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Course Contents

Content 8 chapter:

Chapter 1:FUNDAMENTAL OF AM.Chapter 2:MARKET FOR AIR TRANSPORT SERVICE.Chapter 3:MARKETING ENVIRONMENT& AIRLINE BUSINESSChapter 4:PRICING AND REVENUE MANAGEMENT--------------------------------Mid-term------------------------------------------Chapter 5:DISTRIBUTING OF THE PRODUCT AND BRANDINGChapter 6:RELATIONSHIP MARKETINGChapter 7:AIRLINES SELLING,ADVERTISING&PROMOTEChapter 8:THE FUTURE OF AM----------------------------------Final exam--------------------------------------

CHAPTER 4

Pricing and RevenueManagement

Learning outcome

• Know the different facets of airline marketing.• Fundamental issues pertaining the revenue

management in airline marketing

Who are they??????

CHAPTER 4 Pricing & Revenue

ManagementPRICE MANAGEMENTPricing – Part of Marketing MixPrice Deregulation Dissemination of Fares InformationRevenue Management SystemPricing Policies-Management of Discount FaresPricing Policies-The Structure of Air Freight

Pricing

1. Pricing – Part of Marketing Mix

-The product and pricing in airline decisions must clearlybe made together.

-E.g:-invested large sums - First and Business Class products, better seats, quality catering and improved in-flight entertainment.

-Raised the prices of First and Business Class tickets to provide a return on the investment that has been made.-read pg:175

CHAPTER 4:Pricing and Revenue Management



Pricing


2.Price Deregulation

-Government regulatory policy constraint on airlines’ pricing freedom in international aviation

-Fares with their respective governments for approval.

-Now , airline free to price they like.!!!!!-International Air Transport Association (IATA) to run the Tariff Conferences at

which fares have been agreed.

Effect….Airline gained freedom to innovate with their own promotional prices!!Get discount!!!

Read pg:175



Pricing


3. Dissemination of Fares Information-The system for disseminating fares information

precluded rapid changes.E.g: -previously: such disseminating was a printed tariff manual.-preparing these manual-would take many weeks!!-Now: the GLOBAL DISTRIBUTION SYSTEMS : travel agent have instant

access to a fares database.

-pages:175



Pricing


4. Revenue Management System

-the advent of sophisticated systems for managing the sale of seats (and, increasingly, of cargo space).

-In deciding on pricing policies which will optimize financial returns , carriers must decide on the number of seats they will sell, at what prices and in what currencies.

-Airline attempts to produce the systems which allow them to optimize revenue.

-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 .Pages:176



Pricing

~~WHO LOVE DISCOUNT~~

Pricing Policies-Management of Discount Fares

a) To control of discount fares is exercised in 2 ways:

I. The revenue management systems I used to decide on the number of low-fare seat available on different flight.

EG: off-peak flight, low prices or seat empty :on-peak flight, high prices to force passenger to travel.

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

EG : Too much condition and term.

CHAPTER 4 Pricing & Revenue Management


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


5. Pricing Policies-Management of Discount Fares


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.

Page:183




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




iii. Advance Purchased- must book and 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


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




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




vi. Fares only available 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



Pricing


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) Commodity types vary special costing for extra services, e.g.., security,

refrigeration, fragility, etcd) Density-airline must charges shipper of low density freight on a

volumetric basis.


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

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


6. Pricing Policies-The Structure of Air Freight Pricing

iii. Express Market

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



iv. Express Market-cont

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



iv. General Freight Market

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

Q-bank• Please explain how the airline can control their discount

fares?• Please explain 3 of Major Types of Discount Fares Conditions

that you know.• What the factor of consideration for the Structure of Air

Freight Pricing?• Explain the meaning of Discount Fares and give 2 example

from the major type of Discount Fares offered by airlines?• What are the characteristics of the Express Market in Air

Freight business?

Documents

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