Airline tickets pricing is a juggernaut and the carriers which are able to do it most beneficially are the ones which rake in the maximum profits. There have been many studies on the various factors that influence the ticket prices of an airline as well as the ones which are influenced by it. Let us understand these broad categories of the various factors which affect pricing as well as the interrelationships among these.
The three broad categories which affect the pricing are market structure, demand and operational factors. The structure refers to the external environment within which an airline operates and the way the industry is organized in a particular country. This environment is made of the government regulations and policies, competition, international relations and other such parameters which define the playing field for the whole industry as such. The demand factor is quite understandable. If demand is more than the supply, prices will go up and if it is less than the supply, there will be depressed aviation climate and the lowest air fare might be on offer. Operational factors is a wide category comprising of a whole range of factors ranging from online ticketing, airport handling and management, routes, schedules and much more.
As prices of airline tickets is affected by these factors, pricing also affects some factors such as the load factor and the revenue earned. If prices are too high, it might mean that there is less number of passengers and consequently the revenues are more likely to be less. Further, competition and nature of markets also affects the load factors. More competition would mean that the customer has more options to fly which reduces the average load factor on a particular airline. Similarly, flying on a more tourism oriented market would have high load factors as more passengers will be there to fill the seats.