1 / 9

Pricing in Small Connecting Markets

Pricing in Small Connecting Markets. Why Hubs Still Work. Fares are Higher for Small Markets (Includes both Small and LCC Presence Effects). For Pax < 10/day Fare = $117 + 0.046 * Distance 257 data points; R-square = 0.42 For 10/day < Pax < 100/day Fare = $106 + 0.037 * Distance

avak
Download Presentation

Pricing in Small Connecting Markets

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Pricing in Small Connecting Markets Why Hubs Still Work

  2. Fares are Higher for Small Markets(Includes both Small and LCC Presence Effects) For Pax < 10/day Fare = $117 + 0.046 * Distance 257 data points; R-square = 0.42 For 10/day < Pax < 100/day Fare = $106 + 0.037 * Distance 758 data points; R-square = 0.37 For Pax > 100/day Fare = $98 + 0.035 * Distance 671 data points; R-square = 0.34

  3. HCC Fares are Higher for Small Markets For Pax < 10/day Fare = $127 + 0.042 * Distance R-square = 0.24 For 10/day < Pax < 100/day Fare = $110 + 0.036 * Distance R-square = 0.30 For Pax > 100/day Fare = $115 + 0.031 * Distance R-square = 0.22

  4. LCC Fares are Higher for Small Markets For Pax < 10/day Fare = $111 + 0.0442 * Distance R-square = 0.33 For 10/day < Pax < 100/day Fare = $100 + 0.034 * Distance R-square = 0.31 For Pax > 100/day Fare = $83+ 0.032 * Distance R-square = 0.38

  5. LCCs Price Close to HCCs in Very Small Markets Pax < 10/day HCC fare =$127 + 0.042 * Distance LCC fare =$111 + 0.044 * Distance

  6. Fares are Linear With Distance • Average Fare = $153 + $0.043 * Dist • R-square = 0.13 • All US domestic markets with valid data • Excluding Hawaii • Mix of HCC and LCC markets • 18,000 data points (Airport Pair O-Ds)

  7. LCCs Price Connections Close to HCCs 10/day < Pax < 100/day HCC fare =$100 + 0.036 * Distance LCC fare =$100 + 0.034 * Distance

  8. LCCs Fares In Nonstop Markets are LowHCC fares are a mix of all-HCC and with-LCC Markets Pax > 100/day HCC fare =$115 + 0.031 * Distance LCC fare =$83 + 0.032 * Distance

  9. Full Model Includes 3-4 Variables Fare = $102 + 0.040* Distance (R2 = 0.36) Fare = $131 + 0.038* Distance – 6.4 * Ln(Pax) (R2 = 0.36) Fare = $153 + 0.037* Distance – 6.9 * Ln(Pax) - $23 if LCC presence(R2 = 0.48) Fare = $151 + 0.037* Distance – 7.0 * Ln(Pax) - $20 if LCC presence + $26 if HCC only(R2 = 0.48)

More Related