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Airline Pricing under Different Market Conditions: Evidence from European Low-Cost Carriers

Volodymyr Bilotkach, Alberto Gaggero () and Claudio Piga ()

Working Paper series from Rimini Centre for Economic Analysis

Abstract: Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily during the period June 2002 - June 2003. Our results indicate that yield management is effective in raising a flight's load factor. Furthermore, yield management interventions are more intense, and generate a stronger impact, on more competitive routes: one possible interpretation is that a reduction in competitive pressure allows the carriers to adopt a more standardized approach to pricing. Similarly, we find that yield management interventions are more effective in raising the load factor on routes where the customer mix is more heterogenous (i.e., it includes passengers traveling for leisure, business and for family matters). On markets with homogeneous customer base, no robust yield management effect was observed.

Keywords: Easyjet; Intertemporal Pricing; Panel Data; Ryanair; Yield Management (search for similar items in EconPapers)
JEL-codes: D22 L11 L93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-eur, nep-hme, nep-ind and nep-tur
Date: 2011-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

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Related works:
Journal Article: Airline pricing under different market conditions: Evidence from European Low-Cost Carriers (2015) Downloads
Working Paper: Airline Pricing under Different Market Conditions: evidence from European Low-Cost Carriers (2012) Downloads
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