The Determinants of Airline Fares

This study analyzes the determinants of U.S. domestic airline ticket prices using over 12 million economy-class fares from flights between October 2019 and February 2020. By integrating fare quotes from an online travel aggregator with official U.S. Department of Transportation data, we assess the relative importance of various factors influencing ticket prices. Econometric and dominance analyses reveal that, aside from route distance, advance-purchase requirements and departure time are the strongest predictors of fares. Prices remain relatively stable until three weeks before departure, then rise sharply, indicating intertemporal price discrimination. Flights departing between 10am and 11am are consistently the most expensive, while midweek departures are cheapest. Greater competition lowers fares, especially closer to departure, when airlines’ ability to price discriminate diminishes. Other significant drivers include day-of-week patterns, holiday travel, and hub premiums, particularly for late bookers. In contrast, slot-control restrictions and expected delays have minimal effects. These findings underscore the complex, dynamic nature of airline pricing and the interplay between supply, demand, and passenger characteristics throughout the booking window.