Economics Principles on Airlines Industry
Oligopoly Market: - Airlines industry comes under Oligopoly market as there is less number of seller or service provider who controls the market. High entry barriers cost prevents other to get into this types of market.
Economies of Scale: - In Airlines industries, fixed cost is very high, to reduce the cost, airlines companies try to get maximum passengers on every flight so that they can maximize the profit.
Customers taste and preferences: - Generally air tickets are available in two class, economic class, and business class. Economics class tickets are for the people who want to spend less and business class is especially for the elite group of people who prefer comfort, so people booked their tickets accordingly to their taste and preference.
Law of Demand: – Demand for the air tickets depends on the availability of other modes of transport and increases in the festival time due to high demand. Increase in demand for tickets results in price hike of air tickets.
People response to incentive: - Nowadays a huge number of people prefer to travel in the air than the railway, and other modes of transportation. As airlines offer a huge discount on their tickets and that enables the customers to get air tickets, at a cheaper price than the railway. So people prefer air tickets over the railway.
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