...Pricing strategies of low cost airlines Keith J Mason Air Transport Group Cranfield University K.Mason@Cranfield.ac.uk 1. Introduction Low cost airlines such as EasyJet, and Ryanair have developed quickly in the European market in the last five years. The UK market has seen the most dramatic development where by the summer of 2001, these carriers accounted for over 22% of the short haul capacity from London and were present in 58% of the 128 short haul routes operated from this city (source: OAG, 2001). During a five-year period from 1997, the seat capacity offered from London has risen by 17%, and virtually all of this rise (95.4%) was attributable to the low cost carriers. The low cost carriers have both penetrated and grown these markets, principally by garnering a consumer perception that the fares offered are very low. This perception has been developed in no small part by extensive advertising and effective use of public relations. For example, Ryanair has offered fares as low as one penny (plus taxes), and therefore it is not surprising that there is great media coverage of these carriers, which in turn generates more interest in the services. Both Ryanair and EasyJet have been very effective in using media coverage of their legal wrangles with traditional carriers such as British Airways and Lufthansa to promote their services and low fares. While the media has helped these airlines communicate their message of low fares to the public...
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...American Airlines 1992 Value Pricing Strategy Evaluate American’s 1992 announcement of a new rate structure: a. What changes did American make? To replace the old domestic air-fare system with 16 different prices, discounts, and restrictions that are constantly changing, American made four key changes to its fares. 1. Instead of 16 different prices, American simplified its pricing structure to include only 4 kinds of fares: a first-class fare, a coach fare that can be bought anytime before flight time (full-fare), 21-day advance-purchase fare, and 7-day advance-purchase fare. The new fare structure was expected to reduce administrative labor costs related to managing different fares by $25 million annually. The change was also expected to reduce coach fares by 38% on average and first-class fares by 20% to 50%, while the cuts in discount rates were smaller. American believed that the fare cuts will produce an increase in travel (number of air tickets sold) which would not only cover but also exceed the reductions in prices per ticket. American anticipated the new system will eventually increase annual revenue by as much as $350 million. 2. Unlike the old fare system which did not allow refunds or reschedule, passengers who buy advance-purchase tickets under the new system will have the option to reschedule their flights if their travel plans change by paying a $25 processing fee. First-class and coach tickets are refund-able, which stays the same from the old system...
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...B Competitive Strategies and Government Policies Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/eco-365-week-5-learning-team-b-competitive-strategies-government-policies/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Competition and Policies Influencing the Airline Industry Emerging Companies, Mergers, Globalization, Pricing, and Profits The airline industry is characterized by increased levels of competition as a result of new companies that venture into the market. Such new entrants bring about an increased level of competition for the existing volumes of consumers that the different airlines have to share. Mergers occur when two companies come together to combine resources, market share, and experience to acquire a better position in the market. Mergers also create a greater pool of resources and stability, which is attractive to consumers. Globalization brings about a higher level of travelling where people will be moving from one point to another. As a result, airline services will be at a greater demand and hence increase business. However, this will also mean that airlines from foreign nations can access any region and as a result there is greater competition (Botten & McManus, 1999; University of Phoenix, 2011). Pricing, Sustainability...
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...ABSTARCT: This report aims to give a brief understanding of strategic commitments, the rationality of predatory pricing and the extent to which predatory pricing strategies are used in the global airline industry. DATE: 5th March 2015 Introduction This report aims to give a brief understanding of strategic commitments and the rationality and extent to which predatory pricing strategies are used in the global airline industry. The Airline industry, being highly competitive, offers many examples of both Strategic Commitment making and Predatory Pricing strategies. What are Strategic Commitments... The commitments that firms make are two pronged, having direct and strategic effects. The direct effect is the clearly identifiable aspect of the commitment. The strategic effect of the commitment is more subtle, as it is the influence and response which the commitment generates from the competitors in the market in regards to their intended short/medium term tactical plans. Strategic commitments can be described as a form of strategy that firms have at their disposal, in which information on plans or intended actions by the business are publically released with the purpose of influencing the actions of other key market players. To be considered a strategic commitment the announced plan/action must have visibility so that those it is intended to influence can observe it, and it must be difficult to reverse, due to costs or other factors such as potential damage to a firm’s...
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...It is commonly known that the airline industry uses a different mechanisms to price discriminate (PD) consumers with varying elasticities of demand in terms of travel.[1] In this case study, I will investigate PD based on the day of the week a ticket is purchased. In theory, this method of price discrimination is very feasible as airfares can be easily changed on a day to day basis. For example, consumers who travel on any given day of the week but purchase on the weekend may have different PED than those consumers who purchase their tickets during the week. By comparing different days of the week and ticket prices, we can study whether the airline industry has identified this method as a valuable segmenting device. I will start this case study by defining the theory of PD then continue by assessing data regarding ticket prices and day of week of which purchased then conclude if there is enough evidence of PD. Price discrimination is the practice of charging consumers different prices for the same good or service, whereby the relevant price in each case depends on the buyers characteristics. The most common form of PD would include grouping consumers based on certain attributes and charging these groups a different price. In pure price discrimination, the price of a good or service will be set at the maximum of which each consumer is willing to pay. The goal of PD is to gain an extra slice of untapped revenue source from consumers who are willing to pay a higher price...
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...UNIVERSITY Southwest airlines: staying ahead in the pricing game ASSINGMENT NO: 3 NAME: RIFFAT AL IMAM ID: 1030234530 COURSE: MKT 202 SECTION: 1 SUBMISSION DATE: 8-3-11 SUBMIT TO: M.A. SADAT SHIMUL ANS TO QUESTION NO 1 Southwest airline is one of America’s most successful air lines. It started its journey in 1970s.From the very beginning it has paid special attention to its pricing strategy. Southwest’s traditional pricing strategy has been low price strategy. When southwest airlines started their business, most of the people did not give it much of a chance. Southwest airlines strategy was completely different from other airline companies. They opted for “point to point” theory rather than “hub and spoke” theory. As a part of this theory they did not serve the major airports dominated by major airlines. They wanted to serve second tier destinations which cut down their costs. They served no meals, only snacks. It did not charge passengers fee to change tickets. It had no assigned seats. All of these ideas not only cut down costs but also helped to attract a particular group of passengers. It had no electronic entertainment, relying on humorous flight attendants. It not only had a low cost but innovative pricing strategy for passengers but it also had a unique plan for their employees. The airline did not offer a retirement plan: rather, it offered a profit sharing plan, thus keeping its fixed cost low. These strategies proved to be really...
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...Airline Ticket Pricing The basis of airlines competition for passengers and a larger share of the market are based on: i. Frequency of service and departure schedule on each route served ii. Price charged, relative to other airlines, to the extent that regulation allows for price competition iii. Quality of service and products offered ‐‐airport and in‐flight service amenities and/or restrictions on discount fare products Passengers on the other hand choose combination of prices, flight schedules and product quality that will maximize the utility of taking a flight. Therefore, it is in the interest of each passenger to have the best service for the lowest price possible on a flight that departs at the most convenient time (Peoples, 2012). Price elasticity is a measure of how responsive consumers are to price changes or consumers' price sensitivity to changes in price. From the law of Demand, we know for certain that an increase in the price of a product will always result in a decrease in the amount demanded and vice versa. That is, we know the direction of the change. Price Elasticity answers the question: When price goes up, how much does the quantity fall. Knowledge of price elasticity helps a firm to accurately forecast the impact of price changes on unit sales. Price elasticity also helps the firm determine an optimal pricing strategy to max profits. The understanding of the price elasticity of demand for a given company's services can guide the firm in...
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...full-service airline British Airlines. The marketing plan will address the class of consumers who prefer to use full-service accommodations. The marketing plan will use many of the market strategies, such as advertising through the media, flyers and the company website. The marketing plan will extend for a 12 month period and following will be an evaluation plan to be used on continuous bases. Company Overview-British Airlines The full-service airline offers high level of fixed and operating costs. Full service airlines operate with fixed cost and fixed products and service (Smith, 2002). The airline provides different types of services such as in-flight meal, travel assistant, lounge access, and many others services. The full service airline has faced much competition from the many low cost airlines on the market which are airlines that provide limited service for in-flights they are able to lower their costs of travel. The airline comes with many services including two class segmentations, online or direct travel agent, and others services. The carrier being one of the oldest airlines in the world continues to support the full service model despite the many low cost airlines. British Airways is the elite carrier in the United Kingdom. The headquarters are located in the Waterside area in London Heathrow Airport. British Airways is the largest airline in the UK it is ranked high among the fleet of international flight destinations. The airlines just signed...
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...”To stay competitive, organizations must change with market conditions and customer desires” (MacVicar & Gooderham, p1). Classic Airlines is facing a difficult time in their history. The organization has lost many of its loyal customers and its remaining customers are flying less frequently. The organizations CEO, Amanda Miller has challenged the marketing team with improving their number of loyal customers while increasing Classic Airlines profitability and stock price. All must be accomplished with a 15% cost reduction. To assist in its growth strategy, Classic Airlines marketing team is looking at growing globally and adding the United Kingdom to their international market. This paper will review channel and pricing strategies Classic Airlines must consider to achieve its desired results. Justification of choice of international market – UK Loyalty is a difficult goal and the most marketers can do at times is to encourage consumers to purchase one brand over another. Classic Airlines choice for an international market is access to the vast number of air travelers each year in the United Kingdom. The Department for Transportation in the United Kingdom estimates that “carrying over 235 million passengers a year and over 2.3 million tons of freight. Demand for air travel is projected to grow in the medium to long-term. Department for Transportation has put in place a long-term framework that balances the delivery of social and economic benefits from aviation...
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...Easy Jet and Ryanair; pricing strategies Flying high with low prices Introduction Easy jet and Ryanair and the two largest low cost airlines in Europe, they dominate the industry. They introduce low prices to entice customers; the earlier the customer’s book, the cheaper the price. By introducing these prices, Easy Jet and Ryanair have forced other airlines such as British Airways and Lufthansa to lower their prices. Both airlines have copied the American ‘South West airlines’ business model and introduced it to Europe. Easy Jet and Ryanair are able to provide the low prices by maintaining low costs. They cut costs in areas such as administration. With the online booking system, this saves them thousands of pounds every year. While cutting costs, the service given on board flights is not as good as the superior companies such as British Airways and Virgin Atlantic. It doesn’t have to be, as customers know that with the low prices comes low customer service. And for the cheap prices customers pay to fly with Easy Jet and Ryanair, they don’t mind. Ryanair Ryanair is the leading low cost airline in Europe. Founded in 1985 by the Ryan family they began with one flight and one aircraft flying between Waterford and Gatwick airport. Shortly after, they began flying regularly between Dublin airport and London Stanstead, competing with British Airways. ‘Carrying fewer than 700,000 passengers annually in its early years, the figures grew to 21.4 million years...
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...Southwest Airlines, Case Analysis Your name BUSN412 Business Policy August 7th, 2011 CASE ANALYSIS Southwest Airlines. COMPANY NAME: Southwest Airlines. INDUSTRY: Air Travel. COMPANY WEBSITE: (www.southwest.com) COMPANY BACKGROUND: Southwest Airlines Co. incorporated in 1967, is a passenger airline that provides scheduled air transportation in the United States. As of December 31, 2010, the company had 548 Boeing 737 aircraft serving 69 cities in 35 states (Southwest Airlines Company profile, 2011). Key officers include: Herbert D. Kelleher – Founder and Chairman Emeritus. Colleen C. Barrett – President Emeritus. Gary C. Kelly – Chairman, President & Chief Executive Officer. The Company functions primarily on point-to-point service rather than focusing on hub and spoke service. About 78% of the passengers of the airline travel on non-stop flights and the Company predominantly serve short-haul routes with flights operating highly frequent. (Southwest Airlines Company profile, 2011) SWOT ANALYSIS: Strengths: By far the biggest strength of Southwest Airlines is the ability of the company to offer reliable low-cost prices; they are also able to maintain lower operating cost which enhances its profitability. They were the first to introduce online booking, ticket less traveling, and no reserved seating, thus making it easier to turn around flights. The teamwork and efficiency within the company’s employees is widely recognized as one of the reasons...
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...INTRODUCTION Air blue is a private Pakistani airline based at Jinnah International Airport Karachi. It started its operations on May 24, 2004. It was the first private carrier of Pakistan to operate the Airbus A320 when it initially started. Air blue has been expanding rapidly despite experiencing competition from the other three airline operators in Pakistan. The airline mainly flies on domestic routes plus internationally to Dubai International Airport and also has plans to fly to the Gulf, UK, and USA. MISSION STATEMENT Air blue will be recognized as the most progressive enterprise in the transportation business. We will offer our customers cost effective transportation service within geographical areas and market segments that can benefit from our services and will insure a return on investment and growth rate consistent with current management guidelines. VISION STATEMENT Our vision is to make Air blue the most admired airline in the world. * Ensuring safety comes first * Providing Service Straight from the Heart * Encouraging product leadership * Delivering superior financial returns * providing rewarding career opportunities SWOT ANALYSIS of AIR BLUE: The SWOT analysis is the process of analyzing organizations and their environments based on their strengths, weaknesses, opportunities and threats. This includes the environmental analysis, the process of scanning the business environment for threats and opportunities, which is considered...
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...TURKISH AIRLINE INDUSTRY OVERVIEW June 12, 2011 · by AC · in Aviation. · Today, I would like to provide brief information regarding the marketing and survival strategies of the airline industry, both locally and internationally. I should probably stress that the airline industry is too global to be considered as only domestically so a marketing analysis ignoring the international market situations would be off balance and superficial. The airline industry in Turkey was first constructed as a monopolistic market. The major and the only company was the government-owned THY. This situation has changed within the EU standardization and privatization process. After the deregulation, many carriers came into the airline industry to compete against the market leader with the goal of taking advantage of the areas where THY was seriously lacking. Government Regulation used to be the main barrier to entry in the airline industry. However, due to the oil shock, the growing public dissatisfaction and the regular shifts in political opinions, the decision to deregulate was taken. The major barrier to entry was broken, leading to a price war with the entry of many low-price and no-frills airlines. Every carrier could enter and prices were not regulated. The cost of customer switching was very low. Thus THY had to develop “frequent flyer programmers” to retain customers by issuing free tickets and upgrades on basis of number of miles flown, raising the level of offered services and lowering...
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...Managerial Economics Term Paper DEMAND IN THE DOMESTIC AIRLINE INDUSTRY OF INDIA Submitted by: Akshata Shirodkar ePGP-02-002 This term paper explores the rational economics behind the demand and its affect on dynamic pricing in the domestic airline industry in India, where both of these vary often with time and units available. Based on the learning gained during microeconomics course, this paper analyses the current pricing strategies and norms practiced by the airline industry. Managerial Economics Term Paper Demand in the Domestic Airline Industry of India CONTENTS 1. INDUSTRY OVERVIEW ............................................................................................................................................... 3 1.1 MARKET SHARE ................................................................................................................................... 3 1.2 INDUSTRY GROWTH ............................................................................................................................ 4 1.3 CAPACITY VS DEMAND ........................................................................................................................ 5 2. AIRLINE INDUSTRY CUSTOMERS ............................................................................................................................... 5 2.1 CUSTOMER SEGMENTS ..............................................................................................................
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...on flying full-service business class with Delta opposed to flying with a discounted low-fare carrier like Southwest. As the economy struggles and air travel becomes more competitive it is not easy to establish the best niche market strategy for an airline. Teplensky defined (as cited in Parrish, Cassill, & Oxenham, 2006) niche market strategy as, "an emphasis on a particular need, geographic, demographic, or product segment" (p. 695). Therefore, it would be ideal for Delta to seek a more specific niche in air travel and differentiate by precisely satisfying customers’ needs; rather than attempting to generalize broad niches that only partly satisfy customers’ needs as a whole. Company Overview/ Description of Location Delta Air Lines Inc. has their corporate headquarters in Atlanta Georgia. However, Delta Air Lines Inc. has a vast worldwide airline system. Delta serves over 160 million customers annually, and offers 356 destinations in 65 countries. Additionally, Delta has over 80 years of passenger service, more than 80,000 employees, and 700 aircraft that spread across six continents. Packed with an array of good services, Delta offers more than 13,000 daily flights, SkyMiles rewards (frequent flier plan), the world's largest airline loyalty partnership, over 50 Sky-Clubs, and an award-winning BusinessElite program (Delta Air Lines Inc., 2011). Description of Product or Service Focusing primarily on business amenities, Delta has a worldwide collection of services...
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