aviation management college

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

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 RevenueManagement

4. Revenue Management System

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

price and what currencies

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

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 RevenueManagement

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

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

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.

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

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 RevenueManagement

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

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

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 RevenueManagement

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 RevenueManagement

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 RevenueManagement

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

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

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

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

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

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

6. Pricing Policies-The Structure of Air Freight Pricing

i. Factors of consideration-cont

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

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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

Shipmentthe act of transporting the goods

Cargogoods carried by ship or plane

Consignmentgoods to be delivered

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

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 RevenueManagement

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 RevenueManagement

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 RevenueManagement

What are the characteristics of the Express Market in Air Freight

business?

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

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 RevenueManagement

Have a Nice Day do make sure

2moro is a better day than 2day

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement

Aviation Management College

AIRLINE MARKETING

Pricing and RevenueManagement