1. Air Arabia : Pricing strategy and programs

2. What is Pricing ?

3. Pricing is the one element of the marketing mix
that produces revenues.
Why pricing strategy ?
Using of price as a strategic tool will
profit more than those that simply let
costs or market determining their
pricing.

4. how air arabia managed
to offer such low cost
air travelling ?

5. They managed it through their unique well
organised pricing strategy composed of :
Pricing objective
Demand curve estimation
Cost management
Competitors analysis
Pricing method
Final price selection

6. Pricing objective
to gain maximum market share

7. Demand Estimation through
• Surveys
• Price experiments
• Statistical analysis

8. Cost Management
Fixed
cost
Variable
cost

9. Fixed cost management
Aircraft fixed costs are diluted by the industry leading
aircraft utilization hours and fuel hedging for price
stability
Variable cost management
Through target costing : examining each cost element -
designing, engineering, manufacturing, sales and bring
down final cost projection.

10. Competitor analysis
Air Arabia identified and analysed all its LCC competitor’s cost -
quality evaluation to customer and developed its own strategy of
providing high quality service in low cost which helped them
capturing the hearts and wallets of customers and becoming a value-
priced competitors for other LCC airlines.

11. Pricing Method
Air Arabia has opted value pricing method by re-engineering
their operations to become a low cost producer without
sacrificing quality to attract a large number of value-conscious
customers.

12. Final price selection

13. how did they succeed in making such
remarkable progress in little over
decade ?
low price maintenance even during fuel price hike
or inflation
Low cost per customer with more
capacity and high average flying time.
Dedicated employees and better online services
Usage of secondary or alternate
city airport
Stopping agency commission and
building a code share relationship

14. challenges faced
• Dip in profit levels during 2009-10
due to huge loss faced by aviation
industry.
• Dip in growth in European traffic
due to bad weather.
• Price control with inflation.
• Fuel hedging during declining
fuel market.

15. achievements
• Skytrax’s world airline awards for best
LCC in Mena.
• Currently owns 39 Airbus A320
with 44 further orders.
• Serves 10 of destinations across three
continent with three hubs
• Earned recognition of best LCC in
middle east
• Became the first publicly owned company in
Arab world after its listing on DSM in 2007
• With continuing upward growth, achieved
a net profit of $135 million

17. Strengths
-high growth rate
-skilled workforce
-barriers of market entry
-domestic market
-monetary assistance provided
-high profitability and revenue
-reduced labour costs

18. Weaknesses
-brand portfolio
-Unable to live up
to expectation
-Unavailability of
major accessories
like eyeshades, In-
flight shocks etc.

19. Opportunities
-growth rates and profitability
-venture capital
-new products and services
-growing demand
-income level is at a constant increase
-global markets

20. Threats
-technological problems
-financial capacity
-government regulations
-price changes
-external business risk

21. disclaimer
Created by Aditya Deva, IIT Ropar during the marketing
internship under Professor Sameer Mathur, IIM Lucknow