You're lusting after that new Mercedes Cabriolet. Or maybe you're in the market for a 10-year-old Camry for your high school senior. And you want a good deal.
You don't pick a price out of thin air; no, you do research, you compare prices, you check in with Edmunds and the Kelley Blue Book.
And guess what? You can do the same thing when you shop for airfare. It's all in knowing how to intelligently compare prices.
Know Your Airline's Invoice Price
When you buy an airline ticket, you're not buying a seat, of course, and you're not quite renting it either. You are purchasing the right to travel from point A to B on a certain day and time. Airline bean-counters track the revenue from your airline ticket purchase by noting the purchase price and then dividing it by the number of miles you have flown: the cents per mile.
The airlines' goal is pretty basic — make sure the cents per mile you pay is greater than the cost per mile it takes to operate the flight. I like to call the airlines' operating cost the invoice price of an airline ticket.
As you might imagine, all kinds of factors go into calculating the invoice price, including the size of the plane, number of crew members, cost of fuel, customer services and more. Typically, the cost per mile for airlines has ranged between 8 and 16 cents. That's right; some airlines operate their planes at almost twice the cost of others — which is how the term low-cost airline was coined.
Take a look at these invoice prices (cost per mile) for a dozen airlines from last year. The data was provided by the airlines to the federal Bureau of Transportation Statistics and is for the third quarter of 2007.
15.8 cents per mile — US Airways
14.0 cents per mile — Delta Air Lines
13.6 cents per mile — Northwest Airlines
13.5 cents per mile — Continental Airlines
13.5 cents per mile — America West (since merged with US Airways)
13.3 cents per mile — United Airlines
13.1 cents per mile — American Airlines
12.0 cents per mile — Alaska Airlines
10.8 cents per mile — Frontier Airlines
9.5 cents per mile — AirTran Airways
9.1 cents per mile — Southwest Airlines
8.3 cents per mile — JetBlue Airways
If you know what a good airline ticket invoice price is, you'll recognize a good deal when you see one (and not everyone does).
How to Calculate the Invoice Cost
For example, a coast-to-coast flight is about 2,400 miles. Occasionally, you will see Southwest offering coast-to-coast flights for $99 one-way during one of their sales.
Do the math (divide $99 by 2,400) and you get 4.2 cents per mile. Compare that to the cost-per-mile invoice costs above, and you know this is a great deal.
Here's my rule of thumb for the very best airline ticket prices based on the length of a flight (and note: longer flights are generally cheaper on a cost-per-mile basis):
$100 each way (2,400 miles) — 4.2 cents per mile – when traveling coast to coast.
$75 each way (1,200 miles) — 6.2 cents per mile – when traveling a few states over.
$50 each way (500 miles or less) — 10 cents per mile — when traveling to nearby cities or in-state.
Again, these are the best of the best deals but it's important to remember that the airlines set aside only a few seats at these prices and they go very quickly. When you see deals like these, don't wait. Book those airline tickets immediately.
Start Shopping Early
Leisure travelers should try to buy tickets in the 5-12 cents-per-mile range whenever possible; the one sure way to do this is to start shopping much earlier than you probably do today — about four months before you want to fly and travel on Tuesday and Wednesdays — the cheapest days to fly.
Business travelers don't usually have the luxury of shopping this early but should always try to purchase tickets at least seven days before departure and preferably 14 days before. Once you get within those seven and 14-day windows, the airlines typically have the biggest price increases.
What About Frequent Flier Miles?
You know what airlines consider frequent flier miles to be worth: they'll sell them to businesses (or you) for between 2 and 3 cents a mile.
So, a few third-grade calculations should quickly tell you whether paying $300-$400 for an airline ticket makes more sense than redeeming your miles (that's assuming you can find a seat with your miles).
When the price of a ticket gets high enough, it makes sense to use miles. For a coast-to-coast trip that's roughly $240 each way ($240 coast-to-coast, divided by 2,400 miles is 10 cents per mile; that's 3 to 4 times what the airlines sell them for).
Always Shop With the Invoice Price in Mind
Learn how to compute the "price per mile" in your head (or buy a 50 cent calculator), remember the "cheapest distance and price rules of thumb" and compare prices to see who offers the best deal.
It's like shopping for that gorgeous SUV you've had your eye on: You aren't going to walk into the showroom, say "How much?" and pay whatever they tell you. Use that same savvy when shopping for airline tickets.
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
Rick Seaney is one of the country's leading experts on airfare, giving interviews and analysis to news organizations including ABC News, The New York Times, The Wall Street Journal, Reuters, The Associated Press and Bloomberg. His Web site FareCompare.com offers consumers free, new generation, software combined with expert insider tips to find the best airline ticket deal.