Airline Bundling and Tiered Pricing

A major commercial airline

A major commercial airline was looking to increase market share by offering tiered, bundled fares to complement its basic offering. By including ancillary features such as free checked baggage, lounge access, and priority boarding, the airline hoped to earn additional revenues from those passengers willing to pay for such services and features.

RSG applied discrete choice modeling conjoint techniques to estimate consumer willingness-to-pay for various features. TURF analysis was then used to identify combinations of products that, bundled together, offered the greatest value to consumers. Based on this analysis, RSG recommended a tiered bundling approach, allowing the airline to increase market share while managing capacity constraints. Pricing was optimized for each tier based on consumer willingness-to-pay for the included features.

The client restructured its product offering and pricing strategy, and is working to incorporate these offerings into revenue management tools. This effort was the second major bundling and pricing study that RSG has completed for this client.

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