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Pricing and Market Control

December 22, 2010

The airline industry is in the midst of a fascinating transition in its commercial delivery and pricing model. It is worthy of study by all commercial practitioners.

It is not so long ago that the industry had major protection, with many airlines in state hands and virtually all distribution occurring via travel aegncies.

Deregulation combined with new network technologies to undermine that model. But the industry has struggled to establish a new distribution and competitive charging approach. It remains locked in battle with some of the on-line providers (for example, American Airlines lawsuit against Orbitz) and is generating increasing anger over the lack of transparency in pricing (for example, all the bolt-on ‘extras’).

There ae complaints that the airlines are trying to restrict price shopping and comparison. These may be valid – but on the other hand, which other industry sector facilitates such comparisons through a common distribution network? And it can certainly be argued that one of the industry’s problems is its inability to charge economic fares.

At the same time, residual regulation continues to limit competition and prevents the elimination of uncompetitive providers or the next level of industry consolidation. It is taking too long to establish truly global, integrated providers.

It is a complex industry and a a great case study for anyone in the commercial world. What do you think should happen to pricing and distribution methods, to ensure a high quality and competitive service for the traveler?

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