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I am based on Chennai and currently living in Toronto. I am planning to go to Switzerland from Chennai after some months ( once I back to Chennai).

Currently I am estimating my vacation cost ( 3-4 days stay in Switzerland , 4 members family).

Approximately, Switzerland is halfway from Chennai to Toronto ( based on distance ), So I expect the airfare to Swiss should be around 50-60% of the airfare of Chennai-Toronto. ( Assume, other than distance all factors are same ie. travel dates, weekdays, off/on season etc).

But I noticed that Chennai-Zurich costs almost 80% of Chennai-Toronto airfare. ( CAD 850+ compared to CAD 1100, if travel dates falls in Oct 2019).

How the airlines decide fares? As per my understanding distance is the most important factor.

Or Am I missing anything?

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tl;dr: do not, ever, try to find logic in airline pricing. There is, but it's beyond human understanding.

The airline tries to maximize its profits and once it decides to fly a plane from point A to point B its costs are pretty close to being fixed regardless of how many seats it can fill. So, it'll try to fill it to the brim while asking the most money it can. Obviously cheaper tickets are easier to sell but more expensive tickets bring more profits. So it has very sophisticated systems making a prediction on how much demand will there be for a given route at a given point of time and it will compare to the supply on said route and set price accordingly. This is so badly not based on distance that you can fly from city A to city C with a transfer in City B cheaper than flying from city A to city B -- (ab)using this is called hidden city ticketing.