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Tuesday, June 2nd 2020

"I'm a travel junkie who's hooked on deals from YVR." - Chris Myden

Why Icelandair's prices suddenly look cheaper, when they are actually more expensive

Airline prices look cheaper, but are more expensive

A couple of weeks ago, Icelandair made a major change in their fee structure, which, overnight, made it seem like their prices suddenly became quite a bit cheaper, when in fact they are now more expensive.

Here is an example:

Let's say you're looking for a flight from Vancouver to Stockholm, Sweden.

You have a look on Google Flights, and notice there are roundtrip flights for $460...

"Pretty great price," you think to yourself.

And indeed, you remember that a few months ago YVR Deals posted an Icelandair deal from Vancouver to Stockholm, Sweden for $470 roundtrip.

"Ok, so $460 is probably a pretty great price then, right?"

But something is very different now

Up until this point, Icelandair has always included a piece of checked luggage with their lowest priced fares.

As of early October, they no longer do. (Bookings made before October still automatically include checked luggage).

What this means is that the $460 flights that are currently showing up on Google Flights, Kayak, Skyscanner, Expedia, Icelandair's website, and every other website or app in the world, are no longer the *realistic* price.

The $470 deal I posted a few months ago was the realistic price.

The $460 prices you are seeing everywhere now are the *unrealistic* price.

To get back to the realistic price, you now need to add back in the cost of a piece of checked luggage.

To do this, you need to search for your flight on the Icelandair website, and instead of choosing 'Economy Light' (no checked luggage) you now need to select 'Economy Standard' (with checked luggage).

We can see that the realistic price for this flight is actually now $610 roundtrip...

Comparing this price against the price from the deal I posted a few months ago ($470) we can see that Icelandair's realistic prices have actually increased by 30% !

This is not an isolated, cherry-picked example. Pretty much all of Icelandair's prices are actually around 30% higher than they were before the fee structure change a few weeks ago.

Why Icelandair is doing this

I don't mean to pick on Icelandair (who has been a major reason for better prices from Canada to Europe in the last few years).

They are definitely not the first airline to make this change, and they are certainly not going to be the last. This is a trend that has been on the rise as of late.

Delta, United Airlines, and American Airlines have recently started doing the exact same thing with their domestic flights - only they are making their prices unrealistic by taking away access to the overhead bin (aka carry-on luggage) or the ability to select your own seat.

Icelandair is likely doing this in response to their closest competitor, WOW Air, the other Iceland-based carrier offering connecting flights to similar European destinations.

WOW Air has always structured their fares this way, from the time they launched. (WOW Air flys out of Toronto and Montreal, as well as various U.S. cities).

Why the airlines are doing this

If you ask the airlines why they are doing this, they'll usually give you a line about 'more choice for the consumer'.

Let's be honest though, the choice to fly overseas without a piece of checked luggage isn't realistic for the majority of people.

But if you *can* get away with flying overseas using only carry-on, you might be the one consumer segment to actually benefit from this new trend. People flying with checked luggage will effectively be subsidizing your cheaper 'seat only' airfares - while they pay more than they used to.

I think there's probably 2 main reasons why the airlines are really doing this:

1. They hope that consumers won't really notice the change, and can make more money this way. In fact, to a lot of people, if they do notice a change, it may seem like the prices are cheaper than they used to be.

2. They want their airfares to appear to be the cheapest on travel websites, search engines, apps, etc, knowing that most people tend to just start their search by looking at the cheapest airfares, and their fares will appear at the top of the search results.

It couldn't have been easy for Icelandair to sit back and watch WOW Air's prices always be the ones that showed up on travel sites as the 'cheapest flights' - even when Icelandair often had the better deals when it came to the realistic price.

Does it matter?

It wouldn't matter as much, if *all* airlines would adopt the unrealistic price model at the same time.

That way, it would be easy (or at least, easier) for travelers to compare apples to apples.

Right now, we are in an awkward transition phase, where some airlines have their unrealistic prices being the ones that show up first on travel sites, airfare search engines, etc - while other airlines are still displaying the realistic prices, but wondering if they too should adopt the unrealistic price model to have their airfares appear to be the cheapest.

As a traveler flying from Vancouver, the three airlines to watch out for with regards to this issue are Delta (when flying to the U.S.), Interjet's new flights to Mexico, and now Icelandair (when flying to Iceland or Europe).

For my part, it's pretty easy for me to compensate for these changes that the airlines are making, and I will continue to only post a deal when the realistic price is unusually low - after comparing apples to apples - and not misleading anyone using unrealistic prices as bait.

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One Response to "Why Icelandair's prices suddenly look cheaper, when they are actually more expensive"

    Has fn0 been here?
       fn0 on October 16th, 2017

    If you book an "economy light" fare then later change your mind about travelling without a checked bag you can add one for C$126 (Canada to Europe), or C$92 (Canada to Iceland) without having to upgrade the class of ticket. Pricy!

    On a side note the voice on the "all agents are busy" recording on Icelandair service centre (1-800-223-5500 prompt 1) is remarkable if you have ever heard Vincent Price or Boris Karloff.

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