Airline pricing is a complicated art. Every so often, I get a message from a reader confused about how business class or first class on a particular flight is cheaper than economy. I ran into this myself for some tickets I was researching just now, so wanted to talk a bit more about what causes this…
In this post:
Business class priced lower than economy…
I need to book a ticket from Madrid to Athens, and while comparing options, I noticed something interesting for an Iberia itinerary I was considering. For the date I needed to travel, business class was cheaper than economy on two flights I was considering.
Admittedly fares are expensive across the board, but on one flight economy cost $575 while business class cost $471, and on another flight economy cost $480 while business class cost $373.
While I wouldn’t say this happens all the time, we see this more often than you’d think. To the average consumer this makes no sense, since anyone in their right mind would want to pay less to get more.
So, what causes this? The simple answer is that this is due to how complicated inventory and revenue management at airlines is. But let me give a more detailed answer…
What causes this odd flight pricing situation
To give a more detailed answer of what can cause business class to be cheaper than economy, it comes down to how airlines are on a never-ending quest to try to get as much revenue out of each passenger as possible.
Airlines do this by trying to segregate their customer base, based on consumer behavior. They do this by having dozens of fare classes, and often filing dozens of fares in a market. The system is so complicated that it sometimes creates situations where business class ends up being cheaper than economy. If you have a plane with 200 people on it, it’s entirely possible that every single passenger paid a different fare to be on that flight.
Typically there are two factors that determine how much you pay for your flight.
The first is what fares an airline has filed in the market you’re flying. For example, below is an ExpertFlyer screenshot of Iberia’s published economy fares between Madrid and Athens. These filed fares are specifically for those traveling between Madrid and Athens, so if someone is connecting, you’d look at the fares published in that market. 
What determines the fare you get is how far in advance you’re booking, when you’re traveling, whether you’re traveling roundtrip or one-way, whether you meet a minimum stay requirement, etc. As you can see above, one-way economy fares range from $161 to $601, and that doesn’t even include all fares.
Meanwhile below are the business class fare classes published in the market, which range from $368 to $928 one-way.
The other thing that determines the fare you get is what booking classes the airline publishes for a particular flight (which you’ll see in the “Booking Class” column in the above charts). So not only does your itinerary have to be eligible for one of the above fares, but then the individual booking class codes need to be available for that type of fare, which will determine how much you pay.
The codes an airline makes available on a flight constantly changes, and is based on the expected demand for the flight. Obviously airlines want to sell the highest fares possible, while ideally not leaving many seats empty.
So there are a lot of factors that go into what fares an airline publishes, and also what fare classes an airline makes available on a particular flight.
To sum it up more succinctly, what’s going on with the above flights is that there’s obviously a lot of demand for economy, but not so much demand for business class. For example, on one of the flights above, economy doesn’t have many seats left, while I don’t see a single seat assigned in business class.
So on that flight, the airline is basically making one of the cheapest business class fares available on that flight (due to lack of business class demand), while only making among the more expensive economy fares available (due to lack of economy availability).
Is that entirely rational? I guess it depends on how you look at it. No, it probably isn’t. However, airline inventory management is complex enough, and that’s why situations like this will happen once in a while. For example, I only saw the above situation (where business class was cheaper than economy) on a single day for the month I was looking at traveling, which suggests that demand was just a bit different than normal that day.
Furthermore, I suppose one could argue that there is sometimes merit to this, when you consider that some corporate travel policies require flying economy, and not business class. So in those situations, the airline could potentially extract more revenue while offering a lesser product.
Bottom line
It’s not unheard of to find that first class or business class fares are cheaper than economy. While that may seem counterintuitive, this reflects how complicated airline fares are. Airlines are trying to do everything they can to maximize each consumer’s willingness to pay, and at times that leads to oddities like this.
Don’t expect to see premium cabins cheaper than economy frequently, but if you do see it, it’s (probably) not a glitch.
Have you ever seen a premium fare cheaper than an economy fare?
My employer will only buy refundable fares. I've found myself more than one with economy tickets 2x the cost of a non-refundable business class ticket. Now, I can authorize the purchase of non-refundable tickets, but it takes quite a bit of paperwork. I did it one time when the refundable fare was $4800 and the non-refundable fare was $250. We had three people traveling...
I frequently see PE, domestic biz & F fares cheaper than coach. Very confusing. I've also seen fully refundable coach fare on UA cheaper than restricted tickets.
This also usually happens when the economy ticket is in a refundable fare class and the business class ticket isn't ... So while you're getting a better seat for less, you're also getting less ticket flexibility.
This reminds me of a rather egregious quirk in Amtrak's pricing that I called "Stupid Roomette Tricks" at the time...
Basically, for the longest time, Amtrak sleeper fares were made of two components: A "room charge" that made up most of the cost, and then a "seat charge" which was the lowest normally-available (i.e. non-sale) fare on that segment. Most of the time this wouldn't result in anything too weird - the room charges were...
This reminds me of a rather egregious quirk in Amtrak's pricing that I called "Stupid Roomette Tricks" at the time...
Basically, for the longest time, Amtrak sleeper fares were made of two components: A "room charge" that made up most of the cost, and then a "seat charge" which was the lowest normally-available (i.e. non-sale) fare on that segment. Most of the time this wouldn't result in anything too weird - the room charges were usually a lot more than the difference between the lowest coach fare and the highest coach fare (there being some regulations in place) because on a lot of LD routes, long-distance coach fares have a practical limit for the folks out there...
...until you got the NEC involved, where Amtrak actually has pricing pressure. At the time, Amtrak was also not selling sleeper space north of Washington, DC, so the room charge calculation basically pretended that you were getting off in DC. And just to top it off, at the last minute, Amtrak sleeper fares tended to /drop/ to sell the remaining space (Amtrak wanted to push up rider counts), especially if there was a "dead leg" (the train was sold out further south, blocking through passengers) - and until Amtrak adopted e-tickets in about 2014 or so (not making that up - cash value tickets stuck around well into the 2010s, and if you hadn't printed off your ticket, you could get a no-questions-asked refund) - while coach/business fares on the NEC usually went up.
So it was not at all uncommon to be able to book a sleeper Richmond-NYC for $10-20 less than coach on the Regional (sometimes less than coach on that train) and WAY less than Business Class on the Regional. And in those sleepers you got a hot meal rather than just free soda, and a bed.
BTW - this went utterly crazy for a year or two when they pulled the diner off the Silver Star. To make up for the loss of the diner, they dropped the room charge by like a third. The result was that the sleepers on that train were basically turning over in Richmond and Raleigh (you might see 12-20 pax getting off at either stop, which was like half of the train's capacity). You didn't get that hot meal, but paying like $150 for a room with a bed New York-Richmond was a stunning deal.
In addition to everything else that's been written, the convertibility of business class cabins means that, when buying a ticket close to departure, the airline may have 3 seats in business class that are likely to go out empty while availability in Y is smaller and/or can be oversold more easily (e.g. you may be able to send pax to fly a LCC which doesn't offer C). Operational upgrades also aren't guaranteed to work well...
In addition to everything else that's been written, the convertibility of business class cabins means that, when buying a ticket close to departure, the airline may have 3 seats in business class that are likely to go out empty while availability in Y is smaller and/or can be oversold more easily (e.g. you may be able to send pax to fly a LCC which doesn't offer C). Operational upgrades also aren't guaranteed to work well on these flights, as they can involve things like splitting families or kicking your frequent flyers out of their preferred seats (for my last 90-minute flight on Lufthansa I got 'upgraded' from an exit row aisle to 3A- I wasn't amused), so it makes sense to encourage people to buy business tickets.
It's interesting that you focus on IB, because that is the airline for which I have also seen Business seats on sale for < Economy as well (usually one stops, e.g. PMI-MAD-ACE).
IB business can even better if you are a resident of the Spanish Islands, where you get 50-75% off base fares in all cabins.
I've had domestic IB biz for less than 30 euros before.
Not one of your better articles Ben. The sentence structure reads like it was written by ChatGPT. By the end of the article I still don't know the answer to the question.
Thank you! My sentiment, exactly!
This used to happen quite frequently on virgin America short haul flights. First class was either cheaper than economy (not by much) or just $20 more.
My theory is that airlines don't actually have good automation infrastructure. I'm pretty sure they still rely on people emailing spreadsheets to each other for pricing updates and I bet this fare issue happens because the updates to prices are not in sync because of flawed spreadsheets or the...
This used to happen quite frequently on virgin America short haul flights. First class was either cheaper than economy (not by much) or just $20 more.
My theory is that airlines don't actually have good automation infrastructure. I'm pretty sure they still rely on people emailing spreadsheets to each other for pricing updates and I bet this fare issue happens because the updates to prices are not in sync because of flawed spreadsheets or the airlines only open a specific window in the day for database updates and they can't get the business class prices in time and don't want to wait. This is the norm for many many many corporations in the world. The more acquisition a company makes the more likely you'll see this update sync issue because the systems between the company and the one they acquired is so vastly different. I personally have seen this in several companies I have worked for and you will be shocked at how frequently managers are afraid to fix it because it's costly, they don't have skillful people and they worry they will break something. So they just leave everything as is.
This is an interesting article, but it really doesn't explain WHY this happens, only HOW (economy and business fare buckets overlap in cost and all except the highest economy fares sold out).
If, as you say, fares are constantly updated, it doesn't explain WHY the airline isn't either updating the business class fare availability to be no less than the economy fare or simply pulling all business class availability and selling those seats as economy,...
This is an interesting article, but it really doesn't explain WHY this happens, only HOW (economy and business fare buckets overlap in cost and all except the highest economy fares sold out).
If, as you say, fares are constantly updated, it doesn't explain WHY the airline isn't either updating the business class fare availability to be no less than the economy fare or simply pulling all business class availability and selling those seats as economy, then upgrading the passengers. And that's not not even considering the reconfigurability of Iberia's intra-European equipment.
"It's complicated" is true, but this part seems pretty easy UNLESS some other factor about the economy fare buckets offered causes the airline to consider them genuinely more valuable than the business class seats (maybe they're fully refundable and the business class buckets are not). Alternatively, perhaps this condition only exists for a short period BEFORE the fare buckets are adjusted -- a sudden, unexpected run on economy consumes all the cheaper fare buckets and it's an hour or two before things get adjusted?
European economy is atrocity. Especially anything owned by BA. I have voluntarily downgraded myself to exit row seat from the biz on more than one occasion.
Business class in Europe is only worthwhile for longer intra-European and connecting flights and definitely not for the aircraft seat!
I think what's missing in your article to make the point very clear and easy to understand, is to explicitly explain why there are many fares and why prices vary so much between fare classes. The Economy tickets available may have been full flex only (rebook/refund without fee, checked luggage, etc.), whereas the cheapest Business fare on the same flight may have been a 'saver'-type fare without checked luggage included, no refund-no rebooking possibility. These...
I think what's missing in your article to make the point very clear and easy to understand, is to explicitly explain why there are many fares and why prices vary so much between fare classes. The Economy tickets available may have been full flex only (rebook/refund without fee, checked luggage, etc.), whereas the cheapest Business fare on the same flight may have been a 'saver'-type fare without checked luggage included, no refund-no rebooking possibility. These details will always have a massive impact on fare price in addition to demand and number of available seats (supply).
I have a scheduled (domestic) Delta flight in September that I booked a couple months ago. I went back and checked it recently and first class was $10 more than the Comfort seat I had paid for.
I called Delta and they moved me to first and I happily gave them the $10. Even the agent told me - good catch.
Especially on short corporate travel heavy routes (probably not MAD-ATH, but ZRH-HAJ or VIE-BRU) it is due to corporate travel policies. Nobody will be entitled Business Class travel on a one hour flight, yet they have to offer it for connecting longhaul premium pax. In order charge corporate travellers high fares, economy nedds to be expensive!
Similar generalization are always wrong. My travel policy covers intra-Europe flights in J regardless of length, and I know many bankers, lawyers, etc. who are also entitled to J on these flights.
Well, HAJ is mainly a manufacturing industry driven route and BRU ist mainly government driven. Of course, there might be the occasional banker or lawyer, but that's certainly not the main demand on these routes.
I am in government and, except may be a minister (if not flying on an air force jet anyway), nobody is entitled to J on such short routes.
We see this in intra Europe flights quite often.
But the most restrictive biz fare is cheaper than a flexible economy one, so you might end up with a biz lite ticket that allows no changes.
In general, I find the fare difference between economy and biz in europe is less than other parts of the world, because of the blocked middle seat situations. This also explains why this situation happens often.
Aren't seats on intra-Europe flights the same in business and economy specifically so they can adjust which row the split is between the cabins? If so, supply is adjustable if there's outsized demand for one of the cabins.
Ben's explanation makes perfect sense, but it feels that intra-Europe should be the exception to the rule.
Yeah but this is usually only done within a certain corridor. So you will never see a Lufthansa flight with zero rows in Business class and you will similiarly never see one with 75% Business regardless of demand structure. This is due to staffing and catering and other considerations like accomodating people who are rebooking.
My record was ONE row of Business Class (MAD-CDG; I was connecting to long haul the following morning).
I recently had a BA flight with 16 rows of club europe.
It was a very short flight as well - either BCN or NCE; I can't remember which.
@ben: while your explanation makes sense. Intraeuropean flights have a changeable no of biz class seats right? so if, as you say, the demand for economy was high and business low why wouldn't the airline just change the # seats of in each category rather then resort to the non sensical pricing of more expensive economy than business?
Yeah but this is usually only done within a certain corridor. So you will never see a Lufthansa flight with zero rows in Business class and you will similiarly never see one with 75% Business regardless of demand structure. This is due to staffing, catering considerations and other factors.
It’s also worth mentioning that relatively few customers are looking at these two class fare options side by side.
I’d say most are just clicking the [Google Flights, etc.] economy link and checking out.
This is good counsel full stop. Some people assume Y always is less. Or the gap from Y to the next class of service is astronomically higher. Check, recheck and check again.
Last time I saw this with Iberia (Madrid to Santiago), my ticket got canceled. LOL
I’ve seen this crop up every so often, especially on BA itineraries. Business is sometimes cheaper than premium economy which is what my company required me to book. But it was easy to get permission to book business once I showed the Finance guys the fare!
Yes, I've found this myself on BA.
When searching for Biz tickets IB always shows Y fares for comparisons. Lowest fare searches show the cheaper booking classes.
When I was still working my employer had a policy that everyone had to fly economy. No domestic first class at all. End of discussion.
Well it happened that I had to go to New Mexico from Boston. last minute, and (because I do this), I checked the First Class rates and found that the price was much cheaper.
I had to get permission from the Comptroller, and boy did that stick in her craw to give me that ok.
Great post Ben, I really enjoyed reading.
Pricing is almost exclusively driven by algos and no way to get algos to be 100% sensical.
seems like it would be easy to include a check in the algo that forces business to be more than economy
Most Delta first/business fares are dual-inventory and are priced relative to an economy fare with the same advance-purchase, minimum stay etc. requirement. For instance, a particular Z fare might be based on a U economy class fare and require both Z and U availability to be bookable. Among other things, this practice ensures that business/first isn't cheaper than economy.
(Oddly enough, premium economy doesn't do this as extensively: it's not that difficult on DL to...
Most Delta first/business fares are dual-inventory and are priced relative to an economy fare with the same advance-purchase, minimum stay etc. requirement. For instance, a particular Z fare might be based on a U economy class fare and require both Z and U availability to be bookable. Among other things, this practice ensures that business/first isn't cheaper than economy.
(Oddly enough, premium economy doesn't do this as extensively: it's not that difficult on DL to find instances where the lowest available premium economy fare is greater than the lowest available business fare)
I regularly take advantage of paid upgrades on domestic short haul routes because doing so is cheaper than the combined cost of paying for a checked back and an extra legroom seat. Of course, this usually only makes sense on airlines where I don't have status, but it always feels like a decent deal.
It is always fun when you see these instances, make the decision to book a higher cabin easier without the guilt! Just booked a multi-city trip (3 cities - U.S., Middle East, Europe) in business but two of the longest legs ended up in first class which saved over $2,000! Yes it may not be the leading products of the world but still. Not many times I will ever end up in first, so will enjoy it.