-Dunleavy, Hugh, Phillips, Glen. The future of airline revenue management. Journal of Revenue & Pricing Management. August, 1, 2009-Legoherel, Patrick, Poutier, Elisabeth, Fyall, Alan. Revenue Management for Hospitality & Tourism. Goodfellow Publishers: Woodeaton, Oxford: 2013-Kuhlman, Ron. Future of Revenue Management – Why is revenue management not working? Journal of Revenue & Pricing Management. January, 1, 2004-Tzo, Tien. The Subscription Economy: A Business Transformation. https://medium.com/@tientzuo/the-subscription-economy-a-business-transformation-83d6fb24a2f9#.u0o2esj5k -National Business of Aviation Association https://www.nbaa.org/ops/part135/certification/-Coplay, Nick. Fractional Aircraft Programs. Sherparereport.com http://www.sherpareport.com/aircraft/aircraft-programs.html-Standard Business Model v. Recurring Revenue Model http://mintconditioninc.com/wp-content/uploads/2012/12/White-Paper-Recurring-Revenue.pdf-Sieger, Jen. Increase Profitability Revenue by moving your project services to recurring revenue model. Worldwide Partner Group. January, 12, 2016 https://blogs.partner.microsoft.com/mpn/increase-profitability-revenue-by-moving-your-project-services-to-a-recurring-revenue-model/-Study of Operator Regulated Under Part 135. FAA Modernization and Reform Act of 2012, Public Law 112-95, Section 409. Federal Aviation Administration. April, 2016 http://nata.aero/data/files/gia/4656_001.pdf

Future considerations include the trend of the subscription economy and it’s impact on consumer demand expectation.

Monitoring the consumer segment of frequent flyer business travelers who make up the majority of the fractional jet market consumer base and also the business traveler of the traditional airlines regarding market share competition is a significant indicator

The competitive advantage of fractional jet firms, in most scenarios, is the ability dominate regional travel for frequent fliers, while the traditional airliners are more competitive with cross national and international legs. Is there opportunity for the fractional jet industry to scale larger than regional, if not can airliners and fractional jet services peacefully coexist?

Both pricing models have pros and cons. Regarding profitability, overall recurring revenue model proves more profitable with the assumption of low or no churn. Profitability in the context of aviation revenue management and on-demand subscription for now is revenue management.

The traditional airline model has proven consistently profitable regarding profit margin among industry leaders -Southwest, Delta, American Airlines, and Spirit Airlines. While the largest firm in the fractional jet industry has reported consistent losses from due to fixed and variable cost management (Berkshire Hathaway investor relations). Average revenue for part 135 carriers is approximately 2.5 million (http://nata.aero/) compared to average revenue of 7.4 billion for top airlines practicing revenue management.

135 Fractional Air Carrier : Firms providing aircraft services including scheduled, on-demand, and cargo operations. Operators of business aircraft that wish to conduct operations for compensation or hire are generally certificated with Part 135 Certification of the Federal Aviation Regulations (FARS).

Some fractional programs are small with only a few aircraft, operating out of a couple of airports and serving a regional marketplace. Others are larger national or international programs, with large fleets comprised of a variety of aircraft types

REVENUE MANAGEMENT: Is the application of disciplined analytics that predict consumer behavior at the micro-market level and optimize product availability and price to maximize revenue growth

RECURRING REVENUE MODEL: Is predictable revenue that can be expected to continue in the future, typically in the form of monthly fee (MRR). Highly utilized in the subscription and service sector

COST PLUS MODEL: Is a cost-based method for setting the prices of goods and services. Under this approach, you add together the direct material cost, direct labor cost, and overhead costs for a product, and add to it a markup percentage (to create a profit margin) in order to derive the price of the product.

The up and coming specialty airline in a box firms have concentrated on local and regional travel with distances typically ranging from 100 to 300 miles. The number and growth of airline in a box firms have highlighted the stagnation of the traditional pay per ticket model and has given rise to the modernization of a monthly subscription pricing model. This research will explore the innovations of subscription pricing model of the airline industry called, airline in a box. Additionally, this research will appraise the traditional aviation pricing strategies and the airline in a box subscription pricing model noting the risk and benefits. Lastly this research provides a comparative evaluation of profitability for the traditional pay per ticket and subscription pricing models in the aviation industry.

AIRLINE IN A BOX - Pricing Analysis of the On Demand Aviation Sector: Benefits and Risks of Subscription and On Demand Flight Services

Whitney Way Texas A&M University – Commerce, College of Business

RESULTS

PRICING STRATEGIES

ABSRACT SUBSCRIPTION PRICING MODEL - AVIATION CONCLUSIONS

FUTURE DIRECTIONS...

References

Surf Air: California Scheduuled135 Carrier

Traditional Revenue Management Model

Subscription On-Demand Model

BENEFITS

RISKS

• Pricing

Maximization

• Variable pricing

Method• Simple capacity Management

• Recurring Revenue irrespective of activity*

• Demand Agility

• Based more on consumer

demand• Consumer centric • Higher life time value per customer• Consumer perception

of price discrimination

• Consolidated Marketplaces

• Low Cost Carriers• Time Commitments and Corporate Sales – demand availability

• Based more on historical firm trend

• Inventory and capacity

requirements

• Higher cost of

Acquisition• Activity cost vulnerability

• Service/ product continuous investment

• Significant impact of low churn

Source: http://mintconditioninc.com/ White Paper

Source: http://mintconditioninc.com/ White Paper

Innovations of Aviation Application • Minimal capital costs, potentially no ownership of aircrafts

• Real time analytics

management• Leasing and contract driven supply chain

• Consumer centric, relationship management

• Shared ownership of consumers Source: http://

www.sherpareport.com/aircraft/aircraft-programs.html