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Canadians may find themselves paying hundreds of dollars more for airline tickets, thanks to a pricing strategy that may be difficult for consumers to circumvent.Mario Tama/Getty Images

Passengers may find themselves paying hundreds of dollars more for airline tickets based on their country of origin, owing to a sophisticated pricing technique employed by some airlines.

While the practice isn’t new, it remains little-known even among well-travelled consumers. Calgary-based United Airlines UAL-Q frequent flier Michael Gillies, for example, was befuddled when he noticed what he at first thought was an egregious currency conversion error on the carrier’s website.

In early February, Mr. Gillies, who is an oil broker, set out to buy a return air ticket for a business trip to Houston. But after inputting his Canadian credit card details on the U.S. version of the United website, he saw that the ticket price of US$968 that he’d been eyeing had turned into a $1,774 charge in Canadian funds – nearly $500 more than what the fare would have been according to the market exchange rate.

The discrepancy was no algorithmic glitch. Instead it reflected a pricing strategy that may be difficult for consumers to circumvent.

The two fares reflected a different availability of tickets available for purchase on the Canadian version of the website compared with the U.S. version, United said in a statement by e-mail.

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It’s what aviation expert John Gradek calls “resident fares,” different pricing that airlines apply based on where a passenger is calling or surfing the web from to make a booking.

The strategy reflects that different geographical markets may have different demand and affordability thresholds for the same flight itinerary, said Mr. Gradek, co-ordinator of McGill University’s aviation management program.

The practice, which Mr. Gradek describes as “fairly common,” is part of airlines’ long-standing dynamic pricing strategies, which apply different fares for the same flight based on market conditions.

Algorithms designed to squeeze every last cent from paying customers have, at times, drawn the ire of consumers. U.S. ticketing giant Ticketmaster, for example, has recently faced criticism from music fans for some concert ticket prices reaching thousands of dollars a seat when the company applied dynamic pricing. (Ticketmaster says it uses the feature with consent from the artist.)

When it comes to airlines, though, consumers are generally accustomed to seeing flight prices fluctuate. They’ve also become better at eluding airlines’ attempts to extract maximum prices. Savvy fliers who want to save money know, for example, to check prices at several different times, set up price alerts or check the historical price trajectory of flights using tools such as Google Flights.

A price hike based on country of origin, though, is harder to avoid, according to Mr. Gradek.

And complicating matters is various third-party travel booking websites can display different pricing than the airlines’ themselves.

Using a credit card that allows for charges in U.S. dollars didn’t help Mr. Gillies, who said his fare still changed to Canadian dollars as soon as the United website detected his Canadian address.

One possible solution is to book the ticket through a U.S. travel agency, which will issue a ticket based on an American address. While the workaround is more time-consuming and requires passengers to pay a modest fee, it may be worth it if the price discrepancy is significant.

Still, even detecting an airline’s application of dynamic pricing based on country of origin can be tricky. Airlines may apply the feature on certain flights but not others or use the pricing strategy on certain routes for only a limited period of time, Mr. Gradek said.

Mr. Gillies, who flies up to 10 times a year for business alone, said he only saw wide price differences between U.S. and Canadian fares for United flights three times in the past five months.

But now that he’s discovered the price difference is intentional, he’s ready to hop on a competitor’s flight, if the price is right, despite the overall positive experience he’s had flying with United, he said.

“I’ll definitely go to the cheaper option.”

Are you a young Canadian with money on your mind? To set yourself up for success and steer clear of costly mistakes, listen to our award-winning Stress Test podcast.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 4:00pm EDT.

SymbolName% changeLast
UAL-Q
United Airlines Holdings Inc
-0.08%51.38

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