A-La-Carte Pricing in the Airline Industry - Graduate Student ...

The Role of Entrepreneurial AttentionRevenue pressure and technological and other shifts refer to the two dynamic changesthat occurred in the airline industry in the past 10 years that drove a move toward expanded a-lacartepricing in the airline industry. Nonetheless, even if these factors did not exist, a revenuemaximizingairline is always, in a sense, revenue pressured, and older technology could haveaccommodated some forms of unbundling and a-la-carte selling. Thus, these factors explain whatmade airlines more likely to pursue a-la-carte pricing strategies in the 2000s, but they do notexplain why air carriers had left unexploited profit opportunities untouched before that time.Based on interview data, the best explanation for this seems to lie in a consideration of thehuman entrepreneurial element and the risk and uncertainty that underlies many businessdecisions.As discussed in the literature review, it is ultimately entrepreneurs who drive businessdecisions and make decisions on the best means to achieve a certain end, based on information atthe time. Looking back to the post-deregulation era, entrepreneurs‘ attention and awareness wasfocused on capitalizing on revenue opportunities arising from a newly obtained freedom tochoose prices and structure routes.One interviewee pointed to the fact that these efforts at redefining the airline routestructure and developing new yield management innovations were the most pressingopportunities during the 1980s. As Franke (2005) points out, a profitable period in the 1990s andthe progress of computer technology turned industry attention to network management systemsthat facilitated sophisticated quantitative analyses (15). Franke further discusses the fact that thedevelopment of these mechanized optimization strategies meant that airlines spent theirresources on optimizing their destination and hub portfolio in relation to other carriers (16).40