question archive International Marketing, 2nd Edition Q n CASE 11 Pricing Air Travel In most of the world, airline travel is available to domestic and international customers
International Marketing, 2nd Edition Q n CASE 11 Pricing Air Travel In most of the world, airline travel is available to domestic and international customers
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International Marketing, 2nd Edition Q n CASE 11 Pricing Air Travel In most of the world, airline travel is available to domestic and international customers. Table 11.8 identifies the top twenty largest airlines in Europe during the year 2016, in terms of passengers. Many of the issues described in this chapter apply to international airline operations. For instance, any competitor in this industry would be subject to the various objectives and pricing methods. Each airline's marketing team could choose from the more common pricing goals, including earning profits, improving market share, retaining current customers, enticing new customers, or countering competitive actions. Selections would be based, in part, on the airline's financial status, country of origin, age, reputation or image, level of governmental protection and investment, and relevant degree of competition. The pricing methods, based on costs, supply and demand, competition, or profitability, all apply to airlines. The complicating factors are that prices, especially fuel prices, change quickly and dramatically. Supply and demand will be influenced by shifts in economic conditions. Competitors and competitive actions vary widely, as carriers enter and leave the marketplace, while some merge in various types of alliances. Profit targets become difficult to establish in such volatile markets. In addition, issues such as terrorism affect operations and prices, as airlines seek to provide security for flights, passengers, and crew members. Discounting also affects the international airlines industry. When Ryanair, the low-cost Irish airline, announced plans for flights from the United Kingdom to the United States priced at 10 in the near future, the goal of offering loss leader flights was to gain a foothold in the British market. Beyond these concerns, ethical issues are germane. For instance, one common practice among airlines has been to label airline fees, which count as revenue for the company, as "taxes." A lawsuit filed against British Airways accuses that airline of the practice and states that the pricing is deceptive. 10 TABLE 11.8 Top Twenty Largest Airlines Europe, 2016 Position Airlines Passengers Ryanair 116.8 million 2 Lufthansa Group (incl. Lufthansa, Austrian, Swiss, Eurowings) 109.7 million LAG (British Airways, Iberia, Vueling, Aer Lingus) 100.7 million Air France-KLM (ind. Air France, KLM, HOP!, Transavia) 93.4 million EasyJet 74.5 million Turkish Airlines 62.8 million Aeroflot Group (incl. Aeroflot, Rossiya, Pobeda) 43.4 million 8 SAS Group (Scandinavian Airlines) 29.4 million 9 Norwegian 29.3 million 10 Air Berlin Group (incl. Air Berlin, NIKI) 28.9 million 11 Alitalia 12 Pegasus Airlines 24.1 million 13 Wizz Air 22.8 million 14 Aegean Airlines (and Olympic Air) 15 $7 Airlines 13.1 million 16 TAP Portugal 11.7 million 17 Finnair 10.9 million 18 Air Europa 19 Flybe 20 SunExpress Source: "Largest Airlines Europe," Airports in Europe, September 11, 2017. Retrieved from www.airportsineurope. Table 11.8 com/flight-info/largest-airlines-europe/. Source: "Largest Airlines Europe," Airports in Europe, September 11, 2017. Retrieved from http://www.airportsineurope.com/flight- info/largest-airlines-europe/. Pg. 272 383
11:08 AM Wed Nov 11 1 52% International Marketing, 2nd Edition Q n pricing is deceptive.10 TABLE 11.8 Top Twenty Largest Airlines Europe, 2016 Position Airlines Passengers Ryanair 116.8 million 2 Lufthansa Group (incl. Lufthansa, Austrian, Swiss, Eurowings) 109.7 million LAG (British Airways, Iberia, Vueling, Aer Lingus) 100.7 million Air France-KLM (ind. Air France, KLM, HOP!, Transavia 93.4 million EasyJet 74.5 million Turkish Airlines 62.8 million Aeroflot Group (incl. Aeroflot, Rossiya, Pobeda) 43.4 million 8 SAS Group (Scandinavian Airlines) 29.4 million 9 Norwegian 29.3 million 10 Air Berlin Group (incl. Air Berlin, NIKI) 28.9 million 11 Alitalia 12 Pegasus Airlines 24.1 million 13 Wizz Air 22.8 million 14 Aegean Airlines (and Olympic Air) 15 $7 Airlines 13.1 million 16 TAP Portugal 11.7 million 17 Finnair 10.9 million 18 Air Europa 19 Flybe 20 SunExpress Source: "Largest Airlines Europe," Airports in Europe, September 11, 2017. Retrieved from www.airportsineurope. Table 11.8 com/flight-info/largest-airlines-europe/. Source: "Largest Airlines Europe," Airports in Europe, September 11, 2017. Retrieved from http:/www.airportsineurope.com/flight- info/largest-airlines-europe/. RYANAIR 1. What should be the primary pricing objectives for the companies at the top of the list in Table 11.8? Would the objectives differ for companies 15-20? Why or why not? 2. Which price setting approach best matches the international airline industry? 3. How might pricing systems vary from Europe among airlines in Asia, the Far East, and the United States, or would they remain basically the same? Explain your answer. 4. Which forms of discounting best match international airline pricing systems? 5. Examine the list of airlines banned in Europe at https://ec.europa.eu/transport/modes/air/safety/air-ban_en.h How would such a ban affect pricing strategies for these companies in other areas where they are not banned? 6. Which of the ethical issues identified in this chapter apply to international airlines? Explain your answer. Pg. 272 384
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