|American Airline pricing|
| In the last few decades, the Airline industry has tried to maximize profits through strategic alterations in the prices according to time booking. The passengers booking earlier on have the advantage of paying less fare compared to the last-minute passengers. AA (American Airline) has tried to maximize profits by using pricing to make sure the rich will pay according to their standard of living. |
The industry has faced several challenges in the environmental changes, acquiring of raw material, legal, aviation authorities, and Air transport users and technology. Due to global warming effects and changes of climate, the industry has to comply with emissions regulations, which increase the cost of operation. They have to comply with government regulations like increased tax rates. The challenges also include Financial difficulties in that the air travel demand has reduced due to economic crises The airline resulting to mergers due to high cost of operation and maximization of profits operators are required to comply with rules and regulations set by different authorities.
The AA analyses the leisure different people would like to experience before providing it at an extra cost. They formulate a structure with fare classes where customers choose. They use three different pricing strategies like fare pricing, value pricing and frequent flyer programs. These types of pricing give the customer incentives like free tickets and discount which makes the customer to appreciate the value of his money.
Fare pricing is depended on the time one book and pays before departure. For example, if a person books for a plane a month ago, it will be cheaper than the person who books three days before departure. The draw is that the customers are not certain of the prices until they acquire the tickets. Some people will opt to use other ways of transport because of the fluctuations of the fares. The pricing is not fair to the customer because AA is trying to maximize on profits at the expense of their clients. Although this is a business, they cannot fly to a certain route if the trip is not breaking even. The change of prices is to encourage different groups of people to buy tickets so that the operation cost is catered for through other ways like reducing the fares to attract more customers.