Pricing Analysis
Reduction in fare
- Calculate Revenue gain (loss) due to demand elasticity
- Subtract Dilution
- Lower Revenue from those who would have anyway flown
- Subtract Refunds
- Match the lower price on already purchased tickets
- Subtract Advertisement
- Unplanned expenditure on advertising the new scheme
- Subtract Variable Passenger costs
- Expenditure on additional food, Traffic liability insurance etc.
- Add spillover & Rejected demand
- Extra Pax. due to increased demand that other airlines can’t handle
Increase in fare => Revenue gain (loss) + Variable Passenger costs