It’s common for a one-way flight to cost as much or more than a return flight. Why does this happen?
Money Mysteries is a column by Ryan Ong that explores the odd world of money. Where does it all go when you give it to a bank? Why does a potato sometimes cost S$200, or shipping a sofa sometimes cost S$1.99? Why is art so expensive, and how do people (legally) rip off casinos? Every week we unveil a new Money Mystery.
If you ever try to book a one-way ticket on a plane, you might be in for a surprise. The cost of a one-way ticket can be twice as much as a return ticket.
That might not make sense, since the return ticket encompasses two trips. But as always, there are bizarre reasons behind the way airline prices work. Here they are:
Reason #1: To Secure Your Business On the Return Trip
Let’s say you run an airline.
You decide to charge S$1,500 for a return ticket to London, and S$750 for a one-way ticket to London. That should make sense, because a return ticket is two flights, right?
Not really. You see, what happens if I buy a one-way ticket to London from you, but decide to fly back with another airline?
Perhaps I buy a S$750 ticket to London, but while I’m over there, I find an alternative flight back that only costs S$720. You’d lose my business on the return trip.
Instead, a cunning approach would be for you to encourage return trip tickets; that would guarantee I’m also flying back with you.
The problem is, I might still insist on buying a S$750 one-way ticket (I’m trying to be clever too; I know may be able to find a cheaper flight back). So now, in addition to pricing a return ticket at S$1,500, you also have to raise the price of one-way tickets to the point where it doesn’t make sense to buy them.
Suddenly, the return ticket costs S$1,500 whereas the one-way ticket costs S$2,500.
Reason #2: Those Who Need a One-Way Ticket Usually Have No Choice
Ever wondered who would book a one-way ticket?
The answer is definitely not regular tourists. When we go on vacation, we know when we’re leaving. and when we’ll be back. People who book one-way tickets tend to business people, or travellers looking for job opportunities abroad. These types of travellers need a lot of flexibility; they don’t want immigration authorities breathing down their necks when they’re in the middle of a million dollar deal, or are two days from a critical job interview.
As such, they won’t be deterred by, say, S$500 more for a one-way ticket. And there’s no reason why an airline wouldn’t get more money out of them, when they’re willing to pay.
Reason #3: One-way Tickets Are Paid for By Companies and Are Tax-Deductible
This is related to reason #2. Most people who buy one-way tickets are doing so for work reasons, and that affects buying behaviour.
For example, the traveller may be an employee of a large corporation, temporarily transferred to an overseas office. The airlines know these people don’t pay their own fare – their employers do. As such, they are not as price sensitive as vacationers; a price difference of even S$1,000 is trivial to a multi-national employer.
For business owners, airline tickets are often tax-deductible as a business expense. They often don’t mind the higher price, as it can be subtracted from taxes they would have had to pay anyway.
Both are factors that allow airlines to charge more.
There Aren’t Many Ways to Save on a One-Way Ticket
If you want to save money on a one-way flight, we have to be frank and tell you it’s not likely.
It’s a minority of travellers who buy these tickets, so the intense competition that leads to undercutting just doesn’t exist. Other than Jetstar’s promotions for one-way flights, most airlines don’t have much pressure to lower the prices of one-way trips.
The only way to save money on your flight is to use your existing air miles for to pay for it.
Don’t have enough miles? Use this as an opportunity to earn more. Booking your flight with the right travel credit card can earn you double the usual rate. The American Express Singapore Airlines KrisFlyer credit card, for example, earns you 2 KrisFlyer miles for every S$1 you spend on SingaporeAir.com.
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.