Case Analysis: The Budget Airline Industry
Price discrimination is a pricing strategy whereby firms charge customers different prices for the same product or service that the offer. It is often that the seller charges each customer the maximum price that he or she is willing to pay. Such discrimination will allow a company to generate higher profits compared to standard pricing as it allows the firm to capture every last dollar of revenue available from each of its individual customers. (Anon., 2015)
The Budget Airline Industry
The Budget Airline Industry is derived from Low-Cost Carriers (LCCs) operating on a different platform from Full-Service Carriers. Such airlines have cheaper fares and fewer comfort in order to maintain low operating costs than their competitors. …show more content…
According to CAPA - Centre for Aviation, in 2012, LCCs account for 26.5% of the total capacity at Singapore Changi Airport. The three LCCs that has contributed to the rapid growth of LCCs in the Singapore Aviation Market are AirAsia, Tiger and Jetstar groups. (CAPA, 7 Mar 2012)
The LCCs have dominated Changi’s passengers’ growth by about two-third over the last decade. In 2004, when LCCs were relatively foreign to the market, it only contributed less than 1 million of the 30 million passengers Changi handled. Moving forward to 2014, Changi handled 54 million passengers, of which, more than 16 million were from LCCs. (CAPA, 3 Feb …show more content…
With brand new Dreamliners in its fleet, Scoot is able to offer services that Full Service Carriers do, at a minimal price. Scoot allows consumers to purchase just a seat, or add extras from hot meals to extra baggage allowance, in-flight Wi-Fi access, extra legroom and much more. Segregating its economy class into four seating preference at difference prices, consumers have the option to fly premium at low cost. (Flyscoot.com, 2014) For further comfort, Scoot offers business class seats as well; this is not offered on the other LCCs operating from Singapore.
Jetstar takes a different approach to distinguish itself. To encourage consumers to choose them as their preferred airline, Jetstar rolled out the “10% Price Beat Guaranteed” scheme. (Jetstar.com, 2013) Jetstar promises to beat any competitor’s airfare by 10% if consumers found other airlines that offers a cheaper price within one hour earlier or later to Jetstar’s departure schedule.
Such offerings enable an airline to distinguish itself from other LCCs and successful price discrimination as the comfort level for consumers is different from other LCCs.
Consumer Constraint and