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Week 9 Assignment

The international airline industry is highly competitive with fluctuating fuel costs and frequent mergers and bankruptcies. Pricing strategies must account for these factors. For major airlines, the goal is low prices to gain market share like Ryanair. Smaller airlines need medium-high prices to ensure profitability with fewer passengers. Yield management, which varies prices based on demand factors, allows airlines to cover costs and limit losses. While basic pricing approaches may be similar across regions, companies must consider their size, reputation, and financial history to determine prices in different markets. Commercial discounts negotiated directly with banks can help airlines manage interest rates and debt.

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Chaham Chaker
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41 views

Week 9 Assignment

The international airline industry is highly competitive with fluctuating fuel costs and frequent mergers and bankruptcies. Pricing strategies must account for these factors. For major airlines, the goal is low prices to gain market share like Ryanair. Smaller airlines need medium-high prices to ensure profitability with fewer passengers. Yield management, which varies prices based on demand factors, allows airlines to cover costs and limit losses. While basic pricing approaches may be similar across regions, companies must consider their size, reputation, and financial history to determine prices in different markets. Commercial discounts negotiated directly with banks can help airlines manage interest rates and debt.

Uploaded by

Chaham Chaker
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Week 9 – Assignment – International Marketing – Case 11

1) What should be the primary pricing goals for firms at the top of the list in Table

11.8? Would these goals be different for firms 15-10? Why or why not?

Airlines, are forced to battle in terms of pricing to remain competitive in this overly

competitive market. In the table, we noticed a big difference in terms of passengers received

per year, Finnair receives about 10 million passengers per year while Ryanair receives 117

million, that is, 10 times more. That's why Ryanair's strategy must be based on low prices,

because it is sure to sell at least 100 million tickets per year, which will increase profitability.

For the rest of the table, airlines with low passenger numbers have to establish a medium-high

pricing strategy to ensure a minimum level of profitability as some are sure not to fill all

flights.

2) Which pricing approach best fits the international airline industry?

The international airline industry is a very turbulent sector in which the barriers to entry, both

technical and economic, are very high. This requires new entrants to make a significant

investment. In addition, this sector is characterized by a high volatility in the price of raw

materials and resources that are essential for the players in the sector, we are talking about the

price of fuel and more specifically of kerosene. This sector is also characterized by a number

of players that is constantly changing; between bankruptcies, takeovers, mergers and

newcomers, competition is more than fierce in this sector that is representative of

globalization. No two players are the same in this market, each one has different objectives
(making profits, improving market share, retaining current customers, attracting new

customers or countering the actions of the competition). These characteristics and

complicating factors do not allow the said market to adopt an approach to pricing that would

best suit the international airline industry. This is why, in my opinion, the best solution in

terms of pricing would be to continue with a pricing strategy based on "yield management",

which allows airlines to vary prices according to environmental factors while allowing them

to at least cover their fixed costs and limit losses.

3) How might pricing systems vary from Europe between airlines in Asia, the

Orient and the United States, or would they remain basically the same? Explain

your answer.

As stated earlier, the airline market is a very large market with a lot of regulation, constant

change, strong price competition, new entrants under the concept of "low cost" airlines.

All these elements make this market a highly competitive one. This is why the pricing

system from Europe to Asia, the Middle East and the United States. However, companies

must take into account factors such as the age of the company's activity, its reputation, the

balance sheets of previous years, etc. as a factor allowing them to set prices.

4) Which forms of discounting best fit the pricing systems of international airlines?

The type of discount that would best fit the international airline pricing system would be, the

commercial discount and, as it can be negotiated directly with the banks closely, it would
allow the airlines to negotiate interest rates directly and limit the impact of debt on the

financial structure of the organization.

References

Daniel W. Baack Barbara  Czarnecka Donald Baack, International Marketing: Edition 2

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