Pricing strategies of airline companies. Discovering the reasons behind ticket price variation on Norwegian airline market.

Abstract

Price of good or service is to some extent a reflection of company’s underlying strategies. On the airline market, price is determined by various factors such as type of carrier, season, flight and fare characteristics, as well as goals and visions of the specific airline company.

This thesis contains an empirical analysis of pricing strategies of airline companies on domestic market in Norway. The research uses primary data on airline fare prices collected directly from websites of two established airlines on Norwegian market, network carrier Scandinavian Airlines (SAS) and low-cost carrier Norwegian Air Shuttle (Norwegian) during the period 8th August 2020 – 10th September 2020. Data sample consists of all flights operated by SAS and Norwegian between five most trafficked airports in Norway according to SSB statistics, with departures on Monday 7th and Friday 11th September 2020. The airports included in the sample are Oslo Gardermoen, Bergen Flesland, Trondheim Værnes, Stavanger Sola and Tromsø Langnes. The analysis uses multiple linear regression with the aim to determine if such characteristics as day of the week when flight departs, flight duration, time to flight departure, market share of the airline on route, competition on departure and time of departure impact the ticket prices on average according to the collected data.

The research is carried out during the times of COVID-19 pandemic which leads to more complicated situation on the airline market. It was, therefore, expected that some natural assumptions on strategies of airlines may not be supported by the data.

The key results are that our data supports that, average fare prices raise with flight length, as well as that average prices increase over time prior to departure day. Moreover, the data provides the evidence that market share on route, competition on departure and time of departure explain some variation in average ticket price in both positive and negative direction depending on the airline company. Finally, it is supported by the data that there are, to some extent, different patterns for pricing of flights which depart on Monday 7th September 2020 and Friday 11th September 2020.

Key words: Airlines, Pricing, SAS, Norwegian