Airline factors Pricing-demand

The question is what do you think the most important factors are when discussing airline pricing and demand? I figured I would start out talking about what demand really is. Demand is defined as the various amounts of a product or service that consumers are willing and able to purchase at various prices over a particular time period. .After taking two economic classes that definition is permanently engrained in my memory. A demand schedule is a tabular portrayal of demand and reflects the relationship between the price or fare—which I believe is an important factor when discussing airline pricing and demand—and the estimated number of passengers who would be willing and able to purchase a ticket at each of these prices.

A common characteristic of demand is that as price falls, the quantity demanded rises; alternatively, as price increase

The last thing I wanted to talk about with demand is elastic demand and inelastic demand. Economists, forecasters, and airline price analysts measure how responsive, or sensitive, passengers are to a change in the price by elasticity of demand. Demand is elastic if a given percentage change in price results in a larger percentage change in passengers carried. Demand is inelastic if a given percentage change in price is accompanied by a relatively smaller change in the number of passengers carried. Pricing analysts and others measure the degree of elasticity or inelasticity by the elasticity coefficient. The determinants of elasticity in the airline industry are competition, distance, business versus pleasure, and time.

Another important factor—if not the most important factor—when discussing airline pricing and demand is cost. Cost is a major determinant in pricing the airline product. The price or average revenue per passenger mile flown must be sufficient to cover average cost per passenger mile flown. Airline costs can be categorized as operating costs or nonoperating costs.

Indirect operating costs are all those costs that will remain unaffected by a change of aircraft type because they are not directly dependent on aircraft operations, including expenses that are passenger related rather than aircraft related and general and administrative costs. Examples are: station and ground expenses, passenger service costs, reservations, sales and promotional costs, and general and administrative costs.

Pricing tactics are also a ver

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