When exactly is the best time to buy an airline ticket? Gary Noakes finds out...
It's a fair bet that The Economic Journal's august pages are not the favourite reading of many business travel buyers, but a paper published by it this summer certainly caused some interest among those who purchase airline tickets on a regular basis. Two economists, called Marc Möller and Makoto Watanabe, concluded in the Journal that the optimum time to buy a ticket is eight weeks in advance of departure, and contrasted this with the purchase of a theatre ticket, which they decided could be left until the last minute, as long-running shows were unlikely to sell out.
Möller and Watanabe argue that when a flight is booked weeks ahead, travellers have to account for the possibility of unforeseen events that make the trip impossible. In order to make consumers take their chances, airlines have to offer advance purchase discounts and, as a consequence, ticket prices increase as the travel date approaches. They contrast this with theatre tickets, which have a fixed price that is constant during the lead-in period of a show's actual date. This price only changes on the day of the show, when discounted rates are offered through outlets such as the ticket booth in London's Leicester Square.
Möller and Watanabe explain that when we want to purchase our theatre ticket at the last-minute, the possibility exists that the event has sold out, so in order to make consumers bear this risk, theatres implement a clearance sale by offering last-minute discounts.
Consequently, those who book early are paying what they term a 'supply security premium'. Previous comparisons of airline and theatre-ticket buying showed that on a selection of 12 US routes, postponing a ticket purchase by one day raises the fare by around 0.1 per cent of the average. In contrast, a study of Broadway performances found that all but two of 199 productions surveyed offered discounts of up to 50 per cent on the day of the performance, and that 14 per cent of theatre-goers took advantage of these discounts.
In the airline world, the general public is now catching on to the concept of long lead-in times. After years of buying cheap last-minute flights to holiday destinations, the business model used by budget airlines is now embedded in the charter airline industry, meaning that - in a purchasing pattern sense at least - everyone is now effectively a business travel buyer.
There is general agreement that buying early secures the best deal when purchasing air travel, but exactly when to buy is another subject altogether. As our chart of web fares shows, reality appears to have trumped academic research, with there being little correlation between date of departure and price paid, except for the general advice that you should not plan to book today and travel tomorrow unless it really is necessary.
Möller and Watanabe's theory would also appear to lose ground once the tendency of business travellers to be vague about their return journey is taken into account, given the likelihood of meetings overrunning and projects missing deadlines.
"This is based on theory put forward by academics," says Wayne Pollard, sales director at Tmc Midas Travel, of the economists' conclusions. "For me, it is too leisure-based - the eight-week theory will never work in the corporate market. I don't think anyone would commit, considering the fact that the corporate traveller will change or cancel. In general we do try to persuade clients to book in advance if they can, but every company will have a different case."
Pollard concedes that the lowest fare categories are the ones that sell fastest on global distribution systems (GDSs), but he also believes that in order to get the best fares, business travellers no longer have to commit to travel plans far ahead of the actual date as often as they did in the past. Moreover, even the cheapest fares now allow far more flexibility than they did before, meaning that overrunning meetings are no longer a problem.
"These days, you can get a ticket to Paris tomorrow for £20, plus taxes, and change it for a fee if you need to," says Pollard. "The model now is much more geared towards the corporate traveller. The worst case scenario is that you have to pay a change fee, whereas in years gone by you would have to buy another ticket."
Mike Hare, chief executive of Portman Travel, however, believes there is some credibility to the academics' findings, at least for domestic and European trips.
"I think the findings are quite accurate if we are talking about short-haul," he says. "Airlines control their inventory by closing down lower booking classes eight weeks before, then six weeks, then four and so on."
This, Hare says, means that the challenge for the business traveller is to plan ahead.
"What we do is advise passengers on key routes what fares look like up to eight weeks in advance, right down to the day before travel, so that they can plan," he says.
Hare also advises buyers to weigh up the pros and cons of buying in advance, and look at this over the course of a year, instead of highlighting the short-term losses and gains.
"If meetings overrun and you do have to lose a couple of sectors and buy a ticket on the day, some companies find that over a year, if you are doing a few trips a week, the savings are greater than if you had bought full-fare on each occasion," Hare says. "In any case, buying the last-minute ticket after missing a meeting is probably what you would have bought anyway."
Buyers also advise clients to be flexible in terms of their choice of carrier unless they have route deals with specific airlines.
Shopping around is obviously something that the major carriers disagree with, citing the benefits that can come from volume deals with a single partner airline. "We tend to work very much on a partnership principle - the price is not what you see on BA.com, it is a private fare that depends on the volume you deliver to us," says Bob Dowdell, British Airways' corporate sales manager. "There is no harm in saying to us: 'This is our volume across five airlines, what would you do if we brought it all to you?'"
Dowdell does, however, agree that buyers need to think differently. "We are trying to get corporates to think a bit more in advance and plan their meetings around their flights, rather than the flights around the meeting," he says. "The earlier the better applies to leisure fares and in some ways, that's also best for business travel, although business travel doesn't lend itself to that. Anything cheap usually carries penalties. You need to think how many of these tickets will end up in the bin."
Paul Wait, Virgin Atlantic's general manager UK/global and multinational sales, is also sceptical of the eight-week optimum purchase time suggested by the academics. "Airlines have different strategies and levels of capacity resulting in different load factor performance," he says. "The behaviours, therefore, are not identical and to try and determine an optimum time of advance booking to obtain the most advantageous rate is unreliable. It's a bit like choosing between a tracker or a fixed-rate mortgage, depending on your view of the future."
But he concedes: "In the long run the earlier you book the more likely you are to get what you want at a price you can afford." One consideration is what time of year you are travelling, as buyers must take into account the likelihood of special advance purchase offers during some months, particularly August, when business fares can be rock bottom if you are prepared to put up with strings attached.
"Clearly, fares with advance booking conditions are more likely to deliver the greatest savings, but they are always likely to be associated with change fees and cancellation penalties," says Wait. "If your business trip is in a peak month such as October then this would certainly be true; however, if it were August then in certain circumstances a special offer introduced into the market at a late stage might prove to be the most economical."
Back at the coalface, Angela Smith, travel manager at construction firm Carillion, also disputes the eight-week advance booking advice from a practical level.
"I'm not sure anyone here has ever booked eight weeks previously," she says. "Meetings have a habit of getting cancelled, but we do ask people to book two weeks before, if possible."
Carillion monitors booking patterns and tracks how many tickets are bought 15 days, 8 to 14 days, four to seven days and three to zero days before departure. A report is then sent to senior managers to encourage sensible buying decisions. "We try to get as many as possible in the 15 day-plus category. We do quite well with flights, but with rail, people book the day before."
Carillion uses preferred suppliers for long-haul flights but opts for the lowest fare on shorthaul and domestic routes.
"It's the best fare on the day with these - we have no deals," Smith says. So the answer to the academics' theory appears to be that the eight week rule may work sometimes, but it seems there is rarely (or never) a time when it is practical when buying business air fares. One final point put forward by Möller and Watanabe suggests that it is best to purchase airline tickets in the afternoon. They speculate that airlines assume bookings made in the morning are more likely to be made by business travel buyers, and that those in the afternoon, and certainly, those in the evening, will be made by leisure travellers. The pair assert that fares are adjusted to match, although they admit it will take further research to prove their case.
Buyers also treated this theory with scepticism and BA added that it was impossible to tell who was buying at a given time of day, as it did not compile data beyond the date of booking. However, Midas Travel's Pollard was more firmly dismissive. "Friday afternoon in our office is absolutely frantic with clients booking," he says. "Otherwise I would say there is not really any difference."
FARE COMPARISONS
BRITISH AIRWAYS: HEATHROW TO NEW YORK, CLUB WORLD
Next day departure: £5,598
Two weeks before departure: £3,993
Four weeks: £3,592
Six weeks: £3,592
Eight weeks: £3,592
VIRGIN ATLANTIC: HEATHROW TO WASHINGTON, PREMIUM ECONOMY FLEXIBLE FARE
Next day and all other dates: £4,087.94
BRITISH AIRWAYS: HEATHROW TO HOUSTON, WORLD TRAVELLER
Next day departure: £1,497
All other dates: £1,498
EASYJET: GATWICK TO BERLIN
Next day: £137.98
Two weeks: £60.98
Four weeks: £39.98
Six weeks: £39.98
Eight weeks: £50.98
LUFTHANSA: LONDON TO SINGAPORE, ECONOMY
Next day: £4,219
Two and four weeks: £1,058
All other dates: £1,059