Pricing policy in the air transport industry is dependent on several factors. Some of these factors include the running cost of the airline which includes cost of fuel, cost of maintenance, cost of hiring and retaining employees, marketing and promotional costs, landing fees to mention but a few. The pricing policy in the operation of an airliner is also influenced by the demand for the specific routes, target market and the degree of competition the industry. Basically the pricing strategy of an airline is meant justify the economic viability of the carriers’ operational activities.
2. Airline’s Preferred Pricing Strategy
For one to understand the pricing strategy that most airlines rely on, it is important to define the products and services that this industry deals in. this include passenger transportation and cargo ferrying services. Of the two, the latter is more economically viable than the former. To this effect, even passenger carriers are being used to carry out cargo ferrying services. Presently, the pricing policy that most airlines in the world prefer is charging passengers for their entire carry-on luggage. This is the based on the new strategy that everything on broad an aircraft must be paid for. These charges on baggage that passengers carry were implemented in the year 2005. Initially the prices used to cover the extra luggage only but the scope of this price strategy has now been increased to cover the first bag that passengers carry based on size. The bottom line is that the cost of travelling with carry-on luggage is becoming expensive as the days go by. The worst part of this scenario is the fact that such information is not readily available to the customer prior to travelling.
3. Factors to Consider While Formulating Pricing Strategies
Factors that have been instrumental in developing this pricing strategy that forces travellers to pay for their luggage include the following: Prior to the enforcement of this directive, passengers were travelling with a lot of luggage that posed a lot logistical challenges to most airlines. Thus cases of loss of luggage were common. This implied that the airlines ended up spending more financial resources compensating their aggrieved customers. In addition to this, their airline had to hire a lot of luggage attendants to manage their clientele’s carry-ons and henceforth increasing operating costs. This implies the mere fact that passengers were carrying a lot of baggage meant extra costs of airlines. The strategy to charge a customer for their additional carry-ons is also motivated by the fact that airlines understand that it is more economically viable to integrate both their passenger and cargo transportation portfolios. The idea is therefore to reduce the cargo space that is doled out to passengers in favor of commercial activities.
4. Link between Pricing and Operation Costs
There’s no doubt that the airline industry costs are influenced by a myriad of very many factors but key of which are every day running costs. Therefore pricing serves not only the purpose of meeting the running costs of airlines and but also guaranteeing return on investment. This pricing policy that mandates passengers to par for their carry-ons has been very effective in reducing the production in the following ways. The most evident way is the fact that airlines no longer have to hire many employees to manage their passengers’ luggage needs. This is because since enforcement of the strategy there has been a massive reduction in the quantity of carry-on baggage. This also implies that passenger now pay for luggage space that initially they received for free and thus increasing the revenue base of the airlines. This increased revenue base is instrumental in meeting some of the airline’s operational costs. Finally, due to the reduction in the number carry-ons this has consequently resulted to a reduction in compensatory payments. This has therefore resulted in reduced operation costs.
5. Relationship between Price, Promotion, Products and Distribution
This pricing strategy that involves passenger paying for their carry-owns has had adverse effects on the airline’s products. Testimony to this is the fact the number of people flying has significantly since these charges were introduced. In addition to this, the fact that passengers are literally fighting for luggage space has had damning effects on the image of most airlines and their products. This strategy has also had adverse effects on the airlines promotional strategies. This is the case because in this age and era most customers are looking for reasonably priced products and services. Airlines are aware of this fact and this is the reason why in their promotional and advertising endeavors they omit the fact that their passengers will be charged for their carry-ons. This implies that this pricing strategy has encouraged unethical code of conduct as far as advertising is concerned. Finally, this strategy has also not been included in the distributional channels of airlines. These include their travel agents and online portals.
Barron, J. ( 2010, August 10). Flight Attendant’s Tale Resonates, and Evolves. Retrieved June 8, 2012, from The New York Times: http://www.nytimes.com/2010/08/11/nyregion/11attendant.html?_r=1
Mackey, R. (2010, August 11). Anxiety Over Carry-Ons Fuels Air Wars. Retrieved June 8, 2012, from The New York Times: http://thelede.blogs.nytimes.com/2010/08/11/anxiety-over-lost-luggage-fuels-air-wars/
Negroni, C. ( 2010, April 6). Less Baggage, Big Savings to Airlines. Retrieved June 8, 2012, from The New York Times: http://www.nytimes.com/2010/04/07/business/07bags.html