Revenue management in the flight industry : evidence of some tourist markets to Gran Canaria

UNIVERSIDAD DE LAS PALMAS DE GRAN CANARIA MSc in Tou ism T anspo and En i onmen al Economics REVENUE MANAGEMENT IN THE FLIGHT INDUSTRY. EVIDENCE OF SOME TOURIST MARKETS TO GRAN CANARIA. Ma ías Sosa B eye 42211852K Supe ised by: Juan Ca los Ma ín Las Palmas de G an Cana ia (11/12/2015) 1 TABLE OF CONTENTS 1. INTRODUCTION Pg. 3 2. REVENUE MANAGEMENT 2.1 Re enue Managemen in he Ai line Indus y Pg. 4 Pg. 6 3. REVIEW ON REVENUE MANAGEMENT PRACTICES IN THE AIRLINE INDUSTRY Pg. 6 4. DATA 4.1 Uni ed Kingdom - G an Cana ia 4.2 Ge many - G an Cana ia 4.3 The Ne he lands - G an Cana ia 4.4 No way - G an Cana ia Pg. 10 Pg. 11 Pg. 13 Pg. 15 Pg. 17 5. RESULTS 5.1. E idences in Uni ed Kingdom-G an Cana ia ou e 5.2. E idences in Ge many-G an Cana ia ou e 5.3. E idences in The Ne he lands-G an Cana ia ou e 5.4. E idences in No way-G an Cana ia ou e 5.5. All in one analysis Pg. 19 Pg. 19 Pg. 20 Pg. 21 Pg. 22 Pg. 23 6. CONCLUSIONS Pg. 25 APPENDIX 1 APPENDIX 2 APPENDIX 3 REFERENCES Pg. 27 Pg. 28 Pg. 29 Pg. 30 LIST OF TABLES Table 1. Numbe o o eign ou is s isi ing G an Cana ia by coun y o o igin. Pg. 3 Table 2. To al a e age expendi u e e sus a e age ligh p ice pe ou is . Pg. 4 Table 3. Fligh s’ cha ac e is ics. Pg. 11 2 LIST OF FIGURES Figu e 1. B i ish Ai lines’ p ices Uni ed Kingdom-G an Cana ia Pg. 12 Figu e 2. Ryanai ’s p ices Uni ed Kingdom-G an Cana ia Pg. 12 Figu e 3. Thomas Cook’s p ices Uni ed Kingdom-G an Cana ia Pg. 13 Figu e 4. Condo ’s p ices Ge many-G an Cana ia Pg. 14 Figu e 5. Ryanai ’s p ices Ge many-G an Cana ia Pg. 14 Figu e 6. TUI’s p ices Ge many-G am Cana ia Pg. 15 Figu e 7. KLM Royal Du ch’s p ices The Ne he lands-G an Cana ia Pg. 16 Figu e 8. Ryanai ’s p ices The Ne he lands-G an Cana ia Pg. 16 Figu e 9. A ke’s p ices The Ne he lands-G an Cana ia Pg. 17 Figu e 10. Ibe ia’s p ices No way-G an Cana ia Pg. 18 Figu e 11. No wegian Ai lines’ p ices No way-G an Cana ia Pg. 18 Figu e 12. Apollo’s p ices No way-G an Cana ia Pg. 19 Figu e 13. Uni ed Kingdom-G an Cana ia’s ou e p ice compa ison Pg. 20 Figu e 14. Ge many-G an Cana ia’s ou e p ice compa ison Pg. 21 Figu e 15. The Ne he lands-G an Cana ia’s ou e p ice compa ison Pg. 22 Figu e 16. The Ne he lands-G an Cana ia’s ou e p ice compa ison Pg. 23 Figu e 17. All in one p ice changes compa ison Pg. 25 Figu e 18. All in one p ice changes compa ison Pg. 27 Figu e 19. Low season’s p ice changes compa ison Pg. 28 Figu e 20. Low season’s p ice changes compa ison Pg. 29 3 1. INTRODUCTION In he pas , he ai line indus y was cha ac e ized by go e nmen egula ions and a high g ow h a e (Teiche , 2008) bu a e 1978 o he U.S. and 1993 o he E.U. he ai line indus y has seen a g ow h in compe i ion hanks o he libe aliza ion o he ma ke . Low Cos Ca ie s en e ed he ma ke and had a g ea pene a ion in i , his led o a s ong compe i ion in he ai line indus y as hose Low Cos companies o e ed cheape ligh s han T adi ional Ai lines, helping hem o cap u e signi ican ma ke sha es. Acco ding o Ga igos-Simon e al. (2010) a e he e en s o Sep embe 11 h, he ola ili y in je uel p ices and he de elopmen o In e ne and o he in o ma ion echnologies, along wi h he massi e en y o Low Cos Ca ie s, ha e led o changes in he ecen yea s. Beside he ac ha Ai line companies s a ed o use es ic ed discoun a es in he 1970s, wha is known as Re enue Managemen o Yield Managemen , he ac o s desc ibed be o e helped he ai line indus y o e ol e and had he necessi y o educing cos s and imp o e bene i s. To each his goal hey imp o ed hei p icing echniques and made an ex ended use o i , wi h he Re enue Managemen echniques hey looked in o selling hei p oduc s, in his case ligh sea s, o each clien a he maximum p ice each o hem would be willing o pay, and in his way hey could ge mo e e enues o a ixed demand. In he case o he Cana y Islands he e olu ion o he ai line indus y helped o imp o e he numbe o ou is s ha isi hem each yea which, along wi h di e en economical and geog aphical ac o s, ha e helped o b eak eco ds in he las yea s. Acco ding o he Ai po s a is ics gi en by ISTAC in he FRONTUR annual s a is ics, he numbe o o eign ou is s has g own up om 8,608,676 ou is s in 2010 o 11,473,600 in 2014. Wa ching he numbe s o o eign ou is s isi ing G an Cana ia we can see he same g owing end du ing he las yea s (Figu e 1). Table 1. Numbe o o eign ou is s isi ing G an Cana ia by coun y o o igin. Sou ce: ISTAC (05/12/2015). Numbe s exp essed in uni s. Those numbe s p o e he impo ance o he ai line indus y o he islands as i is mainly he only anspo mode ha allow ou is s o come o he des ina ion, e en i he c uises sec o has seen some g ow h du ing he las yea s oo. And is his ac o , he ai plane as he only way o en e o exi he islands in a quick way, he main ac o o he p ices o a el o hem. 4 The p ices a e one o he main ac o s o ou is s o choose whe he hey go, when hey ha e o choose be ween one des ina ion o he o he , and, e en i he ligh is no he only expendi u e, as accommoda ion, ood and o he expendi u es as sou eni s and excu sions a e also an impo an pa o he inal p ice o he package. The “ o al expendi u e” s a is ic published by ISTAC con i ms ha he ligh icke is a e y impo an pa o he o al p ice o he package (Table 2). I we ake as an example hose ou is s ha jus buy he ligh in o igin, and hen pay he accommoda ion in he des ina ion o s ay wi h he amily o iends we can see ha jus he ligh is app oxima ely he 40% o he o al cos o he package. Table 2. To al a e age expendi u e e sus a e age ligh p ice pe ou is . Sou ce: ISTAC (05/12/2015). The impo ance o he ligh p ice in he o al package expendi u e accen ua es he need o ou is s o unde s and how he ai lines’ p icing echniques wo k. I ou is s can unde s and he di e en ac o s ha a ec he ligh p ices hey will be able o buy icke s a he cheapes p ice. This essay will y o explain o anyone ha eads i wha Re enue Managemen is and he di e en p icing echniques ha Yield Manage s and Yield Managemen Sys ems use o change he p ices so hey o e he bes p ice o each clien aiming a maximizing e enues once he ou es ha e been scheduled. Du ing he nex pages a b ie in oduc ion o Re enue Managemen and i s applica ions o he ai line indus y will be p esen ed, ollowed by a quick e iew on some o he Re enue Managemen s udies o he ai line indus y, hen a s udy done in he Eu opean Ai line ma ke looking a he p ices gi en by some Ai lines o hei ligh s o G an Cana ia wi h o igin in ou o he main emi ing ma ke s is p esen ed, wi h he pu pose o inding e idences, simila i ies and di e ences in he Re enue Managemen p ac ices in ela ion wi h he days in ad ance he ligh icke s a e bough . This will help a ele s and ou is s o be e unde s and he ligh s ma ke and aid hem o ake be e decisions on when is he bes momen o buy hei ligh icke s. 2. REVENUE MANAGEMENT Kimes and Wi z (2003) de ined Re enue Managemen o Yield Managemen as “ he applica ion o in o ma ion sys ems and p icing s a egies o alloca e he igh capaci y o he igh cus ome a he igh p ice a he igh ime”. Heo and Lee (2011) e e ed o i as selling pe ishable se ices o p oduc s o he co ec cus ome a he co ec p ice wi h he objec i e o maximizing e enue. González and Sule (1994) desc ibed Yield Managemen as a me hod o manage capaci y wi h he objec i e o maximizing he company’s global incomes helping i o sell each capaci y uni o co ec clien a he igh p ice and season pe iod. “Co ec ” and “ igh ” a e wo key-wo ds used o de ine Re enue Managemen as i is he poin whe e he cus ome ge s he g ea es alue o u ili y om he p oduc and se ice while he company ge s he op imal e enue, hey can ge om each clien . 5 Bha ill and Ranga aj (2008) s a ed ha companies can apply one o wo ypes o Re enue Managemen echniques, p ice-based o quan i y-based, o a mix o bo h. Tallu i and Van Ryzin (2004) de ined bo h echniques as:  Quan i y-based Re enue Managemen : is based on a ioning he quan i ies sold o di e en p oduc s o cus ome s segmen s, which leads o limi ing supply.  P ice-based Re enue Managemen : In exchange o limi ing supply his p ac ice looks in o inc easing p ice, wha i eally does is a ioning bu in a mo e p o i able way as i will limi sales bu wi h mo e income. Wha ype o Re enue Managemen o apply is, in p ac ice, dic a ed by business cons ain s which can lead o he use o one o hem o a combina ion o bo h. Acco ding o Sun e al. (2011), Re enue Managemen p ac ices ha e all a se o common cha ac e is ics ha should be me in o de o apply his echnique. These cha ac e is ics a e abili y o segmen he ma ke , a ela i ely ixed capaci y, he in en o y mus be pe ishable, p oduc s mus be able o be sold in ad ance, he demand luc ua es o e ime, and he p oduc o se ice has a low ma ginal sale cos bu a high ma ginal p oduc ion cos . The ai line companies, ho el indus y and o he ou is ela ed companies ha e common cha ac e is ics ha a e ideal o apply Re enue Managemen . They ha e limi ed capaci y, hei demand can be segmen ed in di e en g oups and hey luc ua e by seasons, hey ha e a pe ishable in en o y and p oduc s ha can be sold in ad ance. Bu simply mee ing hose cha ac e is ics is no enough o implemen a good Re enue Managemen Sys em, Bobb and Em e Ve al (2008) s a ed some speci ic issues o he se ice indus ies ha mus be looked a o ge he bene i s om he use o Re enue Managemen . The sys em mus be able o wo k wi h dynamic changes as cancela ions and no-shows, add ess eal- ime in e dependencies be ween componen s and y o ack down he compe i o s eal- ime decisions. To ge he bes o he Re enue Managemen sys em, Boob and Em e Ve al (2008) lis ed h ee c i ical componen s o hose sys ems ha should be implemen ed. The i s one is o ecas ing which is c i ical and di ec ly ela ed wi h he capaci y limi s o de e mine he p o i abili y. The Re enue Managemen sys em should ake his o ical eco ded da a o pas ansac ions o de e mine u u e demand, he mos used o ecas ing ools a e eg ession analysis, exponen ial smoo hing me hods, Box-Jenkins Au o Reg essi e In eg a ed Mo ing A e age models and he Pickup me hods. A second componen o he sys em mus be he o e booking policy which can be applied o e enue managemen sys em wi h a basic economic model whe e he limi is he poin whe e ma ginal e enue and ma ginal cos a e equal o wi h he Le el o Se ice model which is simila o sa e y s ock o in en o y managemen . To help in he decision he ai line o e booking p ac ice should be ounded in wo elemen s, he ne educ ion o bookings om he his o ical peak o he momen when he check-in s a s and he no-show a e a e he check-in s a s. The hi d componen is he ma ke segmen a ion, which is e y simila o he Pa e o P inciple as he 80% o e enue comes om 20% o he cus ome s. So implemen ing a good ma ke segmen a ion sys em is i al o ge he mos e enue. Acco ding o Denizci Guille and Elsie Xu (2013), and ollowing he las poin abo e, a well implemen ed Re enue Managemen s a egy should be able o le he ma ke segmen i sel once he s a egy is applied. The a e ences me hod is one o he bes op ions o le he 6 ma ke segmen i sel . Ra e ences a e es ic ions ca ego ies based on cus ome s’ needs, beha io and willingness o pay. Ra e ences ha e wo ca ego ies, physical and nonphysical. Physical ones a e mo e easible in he lodging indus y as i include oom ype, iew and loca ion, bu ai lines apply hem oo as cus ome can choose window sea o co ido sea , a sea in he i s ows o in he la e , business class o economy class sea . Nonphysical ones a e mo e ela ed o he consume s’ cha ac e is ics (special discoun s o o ganiza ions o employees), ansac ion cha ac e is ics which include ime o pu chase, place o pu chase, e undable icke o no , and consump ion cha ac e is ics as quan i y o equency. I a e ences a e no well design and applied he Re enue Managemen sys em can ail as cus ome s could mo e om one ca ego y o ano he causing a loss in p o i abili y. 2.1 Re enue Managemen in he Ai line Indus y Acco ding o Heo and Lee (2011) he ai line indus y was he ini ial implemen e o Re enue Managemen p ac ices and i was accep ed by o he se ice indus ies wi h simila cha ac e is ics la e on. In he 1970s, ai lines o e ed es ic ed discoun s a e p oduc s mixing discoun ed and high a e passenge s in he same ai c a o maximize p o i (Sun e al. 2011). Bu Re enue Managemen has e ol ed wi h he pass o ime and i s e olu ion can be seen in he se o mechanisms o disc imina e cus ome s wi h di e en willingness o pay by p ice ai lines use nowadays. A he beginning, ai lines segmen ed cus ome s in business and economy passenge s and designed he p oduc s o be mo e lexible o business a ele s and cheape o he economy passenge s. Once he Low Cos Ca ie s en e ed he ma ke , he compe i i e landscape changed d as ically and o op imize he p oduc a ma ke -o ien ed app oach was needed (Teiche , 2008). The ex ended use o In e ne ga e mo e in o ma ion and powe o cus ome s as hey had mo e op ions o ge ligh icke s a be e p ices, bu ai line companies bene i om his oo as i educed dis ibu ion cos s and ga e hem in o ma ion abou cus ome beha io . This ga he ed in o ma ion helped o imp o e he Re enue Managemen sys ems o he ai line indus y and c ea e he e ogenei y in he p oduc o e o adap o he he e ogenei y o he demand which couldn’ jus be classi ied wi h he Business Class and Economy Class model. Some o he Re enue Managemen p ac ices applied o help he ma ke o segmen i sel in his he e ogeneous ma ke a e ad ance pu chase es ic ions, non- e undable icke s, a minimum o days o s ay a des ina ion o equi ing a Sa u day nigh s ay o he cus ome (Pulle and Taylo , 2012). Wi h hose mechanism cus ome s can be segmen ed by hei alue o ime o be p ice disc imina ed. E idences on di e en Re enue Managemen mechanism in he ai line indus y ha e been s udied by di e en au ho s and ha e shown some o he common p ac ices applied by ai line companies. 3. REVIEW ON REVENUE MANAGEMENT PRACTICES IN THE AIRLINE INDUSTRY Du ing he las yea s some s udies abou Yield Managemen we e published wi h he aim o unde s and and explain be e how he di e en echniques a e applied o he di e en ou is 7 companies. The ligh indus y is one o he companies ha mo e ad an age has aken om he Re enue Managemen p ac ices and i has e ol ed a lo in he las decades. In 2004 Pels and Rie eld s udied how low cos ca ie s we e eac ing o he con en ional ca ie s’ p icing decisions and ice e sa, hey ocused on p ice adjus men s done by ca ie s in he London-Pa is ma ke . They s udied he p ices o e u n ligh s o ips s a ing he 23 d Sep embe 2002 and e u ning he 29 h Sep embe 2002 s a ing ou mon h p io depa u e, obse ing p ice changes each week o he i s h ee mon h and each day o he las mon h. The hypo hesis hey p esen ed was ha ai line companies whe e esponding o a e changes o hei compe i o s in a daily basis aking in conside a ion he p ice o he compe i o s he day be o e as well as hei own p ice in he p eceding day. Du ing hei in es iga ion hey disco e ed ha , once he ai line companies eached a minimum e enue, hey s a ed o change hei a es in o wo di ec ions, o maximize p o i s o ma ke sha es. F om hei s a is ical analysis, hey go ha he p ices we e inc easing o e ime o mos o he ai lines, ha he lowes p ice was ound be ween 35 and 21 days be o e depa u e, ha some o he ai lines jus espond o he p ice changes o conc e e ai lines so i ha conc e e ai line didn’ change hei p ice bu he es do he o he ai line doesn’ espond o he changes. In he case o he adi ional ai lines hey don’ espond o low cos ca ie s’ p ice changes nei he hey do when o he adi ional ai lines change hei p ices. They concluded hei s udy ela ing he o e -capaci y c ea ed in some ma ke s by he low cos ca ie s wi h hei s a egy o in es ing in new ai c a wi h he unexpec ed eac ion o compe i o s’ p ice changes. This was obse ed in he eac ion o one o he low cos ca ie s o o he low cos ca ie when he las one s a ed o inc ease hei p ice he i s one s a ed o lowe hem, he au ho s explained his as i he i s ca ie had seen in he p ice inc eases o he las ca ie ha his one has illed his ai plane so he i s one had o lowe p ices o ill his own ai plane oo. Bilo kach e al. (2010) wan ed o unde s and how i ms compe e so he s udied ai lines’ day by day p icing decisions. They s udied mo e han 70,000 a e quo es o one way ligh s om New Yo k o London du ing he 60 days be o e hei depa u e be ween Sep embe and No embe 2005 using Expedia.com. They analyzed only economy class a es o non-s op ligh s. Ha ing he analyzed ou e a la ge numbe o compe i o s allowed hem no only o obse e he gene al end in a es as hey mo ed o he depa u e da e bu hey could also obse e he simila i ies and di e ences be ween he p ice-se ing p ac ices ac oss he di e en ai lines. To ge some e idences hey subjec hei da a o eg ession analysis wi h he objec i e o ge ing a summa y o he ai lines’ p icing dynamics. This analysis led hem o he conclusion ha he a es we e “U” shaped and he lowes a e would ha e been ound a ound 65 days p io depa u e. They ound ou ha a es p esen ed in he i s sc een o he web page we e app oxima ely $5-$10 lowe han in ollowing pages. O he esul hey go was ha he a e age di e ence in p ice be ween buying he ligh icke 60 days be o e depa u e and 1 day be o e depa u e was in he neighbo hood 32$, bu he s anda d de ia ion wen om 239.9$ o 380.7$. They jus i ied his ac oss- ime a ia ion because hey we e using jus one-way ligh s. 8 Fu he analysis lead hem o ind ha mo ning ligh s we e 6$ mo e expensi e, and buying on weekends was cheape . Thei easoning behind he la e was ha a el agen s make hei a angemen s du ing he week days. Wi h a pai -wise compa isons o he ele an coe icien s hey disco e ed ha he p icing s a egies’ di e ences ac oss ai lines a e ha dly andom. Also hey ound ha he e was no undamen al change in he esul s when hei ange o da a collec ion ell on majo holidays as Thanksgi ing week o win e holidays. They didn’ ind a link be ween he ca ie ’s ma ke sha e and he p icing s a egy bu hey no iced ha e en i he h ee majo playe s o he ma ke had di e en s a egies, hey seemed o be mo e simila be ween hem in compa ison wi h mino i ms. And, e en i some o he companies we e in he same alliance o had codesha e ligh s in he analyzed ou e, hey had clea ly di e en p icing s a egies. They concluded ha , as he ai lines employed di e en p icing s a egies, i was impossible o hem o gi e an answe o which model o s a egic in e ac ion is consis en wi h he esul s. Man in and Koo (2010) analyzed he e ec o he day o week in which he ligh icke is pu chased o ind i he e is eally a di e ence be ween buying he ligh icke s du ing he weekdays o he weekends. They ga he ed da a om e u n ligh s om 1000 US domes ic o igin-des ina ion pai s du ing 90 days looking a each i ine a y depa ing on Wednesdays and e u ning 7 days la e be ween Feb ua y and Ap il using Fa ecas .com, hen hey we e able o ga he app oxima ely 540,000 obse a ions. They assume ha as du ing weekends he websi es a ic is lowe han on weekdays, because mos business-d i en shopping occu s du ing he weekdays, he ai lines employ a day- dependen p ice disc imina ion. Bu e en hough i would no be possible o ai lines o lowe he p ices o he ligh icke s on weekends as ha would shi he demand om he weekdays o he weekends. So, hey sugges ha ai lines will o e discoun ed a es in some weekends and highe a es in o he weekends so ha hey can cap u e he demand o p ice-sensi i e consume s wi h he i s s a egy wi hou shi ing he demand wi h he second. Thus, hey con ended ha e en i he e was a la ge a e age p ice dispe sion du ing he weekends, he a e age p ice du ing weekends emained simila o he one o he weekdays. In hei s udy, hey disco e ed ha he p ices we e lowe ing om he 90 days be o e depa u e un il 2-3 weeks be o e depa u e we e hey apidly inc eased. They jus i ied he inc ease o he p ice as he depa u e app oaches as a p ice disc imina ing s a egy ha di e en ia es be ween he ea ly buye s as p ice sensi i e leisu e passenge s and he la e buye s as business passenge s. Du ing he s udy hey ound ha as he depa u e app oaches no only he a e age p ice bu he a e age p ice dispe sion inc eases and he a e o hese also inc eases. This inc ease is jus i ied by he changes in he demand pa e ns. Wha hey also ound was ha he p ice dispe sion was bigge om F iday o Sunday han om Monday o Thu sday because on he weekends he ypes o cus ome s we e mo e di e en han du ing he weekdays. On weekends, lowe p ices could be ound bu he a e age o p ices was he same as du ing he weekdays, hey jus i ied his by s a ing ha he ai line company o e ed a wide ange o p ices on weekends o sa is y all he di e en ypes o cus ome s while du ing he weekdays hey had o o e a sho e ange o p ices as he cus ome s we e mo e simila . 15 Las ly, he ou ope a o chosen o he Ge man ma ke was TUI which non-s op low season ligh depa ed om Düsseldo Ai po he 18 h May a 12:35 a i ing a 16:20 in G an Cana ia. The e u n ligh depa ed he 25 h May a 17:25 and a i ed in Düsseldo a 22:55. The high season ligh had i s depa u e he 11 h No embe a 6:00 a i ing in G an Cana ia a 9:45 and e u ning he 18 h No embe a 10:45 landing in Düsseldo a 16:20. Hand luggage is he only special cha ac e is ic included in he p ice. This ligh will be named TU1(GE) o he low season da a and TU2(GE) o he high season ones in he ollowing g aphic (Figu e 6). Figu e 6. TUI’s p ices Ge many-G am Cana ia 4.3 The Ne he lands - G an Cana ia The adi ional ai line o The Ne he lands is KLM Royal Du ch and i s ligh s ha e 1 s op in F ance be o e con inuing o G an Cana ia. The low season ligh depa ed he 18 h May om Ams e dam a 7:00 o a i e a 13:40 in G an Cana ia. The e u n ligh le G an Cana ia a 10:00 he 25 h May and a i es in Ams e dam a 19:50. The high season ligh had i s depa u e he 11 h No embe a 7:35 and i s a i al in G an Cana ia a 13:40, meanwhile he e u n ligh was he 18 h No embe a 14:30 ha ing i s landing in Ams e dam a 22:45. The booking p ice o Economy Class icke included hand luggage, addi ional luggage, sea selec ion and a snack ha is gi en be o e each landing. To iden i y his ligh in he g aphic (Figu e 7) he nomencla u e KL1(NE) is used o he low season ligh and KL2(NE) o he high season ligh . 16 Figu e 7. KLM Royal Du ch’s p ices The Ne he lands-G an Cana ia Ryanai is once again he low cos ca ie chosen, depa ing in i s low season ligh om Eindho en he 21s May a 13:10 and a i ing in G an Cana ia a 16:50, which e u n ligh was scheduled o depa he 28 h May a 7:15 and a i ing back in Eindho en a 12:45. The high season ligh had i s depa u e om Eindho en he 11 h No embe a 12:25 and a i ed G an Cana ia a 16:05, he e u n ligh depa ed he 18 h No embe a 6:15 a i ing in Eindho en a 12:00. As p e iously he ligh icke jus includes hand luggage, ha ing o p ice o any ex a. The nomencla u e used o iden i y hese ligh s in he g aphic (Figu e 8) will be RY1(NE) o he low season ligh and RY2(NE) o he high season one. Figu e 8. Ryanai ’s p ices The Ne he lands-G an Cana ia 17 The las ligh analyzed o The Ne he lands belongs o he ou ope a o A ke, which is pa o TUI. The selec ed low season ligh depa ed he 18 h May om Ams e dam a 14:55 and a i ed in G an Cana ia a 19:00. I s e u n ligh le a 19:30 he 25 h May and landed a 1:20 he 26 h May in Eindho en. The high season ligh had i s depa u e he 9 h No embe 2015 a 7:00 a i ing in G an Cana ia a 11:05, i s e u n ligh depa ed he 16 h No embe a 11:35 om G an Cana ia and a i ed Ams e dam a 17:25. The p ice included only hand luggage. Nomencla u e AR1(NE) will be used o iden i y he low season ligh and AR2(NE) o he high season one in he nex g aphic (Figu e 9). Figu e 9. A ke’s p ices The Ne he lands-G an Cana ia 4.4 No way - G an Cana ia Fo he No wegian ma ke Ibe ia was he adi ional ai line chosen o s udy, hese ligh s had one s op in Mad id be o e ge ing o hei inal des ina ion. The low season ligh depa ed om Oslo he 18 h May a 14:40 landing a 21:30 in G an Cana ia. The e u n ligh depa ed he 25 h May a 11:20 and landed a 22:25 in Oslo. The high season ligh depa ed om Oslo he 9 h o No embe a 7:25 a i ing in G an Cana ia a 17:55 and had i s e u n ligh he 16 h No embe a 13:45 wi h landing in Oslo a 22:55. The p ice included hand luggage, sea selec ion and addi ional luggage. IB1(NO) is he nomencla u e o iden i y he low season ligh and IB2(NO) he one o iden i y he high season ligh in he g aphic (Figu e 10). 18 Figu e 10. Ibe ia’s p ices No way-G an Cana ia This ime No wegian Ai lines is selec ed as low cos ca ie o co e he No way-G an Cana ia ou e. Fo he low season he chosen non-s op ligh depa ed he 18 h May om Oslo Ga de moen a 18:50 and landed a 23:35 in G an Cana ia. The e u n ligh ook o he 25 h May a 11:40 o a i e in Oslo Ga de moen a 18:05. The high season ligh had i s depa u e he 9 h o No embe 2015 a 17:30 landing in G an Cana ia a 22:15 and i s e u n ligh depa ed he 16 h No embe a 10:00 a i ing Oslo a 16:40. Only hand luggage was included in he basic icke ’s p ice. To iden i y hese ligh s in he ollowing g aphic (Figu e 11) he nomencla u es NA1(NO) and NA2(NO) o he low and high season ligh s, espec i ely, a e used. Figu e 11. No wegian Ai lines’ p ices No way-G an Cana ia 19 Las ly, he ou ope a o chosen o he No way-G an Cana ia ligh was Apollo, which low season ligh depa ed he 20 h May om Oslo a 18:50 and landed in G an Cana ia a 23:35, and i s e u n ligh was scheduled o depa a 11:40 he 27 h May landing in Oslo a 18:05. The high season ligh ook o om Oslo a 9:00 he 11 h No embe 2015 landing in G an Cana ia a 13:50, i s e u n ligh depa ed he 18 h No embe a 14:50 and a i ed in Oslo a 21:30. This was a non-s op ligh which included hand luggage and addi ional luggage. AP1(NO) and AP2(NO) will be he nomencla u es used o iden i y he low season and high season ligh s in he nex g aphic (Figu e 12), espec i ely. Figu e 12. Apollo’s p ices No way-G an Cana ia 5. RESULTS A e p esen ing each ligh wi h i s de ails and i s p ice a ia ion g aphic, hey mus be compa ed. To unde s and i he e is some so o esponse o he p ice a ia ions om one company by o he s, and o obse e i he di e en companies wo k wi h he same p ice end, he di e en ma ke s will be i s analyzed solely, la e on a compa ison wi h all da a will be p esen ed o ind a pa e n in he di e en p ice s a egies o know i he e is an es ima ed numbe o days in ad ance in which he ligh s should be booked. 5.1. E idences in Uni ed Kingdom-G an Cana ia ou e In Figu e 13 all he obse ed ligh p ices o he Uni ed Kingdom-G an Cana ia o bo h seasons a e p esen ed oge he . The i s e idence ga he ed is ha B i ish ai ways seems o ha e a simila p icing policy wi hou depending on he season, bo h o i s ligh s ha e a simila s a ing and inal p ice, wha a ies is how he ligh p ice luc ua es du ing each season, ha ing and inc easing end in he low season, wi h majo p ice s abili y pe iods, and a s able o lowe p ice du ing he i s obse ed mon h o hen s a mixing weeks o highe p ices wi h weeks o lowe p ices o he second mon h, bu in a e age ha ing highe p ice han he pe iod be o e he inc ease. In bo h season a g ea e inc ease o he p ice can be ound a ound 3 weeks be o e depa u e wi h a p ice dec ease once he depa u e da e app oaches o 20 he B i ish Ai ways ligh s. In he low season he p ices doesn’ luc ua e in a wide ange o Ryanai ’s and Thomas Cook’s ligh s a leas ill he las days be o e depa u e, and o he case o B i ish Ai ways e en i he p ice has an inc easing end, as said be o e, he p ices emain s able o long pe iods o ime. Bo h Thomas Cook and Ryanai sha e simila p ices du ing all he low season, excep o he las week, whe e Thomas Cook hea ily inc eases i s p ice a e B i ish Ai ways had done a las p ice d op one week be o e depa u e, his las could be a s a egy o sell he emaining sea s o ill he plane as hey al eady go p o i abili y o he ligh . In he high season occu s some hing cu ious o he analyzed ou e, he low cos ca ie is he one wi h he highes p ices, jus being su passed by B i ish Ai ways in some sho pe iods o ime du ing he las mon h be o e depa u e. The lowe p ices o he adi ional and ou ope a o ligh s could be explained because he numbe o ligh s o e ed du ing his pe iod o ime is much highe , bo h companies we e o e ing mo e ligh s pe day in di e en ime ames which gi es mo e op ions o choose o he demand. A p ice eac ion om Ryanai o B i ish Ai ways’ p ice changes can be no ice in he g aphics wi h some days o delay, as once he second s a s educing i s icke ’s p ice he i s one does he same, and once i s a s o ise i again Ryanai ollows. Figu e 13. Uni ed Kingdom-G an Cana ia’s ou e p ice compa ison 5.2. E idences in Ge many-G an Cana ia ou e In Figu e 14 he ligh p ices obse ed o he Ge many-G an Cana ia ou e a e p esen ed. The Ge man ma ke seems o be a mo e s able ligh p ice ma ke , he s a ing and he ending p ice in mos o he cases is a ound he €50 a ia ion, excep o he Condo high season ligh (€119 lowe las han i s day p ice) and Ryanai low season ligh , which has an ending p ice €290 highe han he s a ing p ice. The daily p ice luc ua ion is e y s able oo excep o some coun ed excep ions, he TUI high season ligh , which had a hea y inc ease in p ice, and hen s a ed o be published in hei web page a discoun ed a e o he ollowing weeks ill depa u e; he Condo ligh s, which in bo h season ha e seen punc ual hea y inc eases in hei ligh p ices, his can p obably be explained by peaks o pu chases, 21 whe e he numbe o sea s lowe o jus 3 o less emaining and due o cancela ions he p ice eco e ed a p ice simila o he pe iod be o e he inc ease. O he e idence obse ed in his ma ke is ha he s a ing p ice o bo h season’s ligh s is e y simila o each company, and e en i he p ices seems o be lowe a he s a ing days o he low season compa ed o he high season, he p ice end up being highe o he low season han he high season. The explana ion o his end could be ha as he companies ha e an his o ical eco d o hei sells and numbe o emp y sea s, du ing he low season hey ha e o capi alize on he lowe numbe o sea s sold o ge p o i , so hey sell a lowe p ices ill hey each he p o i abili y poin and hen hey inc ease hei p ices o ge as much e enue as possible o each ex a sold sea , meanwhile in he high season ligh s hey can sell a numbe o ini ial sea s o highe p ices so ha hey ge he p o i abili y poin e y quickly and hen sell he es o sea s a lowe p ices o maximize e enue a he same ime hey a oid lying wi h emp y sea s. Figu e 14. Ge many-G an Cana ia’s ou e p ice compa ison 5.3. E idences in The Ne he lands-G an Cana ia ou e In Figu e 15 he ligh a es o e ed by he di e en analyzed ai lines ope a ing in he Ne he lands-G an Cana ia ou e a e shown. The clea e idence ha can be obse ed in his ma ke is ha KLM Royal Du ch shows a g ea p ice di e en ial in each season compa ed o he o he ai lines ope a ing in ha ma ke , i has always he highes p ice, excep o he i s wo weeks analyzed in he high season, whe e he ou ope a o ’s p ice is sligh ly highe . This p ice di e en ial could be a p icing policy applied o di e en ia e hemsel es om o he ai lines, as KLM Royal Du ch is he only analyzed ai line company in any o he ma ke s ha o e s hand luggage, addi ional luggage, sea selec ion and a snack o each o i s landings a i s lowes o e ed a e. How hei a es e ol e in bo h pe iods shows a lo on how he p icing policy o his company wo ks, as hey o e immobile p ices o e y long pe iods du ing he i s wo mon h, and hen hey inc ease he p ices in a weekly basis du ing he las mon h be o e depa u e. 22 Meanwhile he ou ope a o A ke o e s a e y s able p ice du ing all he low season, wi h mino daily p ice upda es, and discoun ed a es o long pe iods du ing he high season, whe e hey had up o 60% discoun o e s du ing nea ly wo mon h and hen hey d opped hei p ices in he las h ee weeks wi h no discoun ad e ising bu being e en hough much cheape han he “discoun ed” a e o he p e ious pe iod. Wi h his hey p obably p e ended o ill hei ligh s as soon as possible a he same ime hey we e eaching hei p o i abili y poin and hen sell he es o sea s o he lowes p o i able p ice possible o hem. The case o Ryanai is jus he opposi e, o e ing a e y s able, bu daily upda ed, p ice wi h a dec easing endency in he high season and a “U” shaped cu e o he low season, wi h an ini ial p ice which hen lowe s o s a slowly inc easing up o da e o depa u e. This las s a egy is p obably explained by he p ice educ ion as no enough sea s we e being sold and as he sea s go sold s a o inc ease he p ice o s a maximizing p o i . Figu e 15. The Ne he lands-G an Cana ia’s ou e p ice compa ison 5.4. E idences in No way-G an Cana ia ou e In Figu e 16 he icke s’ p ice e olu ion o he di e en analyzed ai line companies ope a ing in he No way-G an Cana ia ou e can be obse ed. The i s e idence ound is ha he adi ional ai line has he highes p ice in bo h seasons, jus being su passed du ing a sho pe iod in he high season by No wegian Ai lines, he low cos ca ie . The second e idence ha can be obse ed in his ma ke is ha he p ices a e e y s able du ing he i s wo mon h o bo h seasons, and hen depending on he ype o company he p ices s a inc easing o dec easing. In he case o he ou ope a o Apollo, he p ice has a dec easing endency in he las 3 weeks du ing he high season, wi h some i egula inc eases in he las days, and a hea y d op in p ice s a ing he las 3 weeks be o e depa u e in he low season case wi h a s able p ice du ing hose weeks ill he las days when he p ices d op e en mo e. In he case o Ibe ia, he adi ional ai line o his ma ke , he p ice is hea ily inc eased 3 weeks be o e depa u e in he low season scena io and 1 week be o e he high season 23 scena io, being he high season inc ease much mo e d ama ically han in low season; in low season he p ice inc eases om app oxima ely €770 o nea ly €1,200 and in he high season he p ice change was om €690 o mo e han €1,800. Meanwhile he low cos ca ie No wegian Ai lines s a s wi h he lowes p ice and has a slow p ice inc ease endency du ing bo h seasons, su passing he ou ope a o ’s p ice and in some pe iods o high season ha ing e en g ea e p ice han he adi ional ai line. In he low cos ca ie agains ou ope a o si ua ion he e can possibly be a compe i i e eac ion, while he low cos ca ie inc eases i s p ice as hey sell all hei sea s, he ou ope a o main ains hei p ices lowe han he low cos ca ie s ones o gain ma ke sha e and ill i s own ligh s. Figu e 16. The Ne he lands-G an Cana ia’s ou e p ice compa ison 5.5. All in one analysis Once he di e en ma ke s ha e been analyzed sepa a ely gi ing some explana ion on how we e he di e en companies applying hei p icing policies, a gene al analysis is equi ed o ind ou wha a e he p icing echniques applied by he di e en ai lines which a e no ela ed o he single ma ke s bu a e a gene al p icing policy o mos o hei ligh s. A conjoin g aphic is shown in Figu e 17 whe e all he 24 ligh p ices can be obse ed. Because o he g aphic designe limi a ions and o aid in he obse a ions, Figu e 17 will be shown in a highe size in Appendix 1 ollowed by Appendix 2 and 3 whe e conjoin g aphics a e p esen ed sepa a ing he ligh s by seasons. Wha can be obse ed in hose g aphics is ha he gene al p ice di e en ia ing s a egies make adi ional ai lines o ha e he highe bu less a iable p ices, ha ing big p ice inc emen al he nea o he day o depa u e hey a e. The only case whe e he adi ional company is no he one wi h he highes p ice is in he high season o he Uni ed Kingdom- G an Cana ia ou e, whe e Ryanai had a big p ice di e ence wi h B i ish Ai ways and Thomas Cook. 24 O he e idence we can see on he g aphics is ha ou ope a o s ha e lowe p ices, and hei p ices a e no oo ola ile, hey ha e mino changes e e y day. A ke was he only one in publicly show in hei web page ha a ligh was ha ing a discoun a e and i was jus applied in he high season. In gene al lines, excep o he Thomas Cook low season ligh , all he ou ope a o s’ ini ial p ices a e a ound €300, and om he e he p ices ended up being highe he day o depa u e in all cases du ing he low season, and lowe in all case, excep he No wegian ma ke , in he high season. In mos o he cases he p ices inc ease d ama ically in he las 3 days, and he e a e al eady p ice inc emen al du ing he las 21 days, so o ge he bes p ices is be e o buy he icke s be o e his 3 weeks ma k. The bes would be he soone he be e , bu as i has being p esen ed on he di e en g aphics he e a e oppo uni ies whe e wai ing un il 30 o 60 days be o e depa u e good p ices and/o in e es ing discoun s can be ound. And i depends oo on he ype o ai line we a e con ac ing wi h ou ligh , as mos o ou ope a o s p esen ed he e ha e s able o e en dec easing p ices un il he las week be o e he ligh . The explana ion on why some ai lines inc ease hei p ices as depa u e app oaches o hey lowe hem can be ound in di e en ac o s. The ai lines can be lowe ing hei p ices as depa u e app oaches o gain ma ke sha e once hey ha e eached hei p o i abili y ba ie , o hey can be ying o ill in he emp y sea s wi h las minu e sells. In he opposi e side a e he easons behind inc easing he p ices d ama ically as depa u e app oaches, which could be explained by he ai lines ying o maximize p o i om he las sea s o sell and ge he bes e enue e en i hey don’ ill he plain o hey a e aking i s p ice policy in acco dance wi h he ype o a ele which no mally pu chase hei ligh s in he las days, which a e business a ele s. I ’s assumed ha business a ele will mainly pu chase ligh icke s om adi ional ai lines and, each ime mo e o en, om low cos ca ie s, while he ou ope a o icke s a e mainly sold o leisu e passenge s which ha e highe p ice elas ici y. In he conc e e case o he ou ope a o s lowe ing hei p ices in he las days be o e depa u e i can be assumed ha , as ou ope a o s no mally will sell hei ligh icke s in a package holiday, including accommoda ion and o he se ices, hey a e selling he las sea s ou side o package holiday a discoun p ices jus o ill he ligh and ge an ex a e enue as hei main income will come om he selling o package holidays. Las ly, ocusing on why high season ligh s we e sold cheape han low season ligh s o all ma ke s excep he No wegian ma ke , is di icul o ind an answe , as he logic would sugges ha as high season means mo e demand, he p ices should be highe han in he low season, when less people buy ligh s and he compe i ion be ween ai lines is highe as hey igh o he ma ke sha e and e enue. E en hough, a e some esea ch, a logic explana ion was ound. As s a ed by di e en na ional newspape s, s a ing on No embe No wegian Ai line, he Scandina ian low cos ca ie , in oduced i sel comple ely in he Cana ies’ ligh ma ke , inc easing hei ope a ions no only be ween he Cana ies and he Mainland, bu wi h 7 o he main des ina ion in Eu ope. This led o he es o he ai lines o s a a p ice wa agains he low cos ca ie o y o expulse i om he ma ke o minimize he los in ma ke sha e. The No wey-G an Cana ia ou e was no a ec ed by his p ice wa as No wegian Ai lines was al eady ope a ing his ou e since a ious yea s ago and he ma ke had al eady each s abili y.