MKT 6350 Fall 2015 Competitive Marketing Strategy Ram C Rao
Questions for American Airlines
Please keep the total length of the report to less than 12 pages double spaced.
1. (10+10 points) Assess the old pricing policy. What are the forces that led it to arise? What forms of price segmentation are used?
Old policy
After the wake of deregulation. Free from controls, American Airline were able to set the prices in their own structure which consists of two areas- fare structure and restriction and yield management. So American Airline develop its own fare structure based on several segment.
1. By seat attributes. Segment traveler into each classes and therefore apply different prices to each class. Yet there is still some differences between each classes like foot space, seats and boarding order.
2. Different discount offered. Following by various restrictions (e.g., advance purchase requirements, cancellation penalties, minimum stay conditions, schedule limitation), different discount rate was applied for the same class.
3. By seat location. In picture 1 is an example of what different price were applied to the coach for different prices. The range is among 50- 700 due to the location of the seats in one airplane.
Picture 1
Yield Management is another way for American Airline, overbooking policy, discount fare allocation and traffic management. For overbooking policy, American Airline could achieve the most value from each flight. However American Airline offer discounted price, combined with overbooking policy might be a treat for revenue, the discount fare allocation can process and determine the number of discount fares to be offered on each flight. The traffic management enable American Airline to make the best use of each flight and provided multiple choices for travelers in different needs hence maximized revenue.
Forces
By year 1978, American Airline was the second largest airline in US after the deregulation....