ABSTRACT
An airline’s primary aim must be to sell the capacity it is prepared and able to offer at prices that will generate sufficient demand to ensure an adequate level of profit. When launching new services or entering fresh markets airlines will often accept losses in the short term, in the expectation of long-term profits. Few international airlines have a single overriding objective in their pricing policy, though the attainment of profitability looms large, especially for privately owned airlines. The inherent instability of air transport markets may well push tariffs to levels at which no operator can make a profit except for short periods. If fares are above cost for some services, then demand for those services will be suppressed even though it might be profitable to supply that demand at prices that were cost-related. The pricing philosophy inherent in the low-cost business model is to offer very low simple fares, with few but easy-to-understand restrictions.
