In the airline business, many times airline has to give discounts to the passenger. And this discount policy should be controlled properly. In this section, we’ll focus on discount factors and their policy in the airline business.
The decision about pricing level is to depend on deregulated market and it affects two things, one is pricing initiative of competitors and two when they should lead the market by pricing initiatives. There is two way to control discount fares. Firstly, in increasing degree Revenue management system decides about low-cost seats which are available in another flight. On off-peak time the passengers are normally lower than normal situation. The deciders should give more discount to gain at least some profit. When the seats will remain empty, there has at least some cost behind the seat. So, it will cause a loss to the business. To decrease the loss, airlines offer lower-level pricing to the buyer to travel. That increases sales as well as the profit of that business. Secondly, there have some restricted situations that should obey by the airline business. Sometimes, the seats of leisure travel are restricted by the government and the authority. Some obstacles also make an effect on price. That should be maintained and get concerned by the airline business.
There is also another common condition that helps to make decisions here are some common things
Minimum Stay Conditions.
On holiday, many travelers visit many places by the airline. In that case, the airline gives conditions to stay at least a period of time for the traveler. Normally in short-haul travel, the restricted time is one night. Before this period if one wants to go back or return, he/she must pay full fare. And that person will not get a discount. In the long haul route, the minimum stay is normally seven-night. Before that time, travelers can not get discounts. Business travelers are normally traveling frequently and they don’t stay the minimum stay time. And sometimes they have to spend a full payment for return. And other times they get an advantage from FFP.
There has a rule called the Saturday stay rule. This strategy is often used by airlines to separate business travelers from leisure passengers, and many fliers use a Saturday night stay to their advantage to obtain cheaper fares. A round trip flight that has a Saturday night stay somewhere in between is usually more economical than a midweek flight. With the rise of many low-cost carriers (LCCs) and budget airlines, the Saturday-night stay rule is being less and less a factor in the pricing of tickets. However, it remains for many legacy carriers and flag carriers, as these are the airlines many business people choose to fly in the first place.
Maximum Stay Conditions
Maximum stay conditions define a maximum length of time that passengers can stay at their destinations and still return home using a cheaper discounted fare. Normally the period of stay is 45 to 60 days. After that period of time buyer has to spend the full fare on the airline.
Maximum stay conditions are a less effective way of controlling fares for the airline business. Most of the passengers are now business travelers and leisure travelers. They normally don’t stay many days at a destination.
The advance purchase rule defines, a passenger must pay some advance for booking a ticket. In the airline business, this rule is still applied. In this rule, one has to spend a minimum penalty for canceling or altering the flight.
This rule is so helpful for airline businesses because airlines can manage the cash flow and they can use the money for other work. That also gains extra profit. They also have easy capacity management in that they force low-yielding demand to come forward at an early stage. Their most telling advantage, though is again that they make it difficult for the business traveler to use lower fare. Many business trips arise at the last minute. So they don’t take the risk to buy a ticket at the last moment of a standby ticket. They booked the assumed time of their trips. And here the airline business gets extra profit.
Standby fares can be booked at any time. The passenger must be served a seat is not necessary for an airline. They can visit only when seats are available for particular travelers.
There are several common circumstances in which passengers fly standby:
- A prospective passenger is not booked on the flight but waits to see if there is an extra seat after all scheduled passengers have boarded.
- A missed flight requires a passenger to fly standby on the next flight to the same destination, as they now lack a reservation.
- A passenger who is already booked on a flight arrives at the airport early (accidentally or deliberately) and asks to be on standby for an earlier flight. If a standby seat doesn’t open up, they just take their booked flight. The industry calls this a go-show.
- A ticketed passenger requests to standby for an upgrade. Many airlines, particularly in the United States, give free space-available domestic upgrades to first-class to their elite tier fliers. If first-class sells out or upgrades go to higher-tiered passengers, elite fliers can standby in the event a first-class seat becomes available due to a cancellation, no-show, misconnect, irregular operation, or equipment change. If a passenger clears for an upgrade, they may receive a new boarding pass at the gate. Some airlines, such as American and United, have gate-side monitors that show the upgrade and general standby list and announce when First Class is full (no further upgrades are available).
- If a flight is overbooked, an airline may designate all passengers without a seat assignment as “standby” prior to boarding.
There have some advantages and disadvantages for passengers they can fly at a cheap rate, there has also no requirement to pay the advance, they can fly whenever they want and some disadvantages are, they cannot be sure whether the seat is empty or not. In peak season the price may increase beyond their expectations and more.
The business also has some obstacles. They can’t be sure about how many passengers need a stand-by ticket. They also face trouble booking the ticket because many times the caller gives a fake identity to the booking office via calling. They also face crowds in the airline office where other passengers are waiting for flights. That makes trouble for others.
The decisions about stand tickets are important. The airline should not offer Standby fares on their off-peak flights, this is an apparent contradiction off-peak flights are those with the greatest number of empty, seats, which are Standby fares can help to fill. If, though, Standbys are allowed on off-peak flights, the dilutionary effects of doing so will be served.
Now airlines try to ignore standby fares and standby tickets for those obstacles and risks.
In this section special discount is available for specific people one type of passenger is children, young people, and senior citizens. And other types of passengers are occupational discounts. For example, military personnel, seamen, and others.
These fares give preference to named groups, Unfortunately, it is impossible to support them as a form of pricing for airlines. Those carriers that use them often find that they are offering an increasing number of courses, that once a discriminatory discount has been offered to one group, there are no reasons of principle to deny it to others. Once a particular group has known the privilege of cheaper fares on a preferential basis, they will fight hard to retain this right. That will decrease the total revenue of the company.
Fares Only Available as part of a Tour Package
Who is supposed to add the accommodation and other features they are preferable to buy a ticket. That limits the sale of wholesalers. And business travelers are not interested to buy this type of ticket.