Airline Pricing Management

The volume of pricing decisions has significantly increased as the airline industry moves towards deregulation and globalization. Airlines need to respond to the market swiftly in order to remain competitive. This well structured and established pricing management program will help airlines to capture revenue opportunities and protect their revenues in a scientific and timely manner.

This course includes seven modules which will provide you with a general overview of airline pricing management. The training manual is an electronic Adobe Acrobat PDF file, 143 pages, and in color. The manual can be downloaded and printed, or viewed from our online learning center. Module related powerpoint presentations and comprehension assignments are included.

Relevant articles, papers, and presentations, have been collected and are available from our online learning centre, to enhance the learning experience, and provide real-life examples and case studies.

A highly qualified instructor will be assigned to guide the participant throughout the duration of the course. The instructor will provide feedback on each comprehension assignment as well as the final assignment paper. Please note that all our instructors possess current practical working experience in Pricing and Revenue Management. Dionne is also our Luthansa Systems ProfitLine Price system expert.

The seven modules cover the following information:

Module One - The Importance of Price

Pricing is critical to a company's success. In recent surveys done by McKinsey the number one concern for Global Business Executives was pricing, outranking costs, performance and talent. They found that competition was tough and placed extreme pressure on price. Smart pricing brings more revenues or prevents loss of revenues. Conversely, less optimal pricing could cause revenue loss.

Module Two - Pricing and Airline Business Models

A model is the methodology used by a business to sell their products or services. It is synonymous with a business strategy. A business model is the way a company positions itself in the marketplace by choosing a competitive theme, i.e. cost, differentiation, or focus (niche market). A company then competes based on a cost, differentiation or niche market advantage.

Module Three - Cost and Economics in Airline Pricing

Airlines are capital intensive businesses which require large amounts of cash in order to operate. Aircraft and airport facilities require a high amount of capital. Labour intensive, airlines are one of the highest cost per employee in the service industry. Airlines have a highly unionized workforce. Airline costs are roughly 35% labour costs, upwards of 30%, fuel (this has been rising since the Iraq war), 6-9% travel agency commissions which have been declining with the increase in internet bookings, and airport landing fees which have been rising fast. We also discuss the demand and price relationship and the price elasticity factor in pricing decision making.

Module Four - Airline Pricing Terms, Fare Rules and Definitions

This Module will cover all the terms and definitions that are specific to airline pricing. All the pricing categories will be reviewed. Categories make up the fare rules once the fare level has been determined. A fare is not live without the addition of categories. The categories give the fare the rules and conditions of travel.

Module Five - Setting the Price - Pricing Management Process

We have a pricing management process in order to enable us: to capture revenue opportunities and protect our revenues in a timely and scientific manner, to maximize profitability, to drive out inefficiencies and to work as a team. This process applies to all pricing actions, big or small. The larger the implication on revenues, the more rigid the compliance should be with the steps of the process. For smaller or specific fare actions, you may apply this process mentally or verbally, i.e. there is no need to support your decisions with formal documentation. The factors that trigger pricing actions can be broadly characterized as external and internal. There are 6 steps in the pricing management process and they are as follows: collecting information, determining the strategy, taking a pricing decision, distributing the price, communication and monitoring the performance of the pricing decision.

Module Six - Impact of the Internet on Airline Pricing

The internet creates pricing transparency which removes the capacity to hide pricing strategies. Low cost carriers have paved the pathway for internet acceptance within the North American and European markets. Low cost carriers depend on online bookings as their main source of distribution. They have increased the importance of technology to reduce cost where applicable. In countries where internet usage is high you will find a direct correlation with the acceptance of internet bookings. There is also a correlation between internet growth and the emergence of low cost carriers. Cost of labour is high in the airline industry and this further increases the need to use technology to reduce cost and increase efficiencies.

Module Seven - Legacy vs Low-Cost Carrier Pricing

This module discusses the challenges that the legacy carriers face in competing with the low-cost carrier pricing. Legacy carriers have lived with pricing rules and restrictions since deregulation, and now are faced with restriction-free pricing and the risk of revenue dilution. At the same time, competitive pricing levels are often below the break-even costs of the legacy carrier.