Airlines' Pricing Strategies and O-D Markets: Theoretical and Practical Pricing Strategies

Successful marketing strategies are just as substantial as the engineering for the airlines to survive. Part of  the 4Ps is the pricing strategies of the aviation industry. This is specifically paramount for airlines to  increase the market share in the air transport industry. Although it is conclusive for the airlines to offer  competitive fares, academic studies are rare in such a field. If there are airlines-related academic studies or  literatures available, they usually concentrate on the 4Ps but not on pricing itself. The study aims to  evaluate the pricing strategies and origin-destination (O-D) markets of full-service carriers (FSCs) and lowcost carriers (LCCs). Furthermore, the authors would like to find out how airlines set their pricing  strategies to compete in a fast- growing and highly competitive market. The findings revealed that the  airlines attempt to segment the demand in each origin-destination (O-D) market by offering different  combinations of price levels and restriction bundles designed to appeal to different groups of potential  passengers with different levels of willingness to pay (WTP). In an effort to achieve this segmentation of  demand, airlines impose purchase and travel restrictions on lower fares designed to act as 'fences' to  prevent passengers with higher values of WTP for air travel from buying at a discount.

Keywords: The Aviation Industry, Pricing Strategies, RPKs, LFs, ASKs, LCCs FSCs, O-D Markets, GDSs.