scholarly journals ANCILLARY REVENUE PRICING

2015 ◽  
Vol 6 (2) ◽  
pp. 43-62 ◽  
Author(s):  
Andreas Wittmer ◽  
Nicole Oberlin
Keyword(s):  
Airline Industry ◽  
Low Cost ◽  
Performance Ratio ◽  
Major Influence ◽  
Service Network ◽  
Price Performance ◽  
Low Cost Carriers ◽  
The Individual ◽  
Buying Behaviour ◽  
Network Carrier

The airline industry has evolved from a system of long-established state owned carriers operating in a regular market to a dynamic, deregulated industry. This development – especially the emerging competition of low-cost carriers – has had a major influence on the price setting behaviour of airlines. Profitability of airlines is limited and pricing systems are reconsidered. To stay competitive, traditional full service carriers consider the implementation of ancillary revenue systems, which are similar to low-cost carriers. This paper investigates challenges of an ancillary revenue pricing approach for full service network carriers. A qualitative means-end approach is used to find attributes, which are important for air passengers, and influence their ticket buying behaviour. In addition, the study provides insight into the perception of an ancillary revenue system in the full service network carrier market. The findings present 18 ticket purchase attributes and 15 behavioural terminal values in hierarchical value maps. Based on these values, it is evident that most passengers appreciate if some services are included in the price and not offered as ancillaries. Benefits of ancillary revenue systems include the individual ticket creation, customisation, improved price-performance ratio, flexibility gains and progressive ideas. The main drawbacks of the system include a complicated and complex booking process, feelings of uncertainty, branding problems, a distortion of competitive behaviours, a system similar to that of low-cost carriers, feelings of paying extra for every service and a perceived decline in service and quality.

scholarly journals THE EVOLUTION OF LOW COST CARRIERS IN AUSTRALIA

Aviation ◽  
2014 ◽  
Vol 18 (4) ◽  
pp. 203-216 ◽  
Author(s):  
Panarat Srisaeng ◽  
Glenn S. Baxter ◽  
Graham Wild
Keyword(s):  
Low Cost ◽  
Air Travel ◽  
Air Transport ◽  
Market Segment ◽  
Service Network ◽  
Air Transport Industry ◽  
Low Cost Carriers ◽  
Low Cost Carrier ◽  
Network Carrier ◽  
Second Wave

Due to the vast distances across the country as well as between urban centres, Australia is heavily reliant upon its air transport industry. Following deregulation of Australia's domestic air travel market on the 30th October, 1990, low cost carriers have entered the market. Australia's LCC market has had three discrete phases. The first wave occurred between 1990 and 1993 and was subsequently followed by a duopoly period in 1994–1999. The second wave occurred between 2000 and 2006 and the final wave has been in the post-2006 period. This paper examines the evolution of Australia's domestic low cost carrier airline market and finds that by 2010, low cost carriers had captured around 64 per cent of the market. Following the evolution of the “Virgin Australia” business model from a low cost carrier to a full service network carrier, commencing in 2011, the low cost carrier's market share has declined significantly and is now around 31 per cent. “Jetstar” and “Tiger Airways” are the two major carriers presently operating in this market segment.

An Empirical Investigation of the Relationship between Profitability Persistence and Firms' Choice of Business Model: Evidence from the U.S. Airline Industry

2011 ◽  
Vol 23 (1) ◽  
pp. 37-70 ◽  
Author(s):  
Denton L. Collins ◽  
Francisco J. Román ◽  
Hung C. (“Leon”) Chan
Keyword(s):  
Business Model ◽  
Airline Industry ◽  
Low Cost ◽  
Profit Margin ◽  
Pricing Policy ◽  
Low Cost Carriers ◽  
Asset Turnover ◽  
The Individual ◽  
The U.S ◽  
Relative Persistence

ABSTRACT This paper examines the influence of a firm's business model on the relative persistence of profitability in the U.S. airline industry. The strategic management literature describes a firm's business model as reflecting how that firm chooses to compete in the marketplace. Given this linkage between business model, competition, and the marketplace, we conjecture that the persistence of profit margin and asset turnover ratios will be influenced by firms' choices of business model. Further, we hypothesize that this choice of business model influences the relative persistence of the individual revenue and expense components of current profit margin and asset turnover ratios for future profitability ratios. We test these conjectures by (1) partitioning our sample firms according to business model (network carriers versus low-cost carriers), and (2) decomposing sample firms' profit margin and asset turnover ratios into components relating to pricing policy, input cost control, and productivity. We find that the profit margin and asset turnover ratios of network carriers tend to be more persistent than those of low-cost carriers, and that this differential persistence is reflected in the associations between current revenue and expense components, and future profit margin and asset turnover ratios.

scholarly journals The Revenue and Cost of the Airline Company

2018 ◽  
Vol 3 (2) ◽  
pp. 134
Author(s):  
Peng Qin
Keyword(s):  
Airline Industry ◽  
Business Models ◽  
Low Cost ◽  
Asia Pacific ◽  
Service Network ◽  
Fuel Price ◽  
Low Cost Carriers ◽  
Air Pollutions ◽  
Human Cost ◽  
The Government

<p><em>The airline industry is characterized by a number of business models with the most prominent being the Full Service Network Carriers (FSNC) and Low Cost Carriers (LCC) models. The main difference between full service network carriers and low cost carriers is how the airline companies operation their revenue and cost.</em></p><p><em>The advanced developments in telecommunications, air pollutions and the competition of high rail are three new challenges for the airline industry globally while an increasing passengers and the government policies are two big issues for Asia/Pacific regional airline companies. The fuel price and human-related costs are two big issues affecting the company’s cost. Code-sharing and advertising are two possibly ways in increasing company’s revenue, cutting down the fuel cost, advertising costs, controlling the human cost and cooperating with airports are four possibly ways in reducing company’s cost.</em></p>

Hedonic and Utilitarian Values Behind Engagement of Online Consumers

2021 ◽  
pp. 1242-1263
Author(s):  
Farrah Zeba ◽  
Musarrat Shaheen ◽  
Raveesh Krishnankutty
Keyword(s):  
Lived Experience ◽  
Airline Industry ◽  
Low Cost ◽  
Marketing Strategies ◽  
The Self ◽  
Customer Engagement ◽  
Third Order ◽  
Diary Method ◽  
Low Cost Carriers ◽  
Order Construct

In the hyper-competitive Indian airline industry, the low-cost carriers as well as full-service airlines are in dire need of innovative marketing strategies to engage their customers. To understand the dynamics behind the process of customer engagement, the purpose of this paper is to gain insights into the lived experience of consumers about their online air-ticket bookings experiences. In total, 60 frequent air travellers were approached to participate in the study and the self-completion diary method was incorporated to record their ticket booking experiences. The responses recorded in the diaries were analyzed on the basis of their content from which eight themes were derived. The findings bring forth the importance of hedonic experiential values along with utilitarian experiential values toward the engagement of customers during the online air-ticket booking process. The current study is one of the pioneers in conceptualization of customer engagement as a third-order construct by uncovering the sub-dimensions of the second order factors—utilitarian and hedonic experiential values.

Ailing Kenyan carrier will face more competition

2016 ◽  
Keyword(s):  
Airline Industry ◽  
Low Cost ◽  
Air Travel ◽  
Recovery Strategy ◽  
East African ◽  
Content Type ◽  
Profit Margins ◽  
Low Cost Carriers ◽  
Fuel Costs ◽  
Air Carriers

Significance Despite low fuel costs and the global airline industry running profitable operations, Kenya Airways has recorded multiple years of losses, leading the company to consider a recovery strategy that includes selling aircraft and shedding jobs. Impacts East African air carriers could benefit from industry rationalisation, but domestic political concerns could obstruct regional reforms. Low-cost carriers have emerged in Africa but struggle to make headway against publicly owned airlines. Once Kenya Airways exits fuel-hedging commitments, lower prices should improve profit margins. Without airline liberalisation and local carrier rationalisation, foreign airlines will benefit most from growing African air travel. Government protectionism, high taxes and regulation will restrict competition, especially from low-cost carriers.

scholarly journals Overview of the developments in the domestic airline industry in South Africa since market deregulation

2013 ◽  
Vol 7 (1) ◽  
Author(s):  
Rose Luke ◽  
Jackie Walters
Keyword(s):  
South Africa ◽  
Airline Industry ◽  
Structural Changes ◽  
Low Cost ◽  
Air Traffic ◽  
Air Transport ◽  
Load Factors ◽  
Low Cost Carriers ◽  
Global Impacts ◽  
Domestic Airline

Deregulation or liberalisation of air transport has had major global impacts on the domestic air transport markets, with effects ranging from stimulation to changes in the structure and functioning of these markets. In South Africa, deregulation has had wide-reaching effects on the domestic market. The purpose of this article was to investigate the current domestic air transport market. A literature review was performed to examine the effects of deregulation in other domestic air transport markets around the world. This was followed by a review of the South African domestic air transport market prior to deregulation in order to determine the changes that were made following deregulation. The ten-year period immediately following deregulation was also examined; this period was characterised by relatively large numbers of market entries and exits. A database was obtained from the Airports Company South Africa; air traffic movements, passenger numbers and load factors were evaluated. The study showed that the market is still characterised by regular market entries and exits. Also that the entry of the low-cost carriers has stimulated the market, resulting in increased air traffic movements, higher passenger numbers, higher load factors in general and the opening of a secondary airport in Gauteng, Lanseria International. Deregulation and, more specifically, the entry of the low-cost carriers has resulted in structural changes in the market and more choice for passengers.

scholarly journals An Analysis of a Strategic Transformation Plan: The Case of Alaska Airlines

2013 ◽  
Author(s):  
Paul Caster ◽  
Carl Scheraga
Keyword(s):  
Product Differentiation ◽  
Airline Industry ◽  
Low Cost ◽  
Operating Income ◽  
Cost Leadership ◽  
Differentiation Strategy ◽  
Cost Strategy ◽  
Low Cost Strategy ◽  
Network Carrier ◽  
Strategic Transformation

In 2003, amid the turmoil of the U.S. airline industry in the post-9/11 environment, the senior management of the Alaska Air Group announced a “strategic vision” entitled “Alaska 2010.” The pronouncement articulated positions with regard to cost leadership, product differentiation, and growth. This study empirically assesses the efficacy of this decision with regard to the major network carrier of the air group, Alaska Airlines. The analysis focuses on the period beginning with the announcement and ending in 2010.The implementation of such a strategic protocol is dynamic and inter-temporal in nature. Therefore, it is often difficult to assess the effectiveness of changes in strategies, particularly since such effectiveness is often a function of the confounding forces of organizational strategy and market conditions. Thus, this study utilizes the multi-period methodology of the strategic variance analysis of operating income.This methodology decomposes operating income into three components: (1) growth, (2) price recovery, and (3) productivity. This is of particular interest from a strategic planning perspective, as the price component evaluates a company’s product differentiation strategy while the productivity component evaluates whether an airline’s low cost strategy was successful because of efficiency gains.

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