Making a good airfare purchasing decision requires a healthy dose of technology and education. Today I want to broaden your insider knowledge of airlines and their prices by chatting a bit about the “invoice” price of an airline ticket. Since you don’t actually own the seat you fly — the “invoice” price is related to the flights that make up your trip and the easiest unit of measure for comparison is “price per mile”. As you might imagine airlines have a pretty significant difference in their costs. Would you shop for a car without knowing the Kelly Blue Book or Edmunds invoice? Keep reading–this will help you find cheap airfare sales.

Knowing the “invoice” price of an airline ticket and how to use it to your advantage will help you make a very “savvy”air travel purchasing decision — every time.

Sometimes a “good” air travel deal means you have to make a better “bad decision” — to do this it helps to understand what it costs to run an airline and how to correlate that to airline ticket prices — which will quickly tell you whether a particular airline ticket price is a “decent” deal or not ….

First Some Quick Background on Airline Operating Costs

It costs airlines between 8 and 16 cents per flown seat mile to operate an airline.

What does this mean you may ask and why does it matter? (Patience, patience)

Airline bean counters track the cost to operate an airline by doing some simple 3^rd grade math:

• Take all the flights during a certain time period (usually a quarter year)
• Count the number of seats on each flight and multiply by the distance in miles of that flight and add them all up - they call this “Available Seat Miles” or ASM for short.
• Take all the airline operating expenses for the time period and divide by ASM.

This gives you “Cost per Available Seat Mile” (CASM) which is tracked in “cents per mile”.

The following is equivalent of the “invoice” price for a airline ticket from highest to lowest operating costs for popular airlines in the 3rd Quarter 2007 (data provided by airlines via the Bureau of Transportation Statistics).

1. 15.8 cents per mile - US Airways
2. 14.0 cents per mile - Delta Air Lines
3. 13.6 cents per mile - Northwest Airlines
4. 13.5 cents per mile - Continental Airlines
5. 13.5 cents per mile - America West (merged with US Airways)
6. 13.3 cents per mile - United Airlines
7. 13.1 cents per mile - American Airlines
8. 12.0 cents per mile - Alaska Airlines
9. 10.8 cents per mile - Frontier Airlines
10. 9.5 cents per mile - AirTran Airways
11. 9.1 cents per mile - Southwest Airlines
12. 8.3 cents per mile - JetBlue Airways

A few things that should be noted about these numbers:

• Fuel is averaged into these numbers even though a coast-to-coast flight obviously chews up more fuel than a milk run to the nearest metro city
• Size of the airplane is averaged into these numbers so a 2 flight attendant regional jet with a pilot making half of his compatriots on larger planes is lumped in with a 5 flight attendant wider body flights

The bottom line though is that 12 cents is a good rule of thumb “invoice” price to have in mind.

The Cheapest Airline Ticket Prices Rule of Thumb

A coast-to-coast flight is approximately 2,400 miles (as the crow flies) and the very cheapest prices historically (those that you should strive for) are $100 one-way (you’ll see Southwest offering $99 one-way frequently during sales).

That is 4.2 cents per mile - Yes! a great coast-to-coast deal is much lower than the cost to fly the seat on a given flight.

My very cheapest airline ticket price rule of them is as follows:

• 4.2 cents per mile - traveling coast to coast - $100 each way (2,400 miles)
• 6.2 cents per mile - traveling a few states over - $75 each way (1,200 miles)
• 10 cents per mile - traveling nearby city or within state - $50 each way (500 miles or less)

Only a very small percentage of passengers on each flight have paid these cheapest prices - airlines have about 6 to 8 price points for a domestic flight - the cheapest being the most difficult to find and book.

Ever wonder why the New York to Boston Shuttle is a coveted route for an airline? Notice how short haul flight passenger revenue per mile is much higher - especially for business travelers who can pay upwards of 1$ per mile … now you know why…

The Other Shoe Drops

Alas the one big problem for an airline is how many people actually climb on board a particular flight. Airlines strive to maximize profits on thousands of flights a day — as you might imagine — trying to do this is like “rocket science” on the complexity scale.

Obviously every airline wants to maximize the number of business travelers paying 20-50 cents or more per mile, but luckily for most leisure travelers they can’t fill up airplanes completely with business travelers.

Conversely, it doesn’t take a Phd to note that flying an empty seat is not very desirable, which is where those bottom 3 to 4 airline ticket price points for leisure travelers comes into play.

Leisure travelers should try to get in the 5 to 15 cent category whenever they can (you can only do this if you start shopping earlier than most which is 30-40 days out for leisure travelers).

How Much are My Frequent Flyer Miles Worth?

It turns out knowing the price per mile can also help you make a good decision on your frequent flyer mile redemptions.

Airlines will sell them to you or thousands of other businesses that offer them to you for 2-3 cents mile.

A few 3^rd grade calculations should allow you to quickly tell whether paying $200-400 for an airline ticket makes more sense that redeeming your miles (assuming you can find a seat with your miles).

Bottom Line

Learn how to quickly compute the price per mile in your head (or buy a 50 cent calculator) — know the rules of thumb for the cheapest price per mile and you’ll have more arrow in your “savvy” air travel shopper quiver.

Making good airline ticket purchasing decisions is both an art and a science — at FareCompare.com we strive to provide the best technology coupled with the insider eduction so you can always make the best air travel purchasing decision.