The $785.6 billion global airline market is a major part of the world economy and​​​​​​​ is also hugely influential in terms of its impact on other markets such as tourism is incredibly significant. Airline businesses are co​​​​​​​nstantly trying to grow their profits by managing costs effectively and increasing their revenues.

​​​​​​​Whenever you book an airline ticket you can see how airlines are trying to squeeze​​​​​​​ as much revenue as they can out of each passenger they sell to. Here are some of the methods used by the European airline​​​​​​​, easyJet to increase their revenues through flight ticket sales:​​​​​​​

• Airlines set ticket prices to increase revenues by varying prices at different times of the year and times of the day. For example, a ticket sold by easyJet from​​​​​​​ London to Palma Majorca in February can be purchased for as little as $50 for an early morning flight in February but the same ticket will cost $992 when it is purchased for a midday flight in late May. EasyJet’s understanding of price elasticity of demand means decreasing ticket prices when demand is price elastic and increasing prices when demand is inelastic enables them to increase revenue.
• Because the market for low-cost airline tickets is so price competitive, companies in the industry often advertise the cheapest price they can and then charge for additional aspects of the flight they are selling. EasyJet charges $7 for passengers to choose their own seats, $10 for a cabin bag and it costs $12 to get so-called ‘speedy boarding’ which gets you onto the plane ahead of other passengers. This all adds up to $58 for a return flight.
• Selling complementary products is another revenue stream for airlines. As you work your way through easyJet’s online booking system at each stage of your flight booking you will be offered travel insurance, car hire along with food and drink vouchers. You cannot move to the next stage in your flight booking until you say do not want to buy any of these complementary goods.
• A final observation of easyJet’s website is elements of behavioural economics in the choice architecture of the site's page design and layout to encourage you to make a purchase and buy complementary goods. For example, the site takes you to default choices such as adding a cabin bag where you have to actively opt-out of the selection given to you by the web page. The website also creates perceived scarcity and loss aversion in the mind of consumers by informing them there are a limited number of seats left when they look at a particular flight. 

Some possible questions to discuss with a class

1. Why is the demand for low-cost airline tickets price elastic?

2. Why can an airline ticket be sold for $50 on one date and time and $992 on another?

3. Is it ethical for easyJet to advertise cheap airline tickets and then make additional charges for seat selection and baggage?

4. How important is choice architecture on easyJet's website in increasing its revenues?