What is cost plus pricing strategy?

Low cost airline strategy

• Low cost airline pricing strategy ? About 300words meaningful suggestion . Some data support , but not too complex caculation.

• Answer:

  Low cost carriers seek to price their fares well below those of traditional airlines to increase demand and encourage consumers to switch to the low cost carrier. "It is not unusual for a deep fare cut to double the demand for airline service on a city pair." By taking advantage of their lower average seat mile costs and using the increased demand to fill a larger percentage of their flights, the low cost carriers seek to maintain profitability despite offering lower fares. Low cost carriers achieve their lower costs in a variety of ways. First, they seek to keep their business simple and low cost by not providing meals, having more seats on aircraft, not having assigned seats, and offering frequent flyer programs that require minimal administration. Secondary airports, with less expensive landing rights, are typically used. Routes tend to be organized around point-to-point traffic rather than requiring passengers to change airplanes at a hub. Finally, low cost airlines seek to keep their costs low by using one type of aircraft, rapid turnarounds on the ground to keep planes in service, low wages, and a high percentage of direct sales via the Internet. By having lower costs than traditional airlines, low cost carriers can not only price lower than them while maintaining profitability, but they can also seek to compete with other modes of transportation. Fares are frequently positioned to be competitive with automobile travel in the United States and train travel in Europe. Low cost carriers also seek to make their service more attractive to customers, and easier to manage, by eliminating complicated pricing strategies that result in numerous fares for the same route and removing many restrictions on travel, such as the typically required Saturday night stay to receive a discounted fare. A variety of sources exist describing low cost airlines and their pricing strategies: "Impact of Low Cost Airlines" Mercer Management Consulting (2002) http://www.mercermc.com/Perspectives/Specialty/MOT_pdfs/Lowcostairlines.pdf "Predation In the Airline Industry" by Roger W. Fones, Department of Justice (June 12, 1997) http://www.usdoj.gov/atr/public/speeches/1188.htm "Low-Cost Carriers and Low Fares: Competition and Concentration in the U.S. Airline Industry" by Charles Najda, Stanford University (May 12, 2003) http://www-econ.stanford.edu/academics/Honors_Theses/Theses_2003/Najda.pdf "Is Delta Singing The End Of Song?" by Lisa DiCarlo, Forbes (January 4, 2005) http://www.pricingsociety.com/ppsinthenews.asp?nid=175 "Turbulent Skies" The Economist (July 8, 2004) http://www.economist.com/business/displaystory.cfm?story_id=2897525 Sincerely, Wonko Search terms: Low cost airline pricing strategy