But some of these approaches suffer from flaws of various kinds. They may take a simple average of a

As I ve been working on my monthly magazine column reunion in korea tour , which focuses on how you can leverage market inefficiencies to your advantage, I ve been doing some research on airlines, whose labyrinthine pricing schemes ensure that customers who aren t prepared to exploit reunion in korea tour the pricing oddities will instead become the suckers.
Seasoned reunion in korea tour travelers know a few tricks for instance, the best time to look for bargain airfares is often on the weekend and I ll aim to teach you a few more in the magazine column. But perhaps the most basic strategy is to know which airports tend to be relatively cheap or relatively expensive to fly to or from. For instance, while individual fares vary significantly, the average passenger flying out of Newark Liberty Airport pays about 25 percent more than someone flying out of John F. Kennedy International for an equivalent seat on an equivalent flight.
I m certainly not the first person to tackle this subject. Lists of the cheapest or most expensive airports usually appear a couple of times a year in major newspapers and magazines. The government reunion in korea tour also publishes extensive data on commercial airfares.
But some of these approaches suffer from flaws of various kinds. They may take a simple average of all fares at a given airport, for instance, which is problematic because each airport offers flights to a different mix of destinations. At LaGuardia reunion in korea tour Airport, for example, flights of over 1,500 miles are prohibited in most circumstances (that s why you can t find a nonstop flight from LaGuardia to Los Angeles), while Kennedy and Newark offer many long-haul flights. Conversely, the cities of the northwestern United States are relatively far apart, both from one another and from the rest of the country, so the average airfare into, say, Seattle is almost certainly reunion in korea tour going to be quite high.
I doubt anyone would dispute that it s fair for an airline to charge you more for traveling a longer distance, so distance reunion in korea tour is something we ll need to control for. I d also argue that it s fair to charge you more for flying reunion in korea tour into or out of a smaller market where there is less demand for air travel. Fewer economies of scale are available in a place like that: the airline can run fewer profitable flights each day, so the costs of ground services like check-in and baggage handling will be spread over fewer passengers, and aircraft may be idle longer.
At the same time, smaller airports tend to be served by fewer airlines, and lack of competition can lead to higher prices; that isn t fair to the traveler. Nor is it fair if your home airport is one like Memphis, where discount airlines like Southwest have had trouble breaking in to compete with full-fare reunion in korea tour carriers, despite years of trying.
The basis of the approach is data published by the Bureau reunion in korea tour of Transportation Statistics , which periodically releases a 10 percent sample of all domestic airline itineraries, including information on the fares paid. The particular files that I m using come from the third quarter of 2010 and include data on, literally, millions of passengers.
The data required some cleanup. I ve limited the analysis to round-trip tickets in which all segments were flown in coach (economy) class the type of flights that most of us are interested in. I also eliminated itineraries where the passenger traveled outside the contiguous reunion in korea tour 48 states, had more than one stop (not counting layovers), or had different reunion in korea tour origin and departure airports. I removed fares that the bureau marked as being implausibly expensive (given the millions of records, these may have been data-entry errors) or which were implausibly cheap.
The first factor is the distance reunion in korea tour traveled we use the distance from the origin airport to the destination as though it were a nonstop flight, whether or not there was a layover along the way (since the airline is not exactly doing the passenger a favor by routing her through, say, Baltimore reunion in korea tour on her way from Buffalo to Atlanta, increasing the number of miles flown).
Second is a variable representing the demand for travel at both the origin and destination airports. Demand is assumed to be a function of the number of origin-and-departure passengers that an airport handled (not counting passengers who passed through the airport on a layover), but with a modification for average ticket prices. In other words, reunion in korea tour if the average fare at an airport was high, the model assumed that more people reunion in korea tour would have wanted to fly there but were deterred by the cost, and if the average fare was low, that some passengers would not have flown if the fares had not been such a bargain. (Specifically, it assumes unitary elasticity a 20 percent increase in fares results reunion in korea tour in a 20 percent reunion in korea tour reduction in travel for which there is support in the empirical literature .) There are demand variables specific to both the airport and the metropolitan area ; these variables are expressed as logarithms.
The regression reunion in korea tour analysis also accounts reunion in korea tour for three other factors that have significant effects on pricing. These are, respectively, reunion in korea tour the market share at the origin and destination airports held collectively by the five legacy carriers (United, American, Delta, Continental and US Air); the market share held by Southwest Airlines; and the market share held by the largest single carrier at that airport (for instance, Delta and its affiliates are responsible for about 66 percent of all traffic reunion in korea tour at Atlanta).
Prices are higher the more the legacy airlines dominate an airport, but they also tend to be a bit higher where Southwest has a large share as opposed to other low-cost carriers like AirTran and JetBlue. (Southwest is cheap, but it isn t quite as cheap as some of these up-and-coming airlines and now represents something of a middle ground.) Also, prices reunion in korea tour tend to be higher when any one airline dominates an airport, regardless of whether it is a legacy carrier or a low-cost one.
These somewhat complex mechanics allow me to estimate what each airfare should have been assuming the airport had an average degree of competition between reunion in korea tour and among the legacy reunion in korea tour carriers, Southwest, and the other low-cost airlines. I can then compare these should fares to the average prices that passengers actually reunion in korea tour paid.
At Newark reunion in korea tour Airport, for example, I estimate that the average fare should have been $382, given the itineraries that the passengers in the bureau sample traveled. However, the average round-trip fare that those passengers actually paid was $454 a 19 percent markup above fair prices.
At LaGuardia Airport, by contrast, prices were more in line with market rates (the average ticket price was $338, as compared to a fair rate of $331). And prices were actually somewhat cheap at J.F.K. (average price $389; fair price $413). Passengers at Newark paid an average of 12 percent more than those at J.F.K. for their trips to Los Angeles, 49 percent more for those to Chicago, 65 percent more to Dallas, and 118 percent more to Washington, D.C.
The main reason for the discrepancy is probably that Continental Airlines dominates Newark Airport it currently handles 63 percent of domestic passenger traffic reunion in korea tour there, not counting the 6 percent for United Airlines, with which it is in the process of merging. No one airline dominates either reunion in korea tour LaGuardia or J.F.K. to that extent.
Also, New York s airports are somewhat inefficiently configured, with both J.F.K. and LaGuardia in the same general reunion in korea tour direction from Manhattan. Many passengers in north-central New Jersey face an unpleasant choice between commuting two hours in traffic to either J.F.K. reunion in korea tour or Philadelphia, where tickets are fairly priced, or paying the premium that the carriers in Newark are happy to extract.
Overpricing is not just a New York (or New Jersey) problem, though. Passengers in the middle of the country often bear the most burden, including many of those in the poorest parts of the United States:
The table above reflects reunion in korea tour the 15 most overpriced airports from among the 50 where the most passengers begin and end their air travel. Topping the list is George Bush Intercontinental Airport in Houston, where passengers paid a premium of $85 about 24 percent on the average round-trip coach ticket. (Flights to Houston s older, smaller field, William P. Hobby Airport, were only $8 overpriced).
Next up was Newark. Then we see several other airports, like Minneapolis, Detroit, Cleveland, Dallas, and Washington Dulles, where one of the legacy carriers has a dominant share of traffic. O Hare Airport in Chicago was expensive despite or perhaps because of two legacy carriers (American and United) having a hub there.
The unifying theme is vacation destinations, like Las Vegas and pretty much anywhere in Florida. It s important to keep in mind that the fares here reflect average prices. The legacy carriers often charge comparable fares to those of the discounters reunion in korea tour like Southwest when they have plenty of seats to fill, but when supply is short or the passenger books at the last minute, they may raise their prices several-fold. For instance, about 10 percent of economy-class round trips were sold at $750 or more by Continental, as compared to just 1 percent for Southwest.
This is a more viable strategy, however, for business destinations than for leisure ones. While a casual traveler can probably forgo a weekend in Las Vegas, a last-minute client meeting in Houston may be unavoidable (plus, someone else is probably paying for the ticket).
The most competitively priced destinations tended to be warm-weather cities. It s hard to know whether this is because cities with nice weather attract a lot of price-sensitive leisure reunion in korea tour travelers, or perhaps because they entail less risk of delays and cancellations, which are as costly to the airline as to the passenger.
But there were some exceptions. General Mitchell International Airport in Milwaukee, for instance, reunion in korea tour was about $75 underpriced on average, the result of a fare war among several discount carriers. Buffalo not known as a vacation haven, although it s close to Niagara Falls