametric isotonic regression techniques, as opposed to standard parametric techniques, are particularly useful. Most importantly, we can determine the margin of time consumers may delay their purchase without significant price increase, specify the economic loss for each day the purchase is delayed and detect when it is better to wait until the last day to make a purchase. As an application, we analysed air fares for routes from Madrid to London, Frankfurt, New York and Paris over the course of two months, taking into account advance-purchase ticket sales of up to 30 days. We found that the consumer has a margin of 18 days prior to departure within which to purchase a ticket without any significant economic penalty. •A mathematical model determines the margin of time consumers may delay their purchase without significant price increase.•The model specifies the economic loss for each day the purchase is delayed.•It detects when it is better to wait until the last day to make a purchase.•Tourists gain considerable savings if they make their purchase 18 days prior to departure date.•For intercontinental flights, if purchase was not made sufficiently in advance, the best option is a same-day purchase.