Question

Airlines know from experience that tourist passengers face flexible demand for plane travel. Business travellers face a solid demand (inflexible) for their flight. What should the airline do if it wants to increase its total revenue? Explain it in a maximum of 10 sentences.

Answer 1

In the airline industry, price elasticity of demand is separated into two segments of consumers and is considered to be both elastic and inelastic.

Airport revenue typically comes from rents and leases of property and facilities. Additional revenue may come from user fees (such as facility charges), fuel flowage fees, and sales of goods and services provided by the airport such as food and beverage sales, aeronautical charts and deicing services. Airports looking to increase revenue have several options to explore, including

* Raising rates and charges

* Developing revenue-producing facilities

* Encouraging private development on vacant land

* Attracting operators that will pay facility charges

REVENUE GROWTH STRATEGIES

  An airport’s ability to grow revenue will depend on the following things:

* Location of the airport

* Available property

* The economic climate

* Competition

* Consumer demand and price sensitivity

Ideally, airports can meet their operating costs through revenues generated by aviation uses. If costs are higher than revenues, airports may consider conducting a rates and charges survey to see how their prices compare to other airports in the region.