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Pricing strategies of low-cost airlines: The Ryanair case study

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  • Malighetti, Paolo
  • Paleari, Stefano
  • Redondi, Renato

Abstract

We analyse the pricing policy adopted by Ryanair, the main low-cost carrier in Europe. Based on a year's fare data for all of Ryanair's European flights, using a family of hyperbolic price functions, the optimal pricing curve for each route is estimated. The analysis shows a positive correlation between the average fare for each route and its length, the frequency of flights operating on that route, and the percentage of fully booked flights. As the share of seats offered by the carrier at the departure and destination airports increases, fares tend to decrease. The correlation of dynamic pricing to route length and the frequency of flights is negative. Conversely, as competition increases discounts on advance fares rise.

Suggested Citation

  • Malighetti, Paolo & Paleari, Stefano & Redondi, Renato, 2009. "Pricing strategies of low-cost airlines: The Ryanair case study," Journal of Air Transport Management, Elsevier, vol. 15(4), pages 195-203.
  • Handle: RePEc:eee:jaitra:v:15:y:2009:i:4:p:195-203
    DOI: 10.1016/j.jairtraman.2008.09.017
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    References listed on IDEAS

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    Cited by:

    1. David Ramos-Pérez & José Luis Sánchez-Hernández, 2014. "European World Cities and the Spatial Polarisation of Air Transport Liberalisation Benefits," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 105(1), pages 1-29, February.
    2. repec:eee:jaitra:v:64:y:2017:i:pa:p:68-76 is not listed on IDEAS
    3. Moreno-Izquierdo, L. & Ramón-Rodríguez, A. & Perles Ribes, J., 2015. "The impact of the internet on the pricing strategies of the European low cost airlines," European Journal of Operational Research, Elsevier, vol. 246(2), pages 651-660.
    4. Ofelia Betancor & Juan Luis Jiménez, 2011. "When trains go faster than planes: the strategic reaction of airlines in Spain," ERSA conference papers ersa11p295, European Regional Science Association.
    5. Cattaneo, Mattia & Malighetti, Paolo & Morlotti, Chiara & Redondi, Renato, 2016. "Quantity price discrimination in the air transport industry: The easyJet case," Journal of Air Transport Management, Elsevier, vol. 54(C), pages 1-8.
    6. Morandi, Valentina & Malighetti, Paolo & Paleari, Stefano & Redondi, Renato, 2015. "Codesharing agreements by low-cost carriers: An explorative analysis," Journal of Air Transport Management, Elsevier, vol. 42(C), pages 184-191.
    7. Escobari, Diego, 2014. "Estimating dynamic demand for airlines," Economics Letters, Elsevier, vol. 124(1), pages 26-29.
    8. repec:eee:ecotra:v:11-12:y:2017:i::p:49-59 is not listed on IDEAS
    9. Vigren, Andreas, 2016. "Competition in Swedish passenger railway : entry in an open-access market," Working papers in Transport Economics 2016:18, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    10. repec:eee:ejores:v:263:y:2017:i:2:p:337-348 is not listed on IDEAS
    11. repec:eee:touman:v:33:y:2012:i:2:p:249-256 is not listed on IDEAS
    12. Malighetti, Paolo & Redondi, Renato & Salanti, Andrea, 2014. "Competitive vs. monopolistic routes: Are fares so different?," Research in Transportation Economics, Elsevier, vol. 45(C), pages 3-8.
    13. repec:eee:jaitra:v:64:y:2017:i:pa:p:91-99 is not listed on IDEAS
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    16. Dudás, Gábor & Boros, Lajos & Pál, Viktor & Pernyész, Péter, 2016. "Analysis of the lowest airfares considering the different business models of airlines, the case of Budapest," MPRA Paper 74502, University Library of Munich, Germany.
    17. Eugenio-Martin, Juan L. & Inchausti-Sintes, Federico, 2016. "Low-cost travel and tourism expenditures," Annals of Tourism Research, Elsevier, vol. 57(C), pages 140-159.
    18. Moreno, Luis & Ramon, Ana & Pedreño, Andrés, 2015. "The Development of Low-cost Airlines and Tourism as a Competitiveness Complementor: Effects, Evolution and Strategies," Journal of Spatial and Organizational Dynamics, CIEO-Research Centre for Spatial and Organizational Dynamics, University of Algarve, vol. 3(4), pages 262-274.
    19. Maertens, Sven, 2011. "The market potential of all-premium class services on medium haul leisure routes from Germany," Journal of Air Transport Management, Elsevier, vol. 17(3), pages 181-186.
    20. repec:eee:retrec:v:62:y:2017:i:c:p:37-43 is not listed on IDEAS
    21. repec:eee:touman:v:61:y:2017:i:c:p:23-34 is not listed on IDEAS
    22. Salanti, Andrea & Malighetti, Paolo & Redondi, Renato, 2012. "Low-cost pricing strategies in leisure markets," Tourism Management, Elsevier, vol. 33(2), pages 249-256.
    23. Chang, Li-Yen & Hung, Shao-Chih, 2013. "Adoption and loyalty toward low cost carriers: The case of Taipei–Singapore passengers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 50(C), pages 29-36.

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    Keywords

    Dynamic pricing; Low-cost; Ryanair; Fares;

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