Airline Ticket Price Fluctuations and Revenue Management Strategies - Report Example

Airline ticket price fluctuations and revenue management strategies Airline ticket price fluctuations and revenue management strategies Introduction The technical report will present the comparison of rates and fares of air tickets between different airlines and also discuss the trends in change of prices with respect to each airline. For creating the technical report, two months data from five different airlines was collected. It will help to illustrate the significance of Airline ticket price fluctuations and revenue management strategies. The data was collected from October 22, 2014 till December 8, 2014. The airlines selected for the analysis of data were British Airways, Virgin Atlantic; British Airways, Air France; British Airways, Monarch and EasyJet. Specific flights of each of the airlines are selected for keeping the consistency of the data intact. The above stated airlines were selected because these are the most famous airlines of Europe and the collection of data was easy. Visiting the aviation offices of the airlines at airport accessed the fare rates and some data was obtained from Internet. For the comparison British Airway Outbound light number BA0117 (business class), Virgin Atlantic flight number VS003 (business class), British Airways flight number BA0304 (Mixed), Air France flight number AF1081 (mixed), British Airways flight number BA2706 (Leisure), Monarch flight number ZB278 (Leisure), EasyJet flight number EZY8573 (Leisure) were considered. The destinations for Business class were LHR (London, Heathrow) to JFK (New York), LHR (London) to CDG (Paris) and LGW (London Gatwick) to BCN (Barcelona). Graph 1: It was found that in some flights the fare of flight was different on different locations. The rate for same fight when booked from New York was different as compare to the rate of flight when booked from London. The website showed change in reported fares that caused problem in data collection. Initially the data for business class flights one of British Airways and other from Virgin Atlantics leaving from LHR to JFK will be analyzed. The British Airways flight BA0117 flies from London Heathrow Airport at 8:20 a.m. It is found that the initial fare of the flight from British Airways was £1,627.00 on October 22, 2014 the price got decreased up to 60% on 24th October then on 25th October the fare again lifted to £1626.86. There was no apparent change in prices till 14th November. On 15th November, the price increased to £70. Till the end of November the price remained same. From December 3rd there was a considerable increase in price that is £841. The new price was £2468.06 that remained almost same till December 8th. Thus, in two months the fare of the Business class flight number BA0117 varied from £1,627 to £2,551, showing a rise of £924. The Virgin Atlantic flight VS003 flies from London Heathrow Airport at 8:45 a.m. for New York. It is found that the initial fare of the flight from British Airways was £ 1626.86 that remained same with minute variations till November 19th. On November 20, 2014 the price was increased to £1,698 indicating an increase of £72 in the initial fare. Till the end of November the price remained same. On 1st December, the fare of flight was again decreased by £71 for two days. On 3rd December, the price is raised to £841. The new price remained inflated till the end of December with slight variations of up to £50. Thus, the overall increase in the price of ticket was £925. Comparing the fluctuations in the ticket fare of both airline sit is found that the initial price of the ticket was low for both airlines but during December due to Christmas, when maximum number of passengers travel across the country both the companies raised their fares to around £925 that remained consistent till the end of the years. The extreme increase in ticket prices is linked with Christmas and winter holidays as it is the peak time when passengers travel a lot therefore, both companies raised their fares to earn maximum profit. Graph 2: The British Airways flight BA0304 flies from Paris at 7:20. It is found that the initial fare of the flight from British Airways was £93 on 22nd October that remained same till 25th October. The price increased by £39 on 26th October. The price remained same till 12 November that is £135.88. On 13th November, an increased in £13 was observed that remained constant till 20th November with negligible variations. There was a significant increase in price on November 21st that is £73 that lasted for five days. On November 26, the price is markedly raised by £144. Till 6th December the price remained £385. Again a £15 increase appeared in the price of tickets from 7th December that lasted till the end of December. Thus, it could be said that form the initial price that is £93 the fare raised to 403 that is four times the original price of the ticket. The graph of British Airways showed a wide fluctuation of prices within two months. The Air France flight AF1081 (mixed) flies from Paris at 7:10. It is found that the initial fare of the flight from Air France was £88.28 on 22nd October that remained same till 25th October. The price got increased on 26th October by £35. The price remained same till 14 November that is £123.98. On 15th November, an increase of £10 was observed that remained constant till 17th November. There was a slight decrease in price on November 18th that is £18 that lasted for seven days with minor changes. On November 25th, the price is markedly raised by £33. Till 12th December, the price remained £156. Again a £19 increase appeared in the price of tickets on 8th December. Then the price again dropped to £155 to £163 till December end. Thus, it could be said that form the initial price that is £88.28 the fare raised to £163 that is double the original price of the ticket. The graph of Air France showed a continuous fluctuation of prices within two months. Among the two services, British Airways should wide increase in the price of ticket during December affected by the Christmas festival where as the ticket price of Air France showed reasonable fluctuation. British Airways raised the prices drastically. Graph 3 The third graph represents the price vs. date analysis between three Airlines British Airways Monarch and EasyJet offering a leisure flight from London LGW to Barcelona BCN. The British Airways flight BA2706 takes off from London LGW at 9:45 a.m. The ticket price on 22nd October was £129. The price got increased on 23rd October by £29. The price remained same till 12 November that is £157.94 with slight variations of £8 to £10. On 13th November an increase of £38 was observed that remained constant till 14th November. There was a slight decrease in price on November 15th and onwards till December 8th that is £12. Thus, it could be said that form the initial price that is £129 the fare raised to £212 showing a considerable rise of £83. The graph of British Airways showed minor fluctuations of prices within two months. The Monarch flight ZB278 takes off from London LGW at 6:50 p.m. The ticket price on 22nd October was £82.98. The price got decreased on 23rd October by £10 followed by further decrease of £4 in subsequent two days. Then the price rose on 26th October by £4. Till 11 Nov it remained £80.98. On 12th Nov, it increased by only 3£. The data showed similar trend of increase in prices till December 8th. On December 1st, the price was 111£, with an addition of 10£ the price became 121£ and then fall by 10£. On December 8 the price was again £125. The overall increase in price in Monarch Airline was only £42. The graph shows minor fluctuations in two months with continuously increase and decrease in price with slight price changes. EasyJet flight EZY8573 takes off from London LGW at 10:25 a.m. The initial price on October 22nd was £144.98 that decreased to half on the next days that is £74.98 and remained same till 25th October. Again a shift of price was observed on 26th October and the price became 133.98 with an increase of £55. With a £10 increase on 29 October the price remained same till 4 November. On 5th November the price rose to £160.98 and remained constant till 11th November. A considerable drop in price was observed on 12th November that is £46. Then again the price increased on 15th November by £41 that remained same till 24th November with slight changes. On 25th November the price dropped by £27 for one day and then remained constant till December 8th with an increase on £7 (Abdelghany & Abdelghany, 2012; Belobaba, Odoni, & Barnhart, 2009; Ng, 2007; Doganis, 2001). The correlation analysis is used between the airlines to get the idea of how will the fluctuations in prices of one airline (either positive or negative), changes the prices of the other airline, in the first correlation analysis the British Airways and Virgin Atlantic are compared;   British Airways Virgin Atlantic British Airways 1 Virgin Atlantic 0.86810535 1 Correlation Analysis is used to identify the level of relationship that exists between variables in this case, the correlation value lies in between the strong positive linear relationship and a perfect positive linear relationship between British Airways and Virgin Atlantic (i.e. 0.70-1). This shows that if the value of British airways raises its price by £1 the prices of Virgin Atlantic will increase by £0.8681 and vice versa. The second correlation analysis illustrates the relationship between the British Airways and the Air France.   British Airways Air France British Airways 1 Air France 0.82543854 1 The correlation lies in between the strong positive linear relationship and a perfect positive linear relationship (i.e. 0.70-1). This shows that the variation of £1 in the price of British Airways will cause the price of Air France to increase by £0.8254 and vice versa. It was observed that all the airlines have some correlation in between them. The third relationship is analyzed between the British Airways, Monarch and Easyjet.   British Airways Monarch Easyjet British Airways 1 Monarch 0.813059836 1 Easyjet 0.226779955 0.416482 1 The results illustrate that all the airlines have the positive linear relationship among others, but the level of relationship vary. In between British Airways and Monarch lies a strong positive linear relationship as the value is 0.8130 (i.e. greater than 0.70), this means that the increase in the prices of £1 in British Airways will cause an increase in Monarch airfares to raise by £0.8064 and vice versa. The other relationship is between the Monarch and Easyjet,   Monarch Easyjet Monarch 1 easyjet 0.416482368 1 The correlation analysis between Monarch and Easyjet shows that if £1 is increased in the Monarch it will result with an increase in £0.3549. There lies a weak positive linear relationship between the two airlines. It is very crucial to get the tickets at the cheapest prices as it is observed that buying tickets is sometimes very difficult due to the increased prices and other issues but it is recommended to book your ticket in between 14 days - 3months before you decide to travel this will provide you to get the cheapest tickets. Delaying your choice of buying/booking your ticket means you have to pay more for your airline tickets. There are also some specified days in which you can buy the best deals for the plane tickets (Tuesday) is the day that is renowned for this purpose (Dodd & Sundheim, 2011). List of References Abdelghany, D. K., & Abdelghany, D. A. (2012). Modeling Applications in the Airline Industry. farnham: Ashgate Publishing, Ltd. Belobaba, P., Odoni, A., & Barnhart, C. (2009). The Global Airline Industry. Hoboken: John Wiley & Sons. Dodd, P., & Sundheim, D. (2011). The 25 Best Time Management Tools and Techniques. Hoboken: John Wiley & Sons. Doganis, R. (2001). The Airline Business in the Twenty-first Century. London: Psychology Press. Ng, I. C. (2007). The Pricing and Revenue Management of Services. New York: Routledge. Read More