A case study of pricing strategies in European airline markets: The London – Amsterdam route

Published fares London–Amsterdam are used to examine the pricing practices of low-cost and legacy carriers when operating in a large and crowded market. We investigate two strategies of market segmentation involving the time before departure the ticket has been bought, inter-temporal segmentation, and the duration of the stay, implicit segmentation. We find inter-temporal price discrimination emerges as an important strategy for all pricing but the two legacy carriers involved, British Airways and KLM, differ in their use of stay restrictions; British Airways does not assign a specific role to the duration of stay, while KLM make use of such rules extensively in price setting.

► Published fares London–Amsterdam are used to examine the pricing practices of low-cost and legacy carriers when operating in a large and crowded market.
► Considering fare discrimination by when a ticket is purchased and by the conditions attached to a ticket, inter-temporal price discrimination emerges as an important strategy for pricing by all airlines but there are differences in the use of length of stay restrictions between low cost and legacy carriers.
► The details of restrictions used by legacy carriers vary between them, e.g. British Airways does not assign a specific role to the duration of stay, while KLM make use of such rules extensively.