The Effectiveness of Price Discrimination as Pricing Strategy in Low-cost Airline: Case from Southwest Airlines

Abstract

Price discrimination has become one of the airline industry’s most popular and common pricing strategies. The airline industry mainly uses three levels of price discrimination, charging different values for different customer groups. Due to this strategy, airlines can achieve maximum company profits. There are different types of airlines, and in this paper, we focus on the example of a low-cost airline - Southwest Airlines. Discussing the effectiveness of price discrimination as a pricing strategy in a low-cost airline is the primary purpose of this paper. In this paper, we present the essential background, advantages, and recent achievements of Southwest. How the company has successfully used price discrimination is analyzed and demonstrated with a specific example. Finally, it is concluded that for low-cost airlines, price discrimination is good but not necessarily the most effective and that other pricing strategies are to be considered among them.