engleski

AN ANALYSES OF TRADITIONAL AIRLINES' RESPONSES TO LOW COST CARRIERS' PRICING MODELS

Progressive liberalization of the civil aviation industry in the Europe brought intensive growth of the low cost airline sector especially at point-to-point routes where they compete with full service carriers. European low-cost carriers introduced a completely new revenue management concept to the market, thus initiating a major change in pricing and inventory management. Before the introduction of the modern yield management methods, the airlines based their fare product on passenger segmentation and attached to it certain rules and restrictions. The more restrictive fares were designed for tourist and private travelling, whilst higher fares with more flexible rules were used primarily by business passengers. The low-cost carriers presented to the customer a simplified pricing model and instituted a complete change in managing fares and capacity. The customers could buy the service in one-way units, which allowed the low-cost carriers to advertise one-way prices in competition with legacy carriers advertising round trip prices. The new fare structure is especially designed for the Internet which became the main distribution channel for low-cost carriers. The new conditions on the market forced the legacy carriers to react to new challenges which lead to major changes in their fare structures in order to respond to forceful competition within Europe. The objective of fare restructuring is to increase revenue through generating increased demand and improved revenue management. This article gives an overview of the implications of these changes on legacy carriers, covering specifically the changes at one of the European regional carriers.

low cost airlines; revenue management concept; pricing

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