Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 5

Fares and Fees in the Airline Industry Navigating the various websites for low fares, avoiding fees for checked bags and priority seating, and finding the right flight schedule can be a real challenge for the average airline passenger. The complexity of options and sources for purchasing a ticket have expanded significantly in recent years. And the outlook for the future is for more complexity, as new search sites (Google, Hipmunk, etc.) become available and some airlines seek more control over where and how tickets on their flights are purchased. According to Forrester Research, an independent research company, the airlines want passengers to buy tickets based on value and not on low prices. They do not want passengers to comparison shop. For example, American Airlines recently announced that it wanted to deliver fare information directly to customers and to bypass search systems such as Expedia or Travelocity.
Required
1. Explain why you think competition in the airline industry is a cost leadership or a differentiated type of competition.
2. Give an example or two of how you think the complexity of fares and fees in the airline industry affects the sales and costs of the airlines.