ABSTRACT
Pricing is a crucial element in airline management. It is only one of several product and service features which are planned and combined together in order to generate demand. But it is the key mechanism whereby the demand for air services is matched with the supply. An airline’s primary aim must be to sell the capacity it is prepared and able to offer at prices which will generate sufficient demand to ensure an adequate level of profit. A great deal hinges on what each airline considers an adequate profit. For some state-owned airlines it may mean little more than breaking even. For others it may be measured in terms of an adequate rate of return to shareholders or a target rate of return on the value of the assets employed. Some airlines may go further and set out not only to produce a target rate of return on their current assets but also to generate an adequate reserve fund to self-finance, as far as possible, the acquisition of new assets such as aircraft. Singapore Airlines appears in recent years to have followed this latter objective. Thus even the profit objective in airline pricing may have different implications for different airlines. There is also a temporal dimension to the profit objective. While some airlines may be concerned more with current profits, others may place the emphasis on longer-term profitability. They may be prepared to forgo profits in the short term to ensure their longer-term objective.
