Hey Ozbargain,
The reasoning for layover flights being cheaper than direct flights is pretty straightforward - Mainly supply/demand and also customers willing to pay more to fly direct.
However, I'm just wondering if anyone has any insight in how compared to a direct return flight, a multi-city flight plan with additional flights tacked on can come out cheaper.
The scenario/example is this:
Flying Cathay, a economy return flight from Melbourne to Hong Kong is around 1300 AUD.
However, if you book a multi city flight where you go from Hong Kong to Melbourne, and then sandwich a Hong Kong to Tokyo return flight in between, the total itinerary is cheaper (1200 AUD).
I.e MEL -> HKG (5 days)
HKG-> TYO (7 days)
TYO -> HKG (5 days)
HKG -> MEL
The prices for business class is even more absurd/crazy value. Business return with Cathay from Melbourne to Hong Kong is around 6000 AUD, while a business return from Hong Kong to Tokyo is around 4000ish. The multi-city itinerary as above is only 4000 AUD! I'm getting a whopping 4 business flights for four thousand dollary doos.
How is this feasible? It isn't a comparison between a direct flight vs a layover flight, you're literally just adding two additional flights on top of identical return flights, and instead of costing you, you're saving money. It isn't like there is a low demand for these routes either.
Using an analogy, If a pizza was $3 and a soda was $2, a bundle deal might normally be $4 - bundling them together would give you a discount compared to buying two separately. Here, its like a bundle deal is instead $2.5 - even if you didn't want a soda, you would get it anyway as the bundle would be cheaper than just buying the pizza on its own.
Going to Tokyo in this case can be seen as a subsidy instead of an add on.
Any insight or speculation would be appreciated!