CHAPTER 7 SUMMARY

REGULATION * CIVIL AVIATION* PERFORMANCE OVERVIEW * PRICING

STEPHANIE MCLAUGHLIN
INTERNATIONAL COLLEGE OF THE CAYMAN ISLANDS
BE-434
Aviation plays a significant role in the tourism industry. For countries such as
the Cayman Islands, tourism is a key factor in the development of the
economy. Aviation supports sustainable economic growth and is crucial to the
success of tourism.
 U.S. FEDERAL REGULATION OF AIRLINES
• 1938-1978 – regulated by Civil Aeronautics Board (CAB)
• The Civil Aeronautics Act of 1938 formed the Civil Aeronautics Authority to regulate:
air traffic control
safety
certification
airline prices
airline routs
• The Federal Aviation Act of 1958 gave the responsibility of aircraft safety and regulation to the Federal
Aviation Agency, now known as the Federal Aviation Administration (FAA)
• The Airline Deregulation Act of 1978 terminated the CAB and it ceased to exist in 1984, which allowed
the commercial airline industry to be a free market
• International airlines flying into the United States must adhere to all FAA requirements
TYPES OF CIVIL AVIATION

Commercial Aviation General Aviation

• Carries passengers and cargo for • Privately owned and operated
hire aircraft
• Part of the scheduled airline industry • Owned by individuals or companies
for internal and private purposes

The two types of aviation are: civil aviation and military aviation. Civil
aviation represents all non-military aviation.
TYPES OF CIVIL AVIATION

Commercial Aviation General Aviation

PERFORMANCE OVERVIEW
The commercial airline industry recognizes three travel seasons: high, shoulder, and low. These
seasons are used to gage ticket prices, which also have a domino effect on the hotel industry.
PERFORMANCE OVERVIEW
Peak Season
• June 15 – August 31 & December 15 – January 6
• Demand for travel is at its highest
• Higher airfare
• Higher accommodation costs
• Pleasant weather (in the summer)
• More activities
PERFORMANCE OVERVIEW
Shoulder Season
• September 1 – October 31
• Not too crowded
• Generally nice weather
• Reasonably priced airfare
• Reasonably priced accommodation
PERFORMANCE OVERVIEW

Low Season
• November 1 – December 14
• Lower demand for travel
• Lower airfare
• Lower accommodation costs
• Unpleasant weather
• Smallest crowds
• Shorter lines
• Less activities
PRICING
Airlines use a variety of variables, as well as the
passenger type in order to determine ticket costs.

Pricing Variables
• Rout competition
• Rout distance
• Seat demand
• Seat supply
• Fuel prices
• Advance purchase
• Minimum stay
• Departure day restrictions
• Flight time restrictions
• Maximum stay
• Blackout dates
PRICING
Passenger Type

Business Travelers Leisure Travelers

• Willing to pay higher costs • Flexible travel plans

• Less elastic demand • Advance notice
• Less advance notice • Lower costs
PRICING
Yield Management
Yield management is used to maximize profits from fixed assets. Airlines use yield management, also
known as cents per mile, to maximize profits from their aircraft fleet.

• Maximize revenue by managing pricing strategy, control of availability, and inventory

• Control domains
• Significant increase in profit
• Longer distance results in more profit
Profit per passenger by airline region in 2015
PRICING
Overbooking
 PRICING
Many passengers change or cancel reservations, and sometimes just do not show up. Airlines use
overbooking to account for this loss.

• Sell many more tickets than

seating capacity
• Offer compensation for seat
volunteers in the event of over
sale
• Assign seats on a first come first
serve basis
• Deny boarding to remaining
passengers once all seats have
been filled and compensate per
FAA regulations
FAA regulation for compensation

Passengers denied boarding due to over sale

 References

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