Factors Affecting Price of Cheap Airline Tickets


 

Why can’t the airline tickets be fixed? This is a very simple question which has a complex answer. At a very basic level this has to do with revenue optimization. The product being offered is a seat, and there is a limited number of these products. This product has to be sold in such a way that maximum revenue can be gained. In order to seek this basic objective, a number of customer acquisition and retention methods are used. These can be broadly classified as online and offline methods. The most popular offline method is through relationship with the travel agencies. Similarly, there are a number of online marketing methods for achieving this purpose.

Add a little complexity to this rather simple formulation by bringing in a number of airline companies which are flying on same routes. The moment this happens, product differentiation is set to become top priority so that customers can differentiate the airline services on the basis of their USPs. One of the most important factor which helps in both acquiring customers and retaining them is that of providing the cheap airline tickets. Airlines and agencies, both, work out the most innovative ways of providing deals and discounts on airfares. Price is always a dominant, rather predominant factor, in flight booking. The people know that the reduction is prices would not mean compromising with the seat quality that would affect the safety of air travel, which is the most basic requirement. Unlike other products, where lowest prices can be attributed to deterioration of quality, the same can not be true for airline seats. So, reduction of prices to offer seats does not mean that quality will be deteriorated.

Besides competition, another important factor that directly affects the air fares is the capital expenditure incurred while acquiring airplanes and their depreciation levels on per year basis. This can be distributed over the per passenger kilometre which is the cost to the airline. If some airline companies make a bulk deal with the manufacturer and get heavy discounts, this gives the airline the required handle to bring down the price.

Aviation fuel is another important factor for serious consideration when the carriers have to price their seats. Airplanes with more efficient fuel consumption are better slated to provide cheapest air ticket fares. Fluctuation is the currency exchange rate is another important determinant, since this affects the cost of imports which are required for operating the flight.

Seasonal demand fluctuations also have their bearing on seasonal price variations. When the tickets are being sold for the lean season, the scheduled carriers would require to fill seats by offering more discounts. However, when tickets are being booked for the peak travel period, the prices are already high and these are not reduced easily. This is because the airlines know that people generally travel during this period.

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