The customers might get confused by three different options of fares and the provisions associated with each. Preparation for flight: If the traveler needs to bring additional luggage after booking is complete he would have to buy extra slots- this should be specified to avoid inconvenience to customers on the day of the flight. At the airport and in-flight: confusion arising out of 3 fare types as customer handling depends on the type of fare selected. Re-training of airline personnel required. Change management would be crucial. The candidate should cover at least all the above mentioned points. Points to be deducted if change management is neglected
ESADE Case Collection Book 2014 / # Section 1 | Case 1.2_European Airline 16 Question 4: The client currently offers only 1 fare type which is analogous to the medium budget fare in the proposed pricing structure. With reference to revenue what is the main risk in implementing the 3 fare scheme? Suggested Solution One of the main risks is to effectively promote and market each of the 3 fare types to attract the right amount of customers to each far type to optimize the profitability of the whole scheme. As an example, customers who were purchasing the higher priced medium budget tickets would shift towards the low-cost budget type. It would be difficult to attract enough premium passengers to outweigh this, which would result in a lower revenue level compared to before. Question 5: What would be the most effective way to optimize revenue from the 3 fare scheme? Suggested Solution The first step would be to analyses the spending patterns of the 2 different customer types: budget & business. Business travelers are more likely to purchase the premium budget fare and leisure travelers are more likely to purchase the medium and low-cost fare types. Based on the flying patterns (routes, frequency and time of travel) of each customer type the most relevant fare types should be made available while the availability of the others should be limited. For instance: business travelers opt to travel early morning or late night usually between certain destinations. On such flights the availability of medium and low cost budget fares should be limited.
ESADE Case Collection Book 2014 / # Section 1 | Case 1.2_European Airline 17 Question 6: Please calculate the revenue that the client can expect to generate per day with the below pricing/customer information: Average Day: 10000 passengers To be shared with interviewee: New Situation To be shared with interviewee: Flight Patterns: • 40% passengers early morning between 6:00 – 10:00 • 27% passengers during day 10:00 – 18:00 • 33% passengers evening/late night 18:00 – 24:00 Passenger segmentation : 50% of passengers of both customer groups continue to buy the medium fair ticket. For the sake of simplicity assume that business travelers purchase only premium and medium fare types. Leisure travelers purchase medium and budget fare types.