Supply And Demand Effect On Airline Ticket Prices

The Marketing Mix is the name given to the elements which are the key components which a marketing plan should be based upon. Typically in Marketing literature there are four elements: price, place, promotion and product, however this is now sometimes expanded to incorporate another 3 elements: people, physical evidence and process. Pricing policy is clearly very important to the marketing mix and is affected by variables such as firm’s objectives, the nature of competition, demand and firm costs. Firms operate pricing in different ways according to their marketing strategy and the industry in which they participate; an example of pricing methods will be shown and evaluated further in the

22 years, has boosted ticket prices at an exponential rate. Through the use of economic concepts

1. Instead of 16 different prices, American simplified its pricing structure to include only 4 kinds of fares: a first-class fare, a coach fare that can be bought anytime before flight time (full-fare), 21-day advance-purchase fare, and 7-day advance-purchase fare. The new fare structure was expected to reduce administrative labor costs related to managing different fares by $25 million annually. The change was also

Over time many transactions have changed. For example, as previously mentioned within the tourism industry the supply and demand varied within different sectors of those markets. As a result, many third party companies saw opportunities to expand their companies by providing travel assistance. As the price decreases, the supply for flights will decrease and the demand for flights will increase. These third party companies negotiate deals with the various airlines that will be most beneficial for the parties involved. Of course, there have been different trends that have grown based on vast time periods. The impact is measured based on the supply that

Rising jet fuel prices recently led most major US airlines to raise fares by approximately 15 percent. Explain how this substantial increase in airfares would affect the following:

In this paper Learning Team A will explain how Delta Air Lines (Delta) has been affected by the economy, giving details about the positive and negative externalities as well as the shifts in price in elasticity of supply and demand. We will discuss how quantity demanded and quantity supplied has changed due to price changes and technology innovations. We will discuss how government regulations create surplus or shortage of airline flights.

Travel agents therefore are both positively and negatively impacted. Small business customers are positively impacted by the fare changes. Previously, the higher full fare prices discouraged small business travel; small businesses would either decide against travel or incur the cost of a Saturday night stay and purchase a reduced fare ticket. By reducing the full coach fares, small businesses will be able to purchase more convenient flights at more economical prices. Large businesses, on the other hand, may be negatively impacted. Since many large businesses had negotiated discount rate contracts with airlines, the new full coach fare may be higher than these negotiated fares. For large businesses that did not have negotiated contracts, the fares will be lower than the previous full fare rate.

The bulk of aviation demand models have been of the multiplicative form to utilize that

As it gets close to the flight date, the price of the airplane tickets become expensive. Except for the coach part, in which is the date from August 6th to August 7th, the date shows relevancy. People demand to buy their tickets, right before their willing date, rather than buying the ticket in the long future. For the first class, it also shows similar statistics, but for first class, the airplane tickets become much cheaper in terms of comparing the percentage rate between first class and coach class.

Competitive Rivalry: The airline industry is very competitive and there are many rivalries. This is reflected in fare wars, where one airline slashes its fares, forcing others to follow in order to compete

     This section of the report will discuss how each trend mentioned will affect the airline industry. It will also

This segment is within airline industry but needs of customer is different. Target audience is low budget travelers, however, customers within the segment look for different attributes, for example, lunch or beverages as part of travel. Here companies can offer this by charging the customer.

The market research department has undertaken some research indicating that by lowering the ticket price the demand will increase. It has been proposed that the ticket price is decreased to $280. It has been estimated that this will increase passenger numbers to 212 per flight. This will alter the level of revenue; it will also alter costs that are dependant on the number of passages meaning the food and beverage costs, and the travel agent commission which is dependant on the ticket prices. The adjusted operating income per flight is shown in table 2.

This is where supply and demand enters the picture. Supply and demand affects individuals, companies and the financial markets as a whole. In some markets, such as the commodity markets, supply is determined by a physical product. Supply and demand for oil is constantly changing, adjusting the price a market participant is willing to pay for oil today and in

Since the airline industry is a direct product of market conditions, it is greatly affected by all externalities. Many people noticed a decline in travel after the September 11th tragedy occurred due to safety concerns. When there is a huge increase in fares that definitely interferes with the demand for travel; it causes the price of tickets to continue to rise since a clear correlation between supply and demand exists. When the economy is doing well in terms of the employment rate, and when the dollar is strong people have the tendency to travel more (Jerram,1998).