Ancillary revenue pricing

The airline industry has evolved from a system of long-established state owned carriers operating in a regular market to a dynamic, deregulated industry. This development - especially the emerging competition of Low Cost Carriers - had a major influence on the price setting behavior of airlines. Profitability of airlines is limited and pricing systems are reconsidered. In order to stay competitive traditional full service carriers consider the implementation of ancillary revenue systems (similar to Low Cost Carriers). This paper investigates challenges of an
ancillary revenue pricing approach for full service network carriers. A qualitative means-end approach was used to find attributes which are of importance for air
passengers and influence their ticket buying behavior. In addition, the study provides an insight into the perception of an ancillary revenue system in the full service network carrier market. The findings provide 18 ticket purchase attributes and 15 behavioral terminal values shown in hierarchical value maps. Based on those values it became evident that most passengers appreciate if some services are included in the price and not offered as ancillaries. Benefits of ancillary revenue systems are the individual ticket creation, customization, improved price-performance ratio, flexibility gains and progressive idea. Main drawbacks are complicate and complex booking process, feeling of uncertainty, branding problem, deformation of competitive behavior, similar system like Low Cost Carriers, feeling of paying extra for every service, perceived loss in service and quality.