I have been following up round tickets between Las Vegas International Airport and Chicago Midway International Airport for some time now. I have realized that there is notable fluctuation in ticket cost that might be very difficult to explain without thinking of the idea of price skimming as well as competitor impact on ticket prices. There are some online sites such as cheapairfare.com that helps me to note periods when the cost of air travel is at its lowest. Price skimming is a technique in which a business firm sets a high starting price for the services and products but later lowers it over time (Xia and Zhang, 2017). Competition forces the airline firms to lower the airfare charges so as to attract more consumers to their organization.
According to the study done by EYEFORTRAVEL (2018), the recent RM systems tend to lower the number of inventory buckets which implies the deviation of fare prices which are treated as demanding segments. For instance, if the United Airline is limited to only 26 buckets with some set for external parties they always tend to lower their price range between $59 to $114 (EYEFORTRAVEL, 2018). Competition heightened in cities that United Airline serves mainly comprising of Chicago and New Jersey forcing the organization to lower their fare prices. Despite the fact that fare cuts are amazing news for travelers, the airline business risks a significant amount of incomes in the long run.
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From the discussion, it is apparent that the price of air travel is affected by the rising competition in the market. This makes the business to set prices at low and high prices depending on the season or other market forces.
References
EYEFORTRAVEL. (2018). Lessons in pricing with precision from United Airlines. Retrieved from https://www.eyefortravel.com/revenue-and-data-management/lessons-pricing-precision-united-airlines
Xia, W., & Zhang, A. (2017). Air and high-speed rail transport integration on profits and welfare: Effects of air-rail connecting time. Journal of Air Transport Management, 65, 181-190.
