Aviation Logistics Knowledge Lecture – Can Airlines Raise Prices As They Wish?

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Aviation Logistics Knowledge Lecture – Can Airlines Raise Prices As They Wish?

Hello everyone, it’s time again for the monthly aviation knowledge lecture. Today we are talking about a topic that is more topical: Can airlines raise prices at will?

The thing is like this, a little friend told me before that there are tickets and goods, and after confirming with the customer, they are ready to download bkd, and suddenly the airline informed me that the price will be increased. I got very passive, and I had to confirm with the customer again. So I complained to me, whether the airlines are targeting, if they say it goes up, they will go up, how can they live?


Similar experience, I believe that many small partners have tried it more or less. After the goods were confirmed with the airline, the airline told the price to increase due to various reasons. Then you have to reconfirm with the customer, or find another solution. Many friends may find it annoying. But let’s take a step back and think about the opposite question: Can airlines cut prices at will?


If you can answer the opposite question, then you will also be able to answer the question in the title.


Here we need to popularize aviation contracts again . If you don’t understand it yet, please click on the link to review it. Why popularize it? Because, if the goods are signed by BSA, as long as they are within the position range specified by BSA, the price is relatively fixed, which is the contract price and cannot be moved. The ones that can be moved are all free sales positions, and these prices are what we usually call adhoc. The so-called adhoc is a method of single-ticket single negotiation relative to the contract price, and there is no fixed price.

adhoc explanation (The picture comes from the online Oxford dictionary)

adhoc explanation (The picture comes from the online Oxford dictionary)


So, for adhoc, is it really that airlines can go up if they can? In theory, yes. However, airlines generally take into account various market factors before making such a decision. For example, if the entire market is now full of FRA positions, and only Airline A has a position, then Airline A will definitely increase the price. Because now it is equivalent to him being exclusive. After all, this is a commercial society, and rising tides are business rules. For example, now the entire market only has your FRA position, will you not increase the price? However, Airline A will also take into account market factors and subsequent impacts. For example, after he raises the price, can he really attract the goods to his flight? Would people prefer to wait for the next flight of other airlines without paying high prices? So this is something that airlines have to consider, because there is more than one airline in the market.


In addition, airlines must also consider the subsequent impact on the entire company. For example, can the goods that have been put into the warehouse before the notification of price increase be able to maintain the original price? If not, it is actually a violation of the spirit of the contract. Although it is a verbal commitment, it will have a negative impression on the entire airline in the market. Is it necessary to have a negative impact on the company for the sake of temporary gain? This is something that airlines have to consider. There are generally good reasons for airlines to increase prices, either because of changes in market conditions or changes in flight conditions. We will also try our best to take into account the work of the agent. As I said just now, the price of goods that have not been placed in the warehouse, or even have not been placed on bkd, should be increased, but the original price of goods before this should be maintained. A one-size-fits-all approach to raising prices is not necessarily a long-term approach, nor is it recommended. Most of the far-sighted airlines will not do these things, and generally give advance notice, unless there is really a sudden event.


However, airlines do have the right to adjust prices if necessary. But what can be done is limited to free sales positions. Agents will understand as long as they can think about it personally. In fact, it is not easy for airlines. On the one hand, they have to maintain a good relationship with the agent, but they also need to look at the income of the flight. If it is not good, the headquarters says that the income is not good, you should get out; Contract, boycott this airline, then this person will be unemployed. Airline people are also unflattering on both sides. Therefore, when encountering such things, we should still focus on friendly negotiation, and there must be a solution. Take a long-term view. We can’t just blame the airlines, after all, the price of free sales is also determined by the market. Both sides need to understand each other.


Then we turn our heads around again, and if the market situation takes a nosedive and the stock is suddenly out of stock, the airline announces a price reduction. Is it the same reason? Of course it is. For goods that have been placed on bkd or have been put into the warehouse, the price should not be changed. Of course, there are also some agents who take advantage of this, cancel bkd, and rebook. This approach is also not recommended. Because since it is the spirit of the contract, it requires both parties to abide by it, not unilaterally. When we talk about others, we must do our best.


In fact, when it comes to this, many friends will think, so adhoc is more risky. Yes, otherwise what is adhoc? This is why airlines also encourage you to sign a BSA. A relatively healthy flight should have about 80% BSA, and the rest should be free sales. Such a composition will have both a fixed cargo base and flexible deployment space.


Some friends will also think that the free sales position will have a great impact on the second generation? Because they do not have their own fixed positions, prices and positions are subject to generational constraints. Yes, but don’t forget, free sales positions are treated equally even for one generation. Without the stipulation of the contract, the price and position must follow the market. Therefore, if conditions permit, try to allocate important goods to fixed positions. This is also the biggest attraction that dealers give to the second generation, because their prices are relatively more stable and their positions are more guaranteed. You must know that the airline will not and cannot arbitrarily change the price and position in the bookmaker’s contract.


If you say that, is the second generation at a disadvantage? always in a passive state. Of course not. We must look at the problem in its entirety, and try to avoid one-sided judgments. Think about it, in a year, there are low seasons and peak seasons. During peak seasons, the second generation may complain a lot, asking for positions without positions, and asking for prices without prices. But in the off-season, the profit of the second generation is the highest, which is higher than that of the first generation. Because it was out of stock at that time, the price must be very low, and then the second generation found a first-generation coload with a suitable price, and then its own profit was guaranteed, but the first-generation filled the position in order to receive the goods, it is likely to go out at a loss. Therefore, we cannot be blindfolded. So here, I would like to stress again that everyone is an expert, don’t do things that harm others or even harm others, and take a long-term view. The norms of the industry also depend on us to maintain, and we can’t smash our own jobs.


At the same time, this situation also highlights the importance of maintaining a stable performance. In the off-season, even if everyone is out of stock, you go to support, and people will support you in the peak season. This is the same for both airlines and a generation. Who cares about people who are out of stock in the off-season and squeeze positions in the peak season?


Well, I hope this article can inspire some newcomers to the industry. That’s it for this issue, see you next time.

NB: Karron is the owner of the “NatureCalls” Wechat Official Account.

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