For the past decade, airlines have shared a wholly unofficial motto: "Never be a dollar more or less than the competition."
If you don't know what it means, you should, since you're responsible for it; you and everyone else who flies. And if you don't understand the motto, you could be overpaying every time you buy an airline ticket.
What difference can a dollar make to an airline? Possibly the difference between solvency and flying emptier planes -- or at least planes that aren't as packed as their owners like them. Years ago, this dollar difference didn't matter so much; in fact, a difference in airfare prices of $10, $20 or sometimes even hundreds wasn't such a big deal. You called your favorite airline, or relied on a travel agent who knew what you wanted, and paid the asking price. Then along came the Internet.
Airfare search sites helped revolutionize the air travel industry, because you could easily compare prices. Airlines were initially enthused about these new direct-to-consumer shopping channels because it allowed them to cut the costs of human travel agents from the food chain but carriers did not foresee an unintended consequence of ubiquitous price comparison: the death of loyalty. Consumers happily embraced online price comparison and sold themselves to the lowest bidder, miles be damned.
Fast forward to the current era - the airline fee generation - where price comparison search sites called OTAs (for "online travel agencies") and METAs ("multiple site search") give airlines new headaches. In most cases, today's search sites don't give fliers access to the "extras" so dear to the hearts of airlines, and by extras I mean the money-makers like more legroom (for a fee) or early boarding (for a fee). You get the picture.
But where the dollar difference really matters is in the meat-and-potato section of today's sites: the actual airfare listings. I recently looked up roundtrip nonstop flights from LA to NY and saw listings for Continental, United and JetBlue, in that order, for $516. Alaska, with airfares for a buck more, made page two of the listings. And poor American, only five bucks higher (and that isn't much for a ticket that's already costing you over 500 bucks) didn't appear until page five.
It's pretty common knowledge that on a Google 10-pack display of search results, the most clicks go to the items in the number one spot, the number two spot - and the number ten spot. Ten? Yes. Chalk it up to human nature; we trust the top two picks and then we like to scroll down to the bottom whereupon we get bored and click the last on the list.
You tell me: would you look through page after page of identical airfares or pages that show airfares for a few bucks more - or would you buy the first airline ticket you see at the lowest price? Okay, maybe you'd look through a page or two to see if the carrier with your miles program is listed, but beyond that, many of us just don't filter results that much.
Now as to why there are so many identical prices, there's no mystery: airlines have a set of top markets or city-pairs that are their key money makers and they manage the prices of these routes closely. With the lesser routes, airlines just want to sell their fair share and that means being at what is called "competitive equilibrium"; in other words, they keep it close to show up on the first results page.