Let us reveal a SECRET: what is the price of the tickets

How do the airlines price and how the individual offers which you come across during the search.


Anyone who has ever killed a night in search of cheap plane tickets, probably wondered: what determines the price of flights? This week she's tall, then why is it dropping, then rising again, and even tickets for long-distance why-that are cheaper short.

Don't worry, behind this apparent madness lies in accurate calculation. Methods of dynamic pricing is the Foundation of the science of revenue management of the airline, whose goal is profit maximization of the carrier.

And it is not only in the fluctuations of supply and demand; today, the airlines use a complex program that takes into account when calculating the price of an increasing number of factors — the General condition of the different parts of a huge organization to the individual preferences of the passenger.


Evolution pricing


But it was not always so. For most of its history, aviation was heavily regulated non-competitive industry, and a plane ticket cost a fortune. Discounts happen, but usually on certain conditions — for example, it was necessary to conduct a certain number of days at the destination.

International routes are usually serviced by flagship airlines of countries that belonged to each other and to compete like gentlemen.

Aircraft began to move to its present position after 1978, when the U.S. issued a Law on the deregulation this began a worldwide trend of deregulation of air travel.


Ruthless competition


Robert W. Mann, a consultant and former head of planning in one of the airlines, said: "Today is all about planning income and in the last few decades, this area becomes harder and the competition keener".

He says: "the Growth of route networks of airlines and reducing the cost of computing has brought revenue management to a new level of complexity. Developed new methods: for example, the method of calculating the expected return on the seat (Expected Marginal Seat Revenue EMSR) to optimize the tariffs in real time, not only within a given route, but in the entire airline."

So, why is the flight from London to Dubai can cost almost as much as the flights through the same Dubai to Manila?

The fact that the airlines prefer to hold space on the shoulder of the London-Dubai for more paying passengers who are planning a long journey, and to scare off those who are flying close by.


Profiling customers


But how the airline knows who is willing to pay more? Stuart Barvud, founder of aviation consulting company Travercial, says that the airline can make some reasonable assumptions about the profile of traffic on a particular route, and accordingly adjust the prices:

"For example, a flight from London to Majorca is, obviously, leisure. This can determine not only the ticket price but also its dynamics in time. If the airline assumes that vacationers buy tickets in advance, several months before the holiday, she could try to put the prices higher and look at the market reaction.

And if you take a typical business route, say London-Frankfurt, it is logical to start with the lowest price, to achieve a good filling of the cabin, and then sharply raise prices for those who buy a ticket at the last minute."

Moreover, these hasty passengers, ready to buy a ticket for any money, so valuable that some airlines specifically released for them. For example, the Barcelona-based company Caravelo helps airlines to find passengers who are likely to agree to wait for the next flight for a particular payment (voucher or club miles), so the airline gets more seats sold at high fares.


On the way to a total personalization


Maybe you are thinking about the cost of tickets in terms of economy, business and first class, but really the airlines dozens of gradations, and for each tariff is allocated a number of places — when they are sold out, the price jumps to the next step.

But it is now, and the ultimate goal is to know every customer and every offer an individual price. Loyalty program, passengers check-in services airline and tracking users on the Internet can give a lot of valuable data, but to use them to increase income still does not work.

Additional services


Barvud says: "Quite often the data of passengers are scattered in different departments and are of little help to those who are engaged in increasing the revenue of the place."

While personalized marketing in airlines lags behind Amazon and the like, but, according to the Barvud, in this area significant progress is planned: the income management, increasingly take into account not only the cost of the actual ticket, but the total amount that a passenger can pay, including for additional services, and they are becoming an increasingly important source of profit.

For example, many airlines charge for seat selection, and there may also have space for dynamic pricing. Why not put the cost of this service is dependent on the occupancy of the flight or to give a discount to participants of the loyalty program?

Yes, for the loyalty program, this kind of profiling can be beneficial, and another thing, if the Manager who fly often on business and decided to take his family on vacation, "the habit" will show an increased rate? This may well provoke a negative reaction from a profitable customer, and exactly the same as passengers, the company especially values.

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Brand protection


But the task is not to take too many passengers before the airline is the opposite. Very tempting to sell off empty seats on the cheap, but it is possible to lower the status of the brand and alienating the more affluent passengers.

There is a solution to this problem: the company Bidflyer, Plusgrade and SeatFrog has released apps where you can put premium services to auction — the passengers themselves, and anonymously report how much they are willing to pay for extra comfort.published


P. S. And remember, just changing your mind — together we change the world! ©

Source: ru.insider.pro/lifestyle/2016-11-22/priotkryvaem-zavesu-velikoj-tajny-iz-chego-skladyvaetsya-cena-aviabiletov/


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