Aviation Management College

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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AIRLINE MARKETING


PRICE MANAGEMENT

1. Pricing – Part of Marketing Mix

a) Pricing and product, interrelated

b) 1st Class, Business Class, Economy Class

c) ROI on better seat, catering, in-flight entertainment

d) Set-back: recession and overcapacity



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2. Price Deregulation

- Intergovernmental Air Service Agreement (prevent competition even domestic)- Regulatory pricing no longer relevant - freedom to innovate promotional

fares (IATA – Tariff Conferences)- need to have knowledge in

competitive pricing



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3. Dissemination of Fares Information

a) In the past once or twice a year due time needed to printing and

distribution to travel agents,

b) Now active price competition, fare structure become highly unstable

c) Challenges: making the right price, quickly and under great pressure



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4. Revenue Management System

a) Optimising financial returnb) Deciding on the number of seats, what

price and what currencies



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3. Revenue Management System - cont

c) Examples:

- Business destinations; few seats for early sales at low price, mostly for short time bookings at high prices

- Sunday, same destination; most are allocated for low price and FFP



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3. Revenue Management System – cont

d) Problem and concern

Connecting versus point-to-point- connecting, short sector to fly to hub- P2P, short-haul route flying in and out- tendency to turned away long-haul

connecting pox- a loss in network revenue



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PRICE MANAGEMENT

4. Pricing policies - The Pricing Principles

a) Fare Structure - Fare Structure – KUL/LHR

Fare Price Terms/conditions

Buss Class RM7,000RTN --

Economy RM4,000RTN point-to-point

Offer RM1,500RTN 1 week stay, for Oct to Dec, mid-week Day flight



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4. Pricing Policies - The Principles – cont

b) Price elasticity – what is it?

- Business market versus Leisure market- Corporate pax vs. individual pax



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Price elasticity – definitionThe proportionate change in sales of a product as a result of a change in price

The demand for a good is relatively inelastic when the change in quantity demanded is less than change in price.

Goods and services for which no substitutes exist are generally inelastic.

Eg. , a good antibiotic that can cure asthma instantly, customers are willing to pay at whatever price.



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PRICING POLICIES

4. The Principles – cont

c) Lower seat-kilometer cost – bigger planes

d) Uniform pricing vs. differential pricing- may end up customers paying higher prices for a worse product they currently received- traveler may think that they are being overcharge



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5. Pricing Policies-Management of Discount Fares

a) Discount fares are mostly offered in 2 ways:

i. The number of discount seats offered varies during off-peak and peak season

ii. By setting condition to the discount fares, making it less attractive to the Business Traveler



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5. Pricing Policies - Management of Discount Fares

b) The Major Types of Discount Fares Conditions

i. Minimum Stay Conditionsii. Maximum Stay Conditionsiii. Advance Purchasediv. Standbyv. ‘Preferential’ Faresvi. Fares As Part of a Tour Package



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i. Minimum Stay Conditions- need to stay for a specific number of days - going home early will require paying the

full fare price- short-haul; a stay until the weekend, - long- haul; about about a week stay- most effective conditions.



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ii. Maximum Stay Conditions - a maximum length of time, pax can stay - if they stay longer, have to pay full fare - less effective method



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iii. Advance Purchased- pax must pay for their ticket in advance- penalty for cancellation or changes- help to improve cash flow- force the low yield traffic to come forward- not encouraging Business Traveler to buy



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5. Pricing policies-Management of Discount Fares


iv. Standby- can be booked at any time- seats are not guaranteed- money returned or wait for next flight-



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b) The Major Types of Discount Fares Conditions-cont

v. ‘Preferential’ Fares/Discriminatory Fares - divided into 2 groups

1st , Stage of life fares : offered to children.Young people and senior citizen

2nd, Occupation related fares: given toseamen, military personnel and diplomats



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vi. Fares As Part of a Tour Package

- this is inclusive of accommodation and other features of holiday package., golf, spa, sigh-seeing, etc- mostly offered through the travel agents- not popular among Business Traveler



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6. Pricing Policies-The Structure of Air Freight Pricing

i. Factors of consideration

a) varies in size from small packages to 30,00 kilos of consignmentb) fixed documentation and customs clearance costc) special costing for extra services, e.g.., security, refrigeration, fragility, etc



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i. Factors of consideration-cont

d) Additional revenue to pax flighte) Advantage to long-haul ands peak time `



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ii. 2-Types of Freight Pricing

a) General Cargo Rates- high minimum charges for smaller shipments- discount for larger consignment



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Shipmentthe act of transporting the goods

Cargogoods carried by ship or plane

Consignmentgoods to be delivered



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ii. 2-Types of Freight Pricing-cont

b) Specific Commodity Rates- rates, commodity and routes define by IATA- too complex and not being followed



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iii. Express Market

- urgent shipment- integrated carriers- UPS, FedEx, DHL, TNT- guarantee next morning delivery



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iv. General Freight Market

- rates based on negotiation- rates based on supply and demand- discounts for deferred delivery



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iv. Express Market-cont

- slower but time define delivery- peak to off peak cargo- door-to-door- followed by pax airlines



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What are the characteristics of the Express Market in Air Freight

business?



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Explain the meaning of Discount Fares and give 2 example from the major type of Discount Fares offered by airlines?



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Have a Nice Day do make sure

2moro is a better day than 2day



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Documents

Aviation Management College