Mba 523 Airline Pricing Paper

Words: 1195
Pages: 5


Written Assignment 3: Airline Pricing Research Assignment
MBAA 523 Advanced Aviation Economics
December 3, 2015
Professor: Gerald Cook

The purpose of this paper is to discuss concept and theory of 3rd degree price discrimination and how it is applies to the airline industry. Including a brief explanation, of how and why the industry chooses to practice 3rd degree price. With further discussion of data collected from two competing airlines for a typical round-trip itinerary with bookings from two selected cities and with the same departure dates and departure times, the will show how itineraries with closer departure dates are more likely to
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They are both comparable in size within the industry according to the US Department of Transportation. The seating tiers are different for both airlines? American uses a 4 tier fare scheme, offering; Choice, Choice Essential, Choice Plus, and a First class (American Airlines, 2015). While Delta is more conventional with a two tier scheme and offers only main cabin and First class (Delta Airlines, 2015). Since American offers more tiers, the data was collected was from the Choice Essential seating, since it was comparable to Delta?s First class tier. Other amenities were not included in either of the airlines data such as, frequent flyers, preferred boarding, in-flight entertainment, and premium beverage …show more content…
It was undetermined on why the data for Delta skewed up to $1,328 on the date of 12/18/2015 for the business traveler; no major events are schedule in Salt Lake City in the timeframe of the fare.
This brief synopsis and conclusion, shows that from the data of next day fares are much higher for business travelers, than that of fares of the leisure travelers, which usually buy their tickets ahead of time from their planned travel date. As for the carrier, third-degree price discrimination will continue to maximize their revenue, since this economic tool can increase profitability. Going back to the beginning of this paper, when it was discussed how third-degree price discrimination works, it can been seen that the airlines has a the demand curve that is inelastic, the close it gets to departure time.

American Airlines. (2015, December 3). Retrieved from American Airlines: