Factors to consider before pricing are:
(i)Cost factors: - An airline incurs two types of cost of operations, Fixed and variable. Fixed costs are that of the Aircraft acquisition, Fuel, Staff salaries, Airport charges and infrastructure costs while variable includes the fluctuations in the charges, landing and parking fees, taxes and incidental expenses like during delays or technical problems. The pricing team of the airline must be aware of these costs and also the target revenue required in offsetting the costs at the organization level.
(ii)Competition – in this case there is no competition so there is no room for matching pricing levels with competition but you may have to look at indirect competition i.e. other means of transport like buses / trains etc. Low cost airlines like Air Deccan were pioneers in connecting disconnected cities. They tried to keep the flight ticket a little higher than the 2nd AC fares for starters to attract the customers from trains to flights.
(iii)Passenger traffic profile – it relates to the kind of passengers who will fly on this route and this data would be available from survey: a.If the route is frequented by business men there is room for them being able to pay a premium to get to their destination fast. Skimming Pricing can be used in this case.
b.If route is primarily...