An insight into airline dynamic pricing practices in emerging markets: Effects of low cost carriers' presence on routes from Belgrade 'Nikola Tesla' airport

Nikola Ivanov,Radosav Jovanovic

doi:10.5937/tehnika1601119i

Abstract

Dynamic pricing and revenue management in airline industry have been the subject of research for more than twenty years now. Building upon that massive body of research, in this paper we investigate actual dynamic pricing patterns in new and emerging markets. We specifically focus on the impact that recent entry of low cost carriers on a number of routes from Belgrade Nikola Tesla Airport might have had on pricing practices of legacy incumbents. Unlike with most of previous contributions in the field, we analyse the market characterised by relatively low frequencies and predominantly short-to-medium haul flights. In this paper, we observe and analyse pricing dynamics on two types of routes: routes where only legacy carriers operate and routes where legacy carriers face competition from low cost carriers. The effects of route competition on offered airline fares are estimated and conclusions derived.

Highlights

Dynamic pricing, being the core part of the concept of revenue management, is one of the main instruments at airlines’ disposal to increase profit
As an illustrative case study, we focus on the impact that recent entry of low cost carriers (LCC) on a number of routes from Belgrade Nikola Tesla Airport might have had on pricing practices of full-service carriers (FSC) incumbents
Ticket prices are grouped based on carrier type (FSC or LCC), type of route and the day of flight for competing routes

Summary

Introduction

Dynamic pricing, being the core part of the concept of revenue management, is one of the main instruments at airlines’ disposal to increase profit. We focus on temporal evolution of prices, i.e. how the ticket price, as seen by a passenger, changes during several weeks before the flight in seemingly different competitive settings.

Results

Conclusion