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3140 Ch. 12 Flashcards | StudBud
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3140 Ch. 12
3140 Ch. 12
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1
What pricing strategy does Southwest Airlines represent?
Survival pricing
Value-added pricing
Profit-focused premium pricing
Low-fare pricing focused on market share
2
What do station and ground costs include at an airport?
Fuel and oil costs
Costs of air traffic control
Expenses related to flight crew salaries
Building and office maintenance costs
3
____________ are costs that do not vary with changes in available seat-miles (ASMs).
Variable costs
Indirect operating costs
Nonoperating costs
Fixed costs
4
What characteristic of airline service makes maintaining price parity with rivals important?
Seasonal pattern of demand
Influence of override commissions
Commodity nature of airline service
Dynamic nature of airline schedules
5
How does elasticity of demand relate to consumer responsiveness to price changes?
Inelastic demand means consumers are unresponsive to price changes.
Inelastic demand means consumers are highly responsive to price changes
Elastic demand means consumers are unresponsive to price changes.
Elastic demand means consumers are highly responsive to price changes.
6
What is the purpose of peak and off-peak pricing in the airline industry?
To encourage travelers to book last-minute flights
To generate revenue during seasonal peaks
To eliminate fare disparities between airlines
To offer discounts to business travelers
7
What is the primary reason why pricing in air transportation is considered more complex than in other industries?
Consumer preferences
High competition among airlines
Rapid changes in technology
The influence of government regulation
8
_________ involves all aspects of planning/executing/monitoring airline flights, including crew scheduling and A/C mx
Elasticity of demand
Flight operations
Mx Repair & Overhaul (MRO)
Inventory management
9
What is the primary purpose of the "guaranteed-fare rule"?
To ensure airlines make a profit on every ticket sold
To guarantee passengers the lowest fare available
To impose penalties on passengers who cancel their reservations
To provide refunds for passengers who change their travel dates
10
Why did airfares almost double during the 1970s?
Because of the rise in fuel costs
Owing to the 1981 air traffic controllers' strike
Due to increased competition between airlines
As a result of government-imposed taxes
11
How frequently does ATPCO transmit and display fare changes to all carriers?
Weekly
Daily at 0600
Every 12 hours
Every hour
12
What factor contributed to the downward trend in air passenger fares from 1929 to 1941?
The growth of air-express traffic
The need to balance revenues and expenses
The introduction of federal transportation taxes
The growth of air-express traffic
13
_____ are the costs associated directly with the operation of flights and can vary with changes in flight activity.
Nonoperating costs
Variable costs
Fixed costs
Elastic costs
14
Which of the following is NOT considered an indirect operating cost for an airline?
Landing fees
Passenger service costs
Ground handling equipment expenses
General and administrative costs
15
Which cost category includes flight crew salaries, fuel, and maintenance expenses?
Nonoperating costs
Overhead costs
Operating costs
Direct operating costs
16
What is one of the primary responsibilities of airline pricing analysts?
Analyzing market share data
Monitoring and responding to daily fare changes by competitors
Managing airline schedules
Operating computerized reservations systems
17
What is the primary role of the Airline Tariff Publishing Company (ATPCO)?
To consolidate and process fare changes
To fund airport improvements
To regulate airline pricing
To conduct airline surveys
18
What is a demand curve?
A graphical repres. of the relationship between price and quantity demanded
A pricing strategy used by airlines
A graphical representation of the law of supply
A table showing competitors' prices
19
What expenses are included in reservations, sales, and promotional costs?
Ground handling equipment costs
Landing fees at airports
Aircraft fuel costs
Staff expenses at retail ticket offices
20
How many individual fares are managed by the ATPCO?
Over 500,000
Over 100,000
Over 1 million
Over 2 million
21
What was the role of the ATPCO when airline pricing was regulated by the Civil Aeronautics Board (CAB)?
It managed airline schedules
It served as a source of automation for travel agencies
It established fare rules.
It consolidated fare information
22
What does directional pricing involve?
Adjusting prices based on the direction of travel (eastbound vs. westbound)
Offering discounted fares for flights traveling to Mexico
Setting $ differently based on the passenger's preferred travel direction
Lowering fares on flights departing from the airline's hub city
23
What is the primary objective of inventory management in the airline industry?
To minimize the number of lower-fare seats available
To accommodate all passengers regardless of fare class
To maximize the number of empty seats on each flight
To sell as many seats as possible at the highest fares
24
What does the law of demand state?
As price rises, quantity demanded falls
As price rises, quantity demanded remains constant.
As price falls, quantity demanded falls.
As price falls, quantity demanded rises.
25
Which organization serves as an electronic clearinghouse for fare information and changes in the airline industry?
Skip Brinkman and Associates
FAA (Federal Aviation Administration)
IATA (International Air Transport Association)
ATPCO (Airline Tariff Publishing Company)
26
What was one of the effects of airlines reducing their fleet sizes?
Decreased market share
Improved on-time performance
Increased frequency of flights
Larger aircraft used on selected routes
27
In the case of inelastic demand, what happens when a price decline occurs?
Total revenue remains constant.
Total revenue falls
Total revenue is unaffected by price changes
Total revenue increases.
28
How are passenger variable costs related to fare increases?
They increase as fares increase
They decrease as fares increase
They are unrelated to fare changes
They remain constant regardless of fare changes
29
Which category of costs is NOT associated with passenger services?
Engineering and maintenance costs
In-flight catering expenses
Training costs for cabin staff
Ground transportation costs
30
What distinguishes variable costs from fixed costs in airlines?
Variable costs increase with output, while fixed costs remain constant.
Variable costs decrease with output, while fixed costs increase.
Variable costs are unrelated to output, while fixed costs increase.
Both variable and fixed costs decrease with output.
31
Which type of costs is difficult to compare among different airlines due to varying accounting systems?
Indirect operating costs
General and administrative costs
Fixed costs
Direct operating costs
32
____________ is the willingness and ability of passengers to purchase air travel services at different price levels.
Fixed costs
Inventory management
Demand
Supply
33
_____ are standard fares that are available to all passengers and are not subject to special conditions or restrictions.
Promotional fares
Elastic fares
Common fares
Discount Fares
34
What is a demand schedule in economics?
A list of airlines' pricing strategies
A description of government regulations affecting pricing
A graphical representation of consumer preferences
A representation of various prices and corresponding quantities demanded
35
What does the demand curve facing an airline represent?
A direct relationship between price and passengers carried
An inverse relationship between price and passengers carried
A constant number of passengers regardless of price
A constant price for different levels of passenger traffic
36
How did airlines respond to the financial challenges brought about by the 2001 terrorist attacks and other deficits?
By increasing the frequency of flights
By expanding traditional hub-and-spoke systems
By downsizing their fleets
By forming fewer alliances with other carriers
37
What role did the Civil Aeronautics Board (CAB) play in regulating airfares?
It set fixed fares for all airlines
It ensured airlines earned adequate revenues
It eliminated competition among airlines
It encouraged airlines to reduce fares
38
The ____________ measures how responsive the quantity demanded is to changes in price.
Elastic demand
Law of demand
Demand elasticity
Inelastic demand
39
What marketing variable has received the most attention in the airline industry since deregulation?
Promotion
Price
Product
Place
40
What does the elasticity coefficient (Ed) measure?
The percentage change in airline profits
The influence of government regulations on pricing
The degree of responsiveness of demand to price changes
The number of competitors in the airline industry
41
What was the objective of the CAB's policy in the early 1950s to limit coach fares to 75 percent of first-class fares?
To discourage the use of coach services
To maintain high first-class fares
To increase the revenue from first-class fares
To encourage the use of coach services
42
Why are business flyers generally less responsive to price changes than vacationers?
Business flyers have more flexible schedules
Business flyers are often on expense accounts.
Business flyers prefer late-night flights
Business flyers are generally more price-sensitive
43
What is the primary focus of airline inventory analysts when managing flight bookings?
Maximizing advertising budgets
Minimizing denied boardings
Maximizing low-yield revenue spin
Minimizing high-yield revenue spill
44
Which factor is NOT considered when calculating hourly fuel costs for a particular route?
Departure time
Cruise altitude
Wind conditions
Aircraft weight
45
How do airlines typically calculate aircraft depreciation?
Applying straight-line depreciation over a fixed number of years
Relying on market fluctuations to determine depreciation
Using a complex formula based on passenger volume
Employing a variable rate based on the number of engines
46
What did Airlines do to attract passengers during the recession?
Raised its normal coach fares
Reduced flight frequency
Introduced a no-frills fare with a 35% discount
Increased the number of complimentary services
47
How does competition affect demand elasticity?
More competition leads to less elastic demand
Competition only affects short-haul flights
More competition leads to more elastic demand
Competition has no impact on demand elasticity.
48
What do fare penalties typically apply to?
Passengers who cancel their reservations
First-class passengers
Passengers with frequent flyer status
Passengers who book well in advance
49
Which factor is NOT considered when estimating the net economic impact of a fare increase?
Refunds to passengers
Rejected demand by other airlines
Advertising expenses
Passenger variable costs
50
When a small change in price leads to a relatively larger change in the quantity demanded, it is known as ____________.
Demand elasticity
Elasticity of demand
Elastic demand
Inelastic demand
51
What contributed to the decline in average airfares from the mid-1990s to 2014?
Rising labor costs for airlines
Increased competition between low-cost carriers
The imposition of passenger facility charges
Decreased demand for air travel
52
Why do load factors normally increase with reductions in available seat-miles (ASMs)?
To maximize losses for the airline
To increase the total number of passengers carried
To maintain a consistent level of profit
To cut back on flights and routes with low load factors
53
Which of the following is an example of a fixed cost in the short term?
Maintenance costs
Fuel expenses
Ground handling fees
Building lease payments
54
Which airline tends to be a profit-focused premium pricer and a price leader in most markets?
Southwest Airlines
United Airlines
Turkish Airways
American Airlines
55
In the short run, what can airlines vary relatively quickly to adjust their capacity?
The quantities of resources like labor and fuel
The type of aircraft in their fleet
The total number of employees
The overall capacity of the airline
56
Which factor could lead to an increase in demand for air travel?
An increase in the number of passengers in a market
A decrease in passenger preferences for airlines
An unfavorable change in passengers' financial status
A decrease in the number of passengers in a market
57
In the 1950s, what caused average fares to increase during the Korean conflict?
The introduction of a uniform mileage rate
A shortage of available aircraft
A reduction in military airlift capacity
A fare increase of $1 per ticket
58
What is the primary focus of Southwest Airlines' pricing strategy?
Offering premium services
Market share and diverting traffic from other modes of transportation
Profitability
Maximizing revenue
59
During the pioneer days of airline development, how did airlines determine passenger fares?
By copying their competitors' fares
By asking the government to set fares
By calculating the cost of aircraft operation
By offering fixed, uniform fares for all routes
60
What type of airlines found opportunities in the low-cost sector during the cost-cutting trends?
Major legacy carriers
Airlines with traditional hub-and-spoke systems
Smaller airlines
Airlines with large fleets
61
The term "block speed" refers to the ____________ speed of an aircraft as it travels through the air.
Maximum
Terminal
Average
Minimum
62
What is the purpose of advance purchase requirements for excursion fares?
To provide discounts for one-way travel
To limit the number of seats offered in a sale
To encourage passengers to book last-minute flights
To restrict business travelers from taking advantage of low fares
63
What caused the significant decrease in average airfare in 2020?
A decrease in fuel costs
Government-imposed fare restrictions
A sudden increase in demand for air travel
The impact of the COVID-19 global pandemic
