Airline Pricing

Paper Summary:

Airline pricing is a complex, unpredictable process that is affected by many factors. Three of the major factors affecting this process are competition, demand and inventory. Airlines refer to it as "yield management" yet few offer an explanation for why a one-way flight costs as much as a round-trip ticket does. This essay describes the process of airline pricing and the factors that affect it, in an attempt to understand the logic behind major and discount airlines when creating their pricing structures.

From the Paper:

"Demand is another factor that affects airline pricing. This factor explains why it is cheaper to fly on a weekday, at off-peak hours, or on days other than major holidays. Some flights are more popular than others, possibly due to the time or day or day of week. A red-eye flight is not as popular as a flight in the morning. And a flight on Tuesday is probably not as popular as a flight on Friday, unless it is around a major holiday. Regardless, airlines must operate these flights to maintain a regular schedule, so prices must be changed, flight by flight, to attract people to fill up the less popular flights and the more popular flights."

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