Internet Price Research: Flight Fares

Internet Price Research
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Internet Price Research
Abstract
Flight fares are influenced by different factors. Examples of these factors include demand, competition, seasons, global fuel prices, increased competition, distance traveled, the day of the week, when the ticket was bought, and whether someone is using a low-cost or full-service carrier. These factors dictate the fares charged by airlines. However, does the choice of airport showcase any differences between the fares charged? Is it true that airlines operating from secondary airports in large cities charge lower fares than those operating from primary airports? This paper offers an answer to these questions while showcasing that it matters little the airport from where an airline operates.
Introduction
The airline industry experienced a tumultuous period during the COVID-19 pandemic. Because of the necessary travel restrictions, the airline industry suffered greatly and endured economic losses to the tune of $168 billion (Bouwer et al., 2022). While the pandemic did contribute greatly to this loss, Bouwer et al. (2022) note that the airline industry has been plagued by problems long before the pandemic struck. The above goes to show that the airline industry is quite fragile and is impacted by different factors in the world. However, even with the pandemic, freight rates increased because of the increase in demand. Demand is a key element that affects flight prices. Other factors include seasons, global fuel prices, increased competition, distance traveled, the day of the week, when the ticket was bought, and whether someone is using a low-cost carrier or a full-service carrier (LCC vs. FSC). These factors dictate the price of a flight and influence how airlines set their fares.
The LCC vs. FSC factor is one that has been studied, especially with regard to profitability and the choice of airport. As Jimenez and Suau-Sanchez (2020) indicate, LCCs have often been considered secondary airport carriers because most airlines within this bracket use secondary airports more than primary ones. The researchers add that LCCs have almost exclusively used secondary airports to the point where this is 'considered an archetypal feature of the LCC business model.' The statement above is widely accepted globally, and LCCs are widely known to preferably operate from secondary airports. On the other hand, it is also widely accepted that FSCs preferably operate from primary airports (Acar & Karabulak, 2015). Further, the two categories of carriers are also distinguished by the flight routes they often operate. FSCs are known to primarily fly internationally while also having a limited amount of local and regional flights. On the other hand, LCCs are known to mainly fly local and regional routes. In their study, Lei and Papatheodorou (2010) indicate that LCCs have been at the center of revenue growth of regional or secondary airports because of their preference. In the coming years, the expectation is that FSCs will look to increase their dominance and either acquire LCCs or increase their flights to regional airports. As things stand, however, LCCs appear to be winning, especially when one considers profitability margins. In their study, Soyk, Ringbeck, and Spinler (2018) reveal that LCCs happen to register revenue earnings for every flight capacity compared to FSCs. However, because of their network profitability, FSCs still maintains a lead over LCCs.
In this paper, the goal is to compare prices between airlines serving secondary airports in large cities and those serving primary airports. The research is based on the premise that airlines serving from secondary airports offer lower prices compared to the airlines serving from primary airports. The paper will compare different airlines, including Southwest Airlines, United Airlines, and Delta Airlines. The purpose is to showcase the price differential between these airlines. The primary airport to be examined is the George Bush Intercontinental Airport in Houston, while the secondary airport will be Houston (Hobby) in Houston. The routes to be explored will mainly be Houston-California, and the destinations will be San Diego, San Francisco, San Jose, and Santa Barbara. For purposes of perspective, the prices for Southwest Airlines from Hobby and IAH will be included in the comparison table.
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