Aviation Management College AIRLINE MARKETING

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management PRICE MANAGEMENT 1.Pricing – Part of Marketing Mix a)Pricing and product, interrelated b)1 st Class, Business Class, Economy Class c)ROI on better seat, catering, in-flight entertainment d)Set-back: recession and overcapacity

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 4.Revenue Management System a)Optimising financial return b)Deciding on the number of seats, what price and what currencies

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management PRICE MANAGEMENT 4.Pricing policies - The Pricing Principles a)Fare Structure - Fare Structure – KUL/LHR FarePriceTerms/conditions Buss ClassRM7,000RTN -- EconomyRM4,000RTNpoint-to-point OfferRM1,500RTN1 week stay, for Oct to Dec, mid-week Day flight

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 4.Pricing Policies - The Principles – cont b)Price elasticity – what is it? - Business market versus Leisure market - Corporate pax vs. individual pax

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management Price elasticity – definition The 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.

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 5. Pricing Policies - Management of Discount Fares b) The Major Types of Discount Fares Conditions i.Minimum Stay Conditions ii.Maximum Stay Conditions iii.Advance Purchased iv.Standby v.‘Preferential’ Fares vi.Fares As Part of a Tour Package

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 5. Pricing Policies-Management of Discount Fares b) The Major Types of Discount Fares Conditions 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.

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 5. Pricing Policies-Management of Discount Fares b) The Major Types of Discount Fares Conditions ii. Maximum Stay Conditions - a maximum length of time, pax can stay - if they stay longer, have to pay full fare - less effective method

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 5. Pricing Policies-Management of Discount Fares b) The Major Types of Discount Fares Conditions 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 5. Pricing policies-Management of Discount Fares b) The Major Types of Discount Fares Conditions iv.Standby - can be booked at any time - seats are not guaranteed - money returned or wait for next flight -

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 5. Pricing Policies-Management of Discount Fares b) The Major Types of Discount Fares Conditions-cont v.‘Preferential’ Fares/Discriminatory Fares - divided into 2 groups 1 st, Stage of life fares : offered to children. Young people and senior citizen 2 nd, Occupation related fares: given to seamen, military personnel and diplomats

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 5. Pricing Policies-Management of Discount Fares b) The Major Types of Discount Fares Conditions 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

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 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 consignment b) fixed documentation and customs clearance cost c) special costing for extra services, e.g.., security, refrigeration, fragility, etc

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 6. Pricing Policies-The Structure of Air Freight Pricing i.Factors of consideration-cont d) Additional revenue to pax flight e) Advantage to long-haul ands peak time`

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 6. Pricing Policies-The Structure of Air Freight Pricing ii.2-Types of Freight Pricing a)General Cargo Rates - high minimum charges for smaller shipments - discount for larger consignment

Aviation Management College AIRLINE MARKETING Shipment the act of transporting the goods Cargo goods carried by ship or plane Consignment goods to be delivered

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 6. Pricing Policies-The Structure of Air Freight Pricing ii.2-Types of Freight Pricing-cont b)Specific Commodity Rates - rates, commodity and routes define by IATA - too complex and not being followed

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 6. Pricing Policies-The Structure of Air Freight Pricing iii.Express Market - urgent shipment - integrated carriers - UPS, FedEx, DHL, TNT - guarantee next morning delivery

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 6. Pricing Policies-The Structure of Air Freight Pricing iv.General Freight Market - rates based on negotiation - rates based on supply and demand - discounts for deferred delivery

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management 6. Pricing Policies-The Structure of Air Freight Pricing iv.Express Market-cont - slower but time define delivery - peak to off peak cargo - door-to-door - followed by pax airlines

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management What are the characteristics of the Express Market in Air Freight business?

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management Explain the meaning of Discount Fares and give 2 example from the major type of Discount Fares offered by airlines?

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management

Aviation Management College AIRLINE MARKETING Pricing and Revenue Management