Airlines’ pricing strategies to face COVID-19 demand shocks

COVID-19 had a great negative effect on the travel industry, especially on the aviation sector. Along with travel restrictions to contain the spread of the virus, a great drop in demand was registered, mainly caused by the decrease in the willingness to travel. This study explores the impact of COVID-19 on airline pricing curves, both in terms of price level and the extent to which price discrimination is applied. By analysing all major European flights departing from and arriving to Italy, results show an overall decrease in airline price per kilometre of 31%. Additionally, price discrimination intensity drops with COVID-19. These outcomes can be commented in light of two main impacts of the pandemic on air travel demand, namely the variation in the passenger mix and a higher travellers’ price sensitivity. Further analyses indicate that, along with other market and flight characteristics, competition, and airline- and destination- types play an important role in determining prices and the price discrimination intensity.