Mr. Yang
Introduction
In recent years, the competition between low-cost airlines / no frills airlines and legacy airlines has arouse a heat debate, especially in North America. Although airline industries including diverse tasks, deciding the price of airplane ticket might be the most significant part in marketing. This assignment attempts to analysis the different pricing strategies that Airline companies make to enhance competitiveness in North America. Moreover, these comparisons will be supported by examples of low-cost airline (Southwest Airline) and legacy airline (American Airlines). Firstly, discussing the operation, which is called low-cost carrier. Secondly, analysis their strategy in defining price. Final parts are a development with these points and a proof of the successful experiences in the airline industry. Key point 1
“Pricing” is a useful strategy for Airline Companies to increase their profit. It is widely believed that Airline industry has become intense because there are over 200 airlines companies attempt reducing price of airplane tickets. Facing the intense competition, Low Price might be the tactic used by airlines. In addition, “Fixed cost”, the basic costs to maintain a company, is the other difficulties in traditional airline companies for covering financial situation due to problem of Inflation. The two challenges threat airlines in recent years, hence some traditional airlines transfer to Low-Cost carrier (LCC) to economize unit costs. Furthermore, the cost in Human Resource (HR)/cost of employees conceivably rise to the most expensive part in fixed costs, however the drawbacks usually are ignored by traditional airlines (Laurie H. 2006. P315). In other words, LCC is a conception that responds the lower cost to lower price.
Southwest airline, one of the LCC Airline Company, has become a famous case learned by Ryan Air, Easy jet and other Low-Cost Carrier, because Southwest airline reduced not only the cost in their human resource
In recent years, the competition between low-cost airlines / no frills airlines and legacy airlines has arouse a heat debate, especially in North America. Although airline industries including diverse tasks, deciding the price of airplane ticket might be the most significant part in marketing. This assignment attempts to analysis the different pricing strategies that Airline companies make to enhance competitiveness in North America. Moreover, these comparisons will be supported by examples of low-cost airline (Southwest Airline) and legacy airline (American Airlines). Firstly, discussing the operation, which is called low-cost carrier. Secondly, analysis their strategy in defining price. Final parts are a development with these points and a proof of the successful experiences in the airline industry. Key point 1
“Pricing” is a useful strategy for Airline Companies to increase their profit. It is widely believed that Airline industry has become intense because there are over 200 airlines companies attempt reducing price of airplane tickets. Facing the intense competition, Low Price might be the tactic used by airlines. In addition, “Fixed cost”, the basic costs to maintain a company, is the other difficulties in traditional airline companies for covering financial situation due to problem of Inflation. The two challenges threat airlines in recent years, hence some traditional airlines transfer to Low-Cost carrier (LCC) to economize unit costs. Furthermore, the cost in Human Resource (HR)/cost of employees conceivably rise to the most expensive part in fixed costs, however the drawbacks usually are ignored by traditional airlines (Laurie H. 2006. P315). In other words, LCC is a conception that responds the lower cost to lower price.
Southwest airline, one of the LCC Airline Company, has become a famous case learned by Ryan Air, Easy jet and other Low-Cost Carrier, because Southwest airline reduced not only the cost in their human resource
References: Tim Hazledine (2011) Legacy carriers fight back: Pricing and product differentiation in modern airline marketing p130-p135 Laurie Hunter (2006) Low Cost Airlines: Business Model and Employment Relations, Vol. 24, No. 5, pp. 315–321, European Management Journal Hall, A. 2007, Completed in Partial Fulfillment of the Requirements of OM 5210 Diego Escobari (2013) Asymmetric Price Adjustments in Airlines, pp. 74-85, MANAGERIAL AND DECISION ECONOMICS Manuela A. Hernandez. and Steven N. Wiggins (2013) NONLINEAR PRICING STRATEGIES AND COMPETITIVE CONDITIONS IN THE AIRLINE INDUSTRY p539-p561 Economic Inquiry Silva Ishak (2013) Flight Global DATA Research Team Vol. 30 Issue 5, p36-37. Airline Business., James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser, Jr., and Leonard A. Schlesinger (1994) Putting the Service- Profit chain to work p164-p174 Harvard Business Review International Air Transportation Association (IATA) http://www.iata.org/publications/pages/wats-passenger-carried.aspx