[jdavid]

Another problem in the airline industry is pricing stability. current prices have been climbing over the last few years and pricing has always been confusing. I think there are several possible algorithm and economic models that could be leveraged to solve pricing on the fuel side, and on the consumer ticket side.

Stable prices means that consumers and airlines can both plan better.

For consumers, it means confidence in buying a ticket.

For airlines, it means predictable revenue, and costs, which should add to the market cap of the companies.

[jhaglund]

A HUGE reason for that instability is most of your plane ticket pays for fuel. some airlines buy futures, some just stockpile fuel when it's cheap.

My father worked in fuel procurement for a few airlines. He hated fuel price instability as much as you hate air fare instability.

[CaptainZapp]

What looks confusing has a lot of science and math backing it up. The procedure is known as yield management (http://en.wikipedia.org/wiki/Yield_management#Airlines) and the idea behind it is selling as many seats on a plane as expensively as possible. Since nothing is going stale quicker then unsold airline seat when the doors close they rather sell you a seat for 200$ instead of asking 2K and having an unsold seat.

In a nutshell: An airplane cabin is segmented into a number of classes. There can be a dozen, or even more classes, even though you only see economy, business and maybe first.

Each class gets allocated a number of seats and the actual booking class can have more, or less restrictions attached to it (for example: refunding, or changing the ticket, mandatory Saturday night stay, minimum duration of stay, etc).

The more flexibility you require the more expensive the ticket becomes.

Even though it looks very confusing from a passenger perspective and prices can fluctuate on an hourly basis, depending on the number of seats available for a specific sub class, the concept makes a lot of sense from an airline's perspective.

[jdavid]

This is kinda my point the pricing is based on old maximums. Today the pricing could have a consumer centric model priced around arrival performance vs. ticket refund-ability and other sub classes.

[qb]

Algorithms are in fact used by airline revenue management departments for perfecting consumer ticket price discrimination. Which is a good thing for the leisure traveller, as their tickets are "subsidized" by people buying more flexible etc. business fares.