The Prime Minister said that he himself has had to cope with higher ticket prices from low-cost airlines such as Easyjet and Ryanair because of increased demand during school holidays.
He accused the companies of deliberately raising prices and said he shared parents' frustrations. During an interview with Free Radio in Birmingham.
Mr Cameron said: "This is very frustrating and I have seen it myself when you are booking on Easyjet or Ryanair.
"Prices go up because of the demand and then you've got holiday companies who sometimes seem to deliberately put up prices at holiday time."
Mr Cameron said that more 'competition' in the holiday sector is 'absolutely key' to driving down prices. But he said that schools also have a part to play in helping parents to get a better deal. He said:
"The other thing we should do is encourage schools. They've got the freedom now to set different term times, is try to encourage them a bit of flexibility. Don't necessarily do everything the same and that I think will help parents."
Following a change in the law under the Coalition Government, head teachers are no longer allowed to grant pupils absence outside of school holidays except in 'exceptional circumstances'. (See below for more details of what these are.)
Head teachers can now issue fines to parents who take their children out of school for holidays.
The Prime Minister added: "What we shouldn't do is encourage parents to take their children away during term time. That is not a good thing for children's education and the evidence is pretty solid on that."
More on Parentdish: Am I allowed to take my child out of school during term time