Topics: Southwest Airlines, Airline, Price Pages: 1 (311 words) Published: May 12, 2013
2 Discuss factors that have affected the nature of costs in the airline industry since 2000. How have these factors affected pricing decisions? 1) Company and product costs
Cite an example of easyJet, it was expecting its pre-tax profits to drop by 45 percent due to higher fuel expenses. Energy costs have casualties leading to easyJet announcing that it would have to cut flights over the coming winter period. Across the industry, fuel costs account for 40 percent of the total airline costs compared to just 13 percent five years ago. The higher the fuel expenses are, the higher the costs in the airline industry will be. So companies have to adjust its pricing decisions consistent with the costs in order to make profits.

2) Other factors that influenced costs
Pay more attention to environment issues. There are some fundamental meetings that stressed on the importance of taking account of environmental factors. They are forced by lobbying taxes and use cleaner plane models. As a consequence, businesses have to comply with the laws, since the cost of airline will increase, they must consider these to their pricing decisions, and the possible outcome is to increase the price of ticket.

Adjust to the advent of information age. Taking advantages of advanced technology means less cost for labor and infrastructure and less time incurred to complete the same job. Say, easyJet allows and encourages its customers to buy tickets online cutting down on administrative costs. From the standpoint in the long run, it will reduce the cost of airline industry. And in turn, they can reduce their price to maintain advantageous stage.

Some other international issues will also affect the costs of airline industry. Say, 9/11 attacks has some impacts on updating security procedures as well as some digital devices. So the cost will increase, thus impacting the pricing decision.
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