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2. Of all the marketing variables that influence the potential salesof airline seats and cargo capacity, price has received the mostattention since deregulation.Economists have emphasized the price variable in describingthe level of demand. Pricing remains a very complex issue inmany industries. In the case of air transportation, it is evenmore complex because of the transition in recent yearsfrom a highly regulated industry to a deregulated environment. 3. Demand is defined as the various amounts of a productor service that consumers are willing and able topurchase at various prices over a particular time period.A demand schedule is simply a representation of a series ofpossibilities that can be set down in tabular form.There is an inverse relationship between price and quantitydemanded. Economists have labeled this inverse relationshipthe law of demand. 4. Air Carriers Demand for Air Transportation perMonth Between Two Cities (hypothetical data)Ref John Wensveen Air Transportation 5. Assumption --- Price is the key variable and all others factorsare insignificant however, non-price determinants exist.The major non-price determinants of demand in the air travelmarket are:(1) the preferences of passengers,(2) the number of passengers in a particular market,(3) the financial status and income levels of the passengers,(4) the prices of competitors and related travel expenses, and(5) passenger expectations with respect to future prices. 6. 1. Preferences of passengers. A change in passenger preferences favorable to anairline - possibly prompted by advertising will mean that more tickets will bedemanded at each price over a particular time period, shifting the curve to theright.2. Number of passengers. An increase in the number of passengers in a marketbrought about perhaps by improvements in connecting flights or by populationgrowth3. Financial status and income levels of passengers. This nonprice determinantrelates to the state of the economy and the level of such things as personalincome, disposable income, and profits (in the case of businesses). Airtransportation is very sensitive to fluctuations in the economy4. Prices of competitors and related travel expenses. An increase in a competitorsprice, all other things being equal, will normally prompt some passengers toswitch to your airline.5. Passengers expectations with respect to future prices. Passengersexpectations of higher future prices may prompt them to buy now in order tobeat the anticipated price rises. 7. Elasticity of DemandCoefficient of ElasticityDeterminants of ElasticityTypes of Passenger FaresPricing ProcessIntro to Airline CostsOutput Determination