OK... maybe someone out there will help my little novice mind understand how airlines price flights.

Living in the Philly area, I am now becoming a frequent US flyer and am becoming more aware of prices (but I am sure this happens on many other airlines as well).

Here is my dilemma. Say I price a flight for PHL-SFO (flight X out bound, Y returning), the price would be $XXX. Now if I price BWI-SFO connecting in PHL I've seen the price up to 40% cheaper. And that is even calculating the same segment out (e.g.- BWI-PHL-SFO flights A to PHL and then X to SFO) and then returning.

So my question herein lies... Why does this happen? One would figure that you are flying "more" so you should be paying more, even when the same flights are involved. I know that this may be a basic question, so please be gentle.

BWI-SFO is a route flown by Southwest, who often has the lowest fares, especially if it is not an excursion fare. In order to compete with Southwest on this route, US matches them on the BWI-SFO fare, even on connections via PHL. --- Since Southwest does not fly out of PHL, there is no need for US to match the lower fare on the PHL-SFO route.

This kind of pricing has led to the concept of "hidden city" ticketing. You want to fly from SFO to PHL, buy a ticket from SFO to BWI with a connection in PHL and just get off in PHL. Obviously, you need to carry on all your luggage if you try to do this. The airlines claim that this is a violation of contract of carriage and have installed software to try to catch people who do this. It is much harder to do it in the reverse direction, because when you fail to board in BWI, you become a no-show and have the danger of having your connecting flight cancelled.

Or you do what thousands of others in non-Southwest cities do.. drive to a Southwest city and then catch their preferred airline.

I drive to CLE (2 hrs OW) all the time, pass up the Continental non-stop, fly right back to PIT, and onto my final destination.

I also drive to CMH (3 hrs OW). It's all up to how much you value the time lost driving, fuel, depreciation on the car, etc vs the difference in fares.

Sometimes your fare will be actually pricing as 2 roundtrips if you are connecting, if that "prices" cheaper than the regular RT tariff. This is completely legal, if the airline autoprices it and the whole itin is on 1 tix. Having some familiarity with pricing, there is no rhyme or reason for a lot of it. Well, actually there is, but its not apparent to the public.

In fact, some of the quirks are signals from airlines to each other to see if fares are going to go up or down. This violation of antitrust has never been proven in court.

chexfan-

welcome to airline pricing, where no two people pay the same, no two travel agencies quote the same and yesterday, today and tomarrow...let alone 2 minutes from now everything can change! Discounts, consolidators, resellers, airlines, points, advanced booking, non refundable, gov't, agent, employee, family, 2-4-1, standby, senior, ticket books, vouchers, and etc, etc. all are part of it.

You will see on these boards ways to improve you pricing, back to back tickets, missing connections, early exits, and similar as well as were to get the best deal on "purchase", buying points, buying tickets from someone with points and all kinds of legal, illegal and "against the airlines rules" type transactions. It is almost as confusing the various ways to get a ticket as the prices for a ticket.

Understanding it ALL is left to few and I do not know anyone of them.

Soon you will discover that this pricing is true in the hotel business, plays, concerts and sports events (the latter three esp near game time).

I believe the best way to understand pricing is to understand what the ultimate goal of the airline is, which is to fill as many seats on each plane as possible with people paying as much as possible.

Like most any product or service, different people place a different value on the same service. For instance, I may be willing to pay $1000 to fly from Dallas to New York to attend a business meeting, while my mother may only be willing to pay $300 for the same flights to see a broadway show. Airline pricing recognizes this fact and is an attempt to ensure that the price each passenger pays comes as close as possible to the maximum price they would be willing to pay for the trip. That is why low fare tickets have restrictions that make them unsuitable for business travelers who are willing to pay more.

There are various contraints on the range of fares that are offered -- primarily being competition and supply/demand. On routes with an excess of seats (such as transatlantic during recent winters) you can see restricted fares drop to extremely low leves as airlines try to fill seats on the planes. Since many passengers will switch to an airline when a fare is lower, airlines often have to match fares introduced by their competitors (who may have a different opinion of what fare will fill all of the seats or may not be acting so as to maximize revenue in order to achieve some other goal, such as bleeding a competitor to death).

Over the years, airlines have developed advanced computer systems which use historical data to predict what the demand for various fares will be on a particular flight at a particular time. Based on this, they will decide how many seats to offer at different fare levels.

So back to your question on why it is cheaper to fly from BWI to SFO via PHL than from PHL to SFO on the same flights, the best explanation is that people are willing to pay more to fly from PHL to SFO than from BWI to SFO. Of course, the fare at any particular time on any particular flight is subject to the influence of competition, demand, etc. The fact that the flights are the same is really immaterial, since the airline is selling you travel from one point to another (Delta wouldn't charge you more for connecting in ATL than CVG even if ATL is a couple hundred miles further).

Bottom line -- No one ever paid more for an air ticket than the trip was worth to them and the goal of the airlines is to ensure that no one ever pays less than the trip is worth to them.

Cigarman has much experience with smoke filled rooms (where these kinds of things are decided)and can solve the mystery. The answer is GNOMES. I've seen them in the room and they set the prices...

Thank you all for your informative replies. All of you made VERY good points and my information is now much clearer.

I am now realizing that the proper answer to my question of how to understand airline pricing should have been "Good Luck!"