Low-cost pricing strategies in leasure markets

The practice of dynamic pricing, so typical of low cost carriers, is generally regarded as a form of price discrimination between “leisure” and “business” travellers on the single flight or on the single route. Across different routes, however, things may go differently. If price increases in the last 15 days prior to departure are meant to discriminate business demand, leisure demand should account for earlier price variations. Working on a database including the daily fare over the 3 months prior to each flights operated by easyJet during 2009, we assign to each route its own “leisure index”, defined as the difference between the rate of price change during the ninety days prior to departure and the one during the last 15 days. Empirical results can be summarized by saying that “business” routes have lower average prices per kilometre, while “leisure” routes show a less dynamic price behaviour, with higher minimum prices and lower maximum prices per kilometre.