A shorter flight can cost three times more than a longer one
On two similar trips out of Detroit, the one with three airlines is $76 and the one with one airline is $242.
Wendover Productions · How Airlines Price FlightsFrom Detroit, a 170 mile flight to South Bend, Indiana, costs $76. A 240 mile flight to Pellston, Michigan, costs $242. Both trips use the same model of small regional jet, and both burn about the same fuel with about the same crew, yet the shorter trip costs less than a third of the longer one.
The difference is not what it costs to fly the plane. It is who else is flying the route. South Bend is served by three competing airlines, whereas Pellston is served only by Delta. When three airlines want the same passenger, the only easy way to win is to charge less, and prices fall toward what leisure travelers are willing to pay.
When one airline has the route to itself, that pressure disappears. The lone carrier can set the fare based on what travelers with no other choice will pay, which is often business travelers and people visiting family, and not on the cost of fuel or miles.
The same pattern holds over much longer distances. A six hour round trip from New York to Los Angeles costs $250, while a six hour round trip from New York to Dublin costs $500. The time in the air is similar, but more airlines compete for Los Angeles, so the fare is lower.
That is why small airports are so often expensive. Fewer airlines means less competition, and less competition means higher fares, even for a short hop.
Questions people ask
If competition lowers fares, why don't more airlines just start flying to expensive small airports?
Small airports have fewer passengers, so it is hard for a second or third airline to fill enough seats to make money. They also have fewer gates and takeoff and landing slots, and business travelers often stay loyal to one airline for frequent flyer miles, which makes it harder for a newcomer to win customers.
Do airlines actually make money on those $76 competitive fares?
Sometimes they do not, at least on that seat alone. Airlines will sell some seats at or below cost to keep passengers from switching to a rival, because holding market share at a major hub is worth more over time. They make up for it with higher fares on monopoly routes and with last minute business fares.
Does driving distance matter, since you can drive to South Bend but not to Dublin?
Yes. On short routes, airlines also compete with cars, buses, and trains, which puts extra downward pressure on fares. On transoceanic routes like New York to Dublin, flying is the only practical option, so airlines have more power to charge what travelers will pay.