The way to price for a profitable airline
How to set the pricing strategy for a profitable airline.
You start with the costs. It is important to know both the set and variable costs for each leg (city pair) you would potentially fly. Include everything like cost of plane, crew, maintenance, fuel and taxes. Plus an ad on for other costs like managment, admin and marketing. Hence lowering the costs is alpha and omega for creating a competititive airline that is also profitable.
Ceate a pricing strategy fpr eah route that gives you a profit at 80% capacity, or lower if you think you can get away with it in the market. Create several steps in the pricing ladder so you have a low starting price for marketing purposes and the fuller the plane the more you get in. Now you have your base price model.
Add on a percentage premium for more poular times of the week, or of the day, and if there are any events scheduled for that market. Add also on a percentage for any premium services you offer, example a 50% add on for middle seat free social distancing. This will lower the level of fill at where a flight is profitable.
This also creates a buffer you can spend part of on discounts for times of the schedule that are more low demand and/or extra maketing. Use it close up to fill the planes because a flown empty seat is a spoilt revenue opportunity.
It is important for all scheduling to maintain a regular frequency. Your customers will remember your departure times easier if they are at the same time most days and most days of the week.
Be flexible with in adding extra departures to your schedule if certain times fills up quikly. On the other hand combine departures ruthlessly if it can be done without incuring charges that makes it unprofitable. So 2 hours apart flights can be combined. More than 6 hours or the next day less so. Remember you can also cancel unprofitable departures and move the passengers to alternative flights further out without penalty if you give them at least 14 days notice.
The fill and profit level of a schedule should be studied at least weekly and nearly daily for the 2 weeks before departure. There is still time to make changes. Every flight is important if one wants to make a profit.
You start with the costs. It is important to know both the set and variable costs for each leg (city pair) you would potentially fly. Include everything like cost of plane, crew, maintenance, fuel and taxes. Plus an ad on for other costs like managment, admin and marketing. Hence lowering the costs is alpha and omega for creating a competititive airline that is also profitable.
Ceate a pricing strategy fpr eah route that gives you a profit at 80% capacity, or lower if you think you can get away with it in the market. Create several steps in the pricing ladder so you have a low starting price for marketing purposes and the fuller the plane the more you get in. Now you have your base price model.
Add on a percentage premium for more poular times of the week, or of the day, and if there are any events scheduled for that market. Add also on a percentage for any premium services you offer, example a 50% add on for middle seat free social distancing. This will lower the level of fill at where a flight is profitable.
This also creates a buffer you can spend part of on discounts for times of the schedule that are more low demand and/or extra maketing. Use it close up to fill the planes because a flown empty seat is a spoilt revenue opportunity.
It is important for all scheduling to maintain a regular frequency. Your customers will remember your departure times easier if they are at the same time most days and most days of the week.
Be flexible with in adding extra departures to your schedule if certain times fills up quikly. On the other hand combine departures ruthlessly if it can be done without incuring charges that makes it unprofitable. So 2 hours apart flights can be combined. More than 6 hours or the next day less so. Remember you can also cancel unprofitable departures and move the passengers to alternative flights further out without penalty if you give them at least 14 days notice.
The fill and profit level of a schedule should be studied at least weekly and nearly daily for the 2 weeks before departure. There is still time to make changes. Every flight is important if one wants to make a profit.
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