Question

Why do airlines generally provide lower prices to customers who book well in advance?

a) To encourage last-minute bookings
b) To reward loyalty program members
c) To fill empty seats and maximize revenue
d) To discourage early bookings

Answer 1

Airlines offer lower prices for early bookings to ensure a stable stream of passengers and maximize revenue by filling seats in advance. This strategy helps airlines manage capacity and forecast demand while providing savings for early customers.

Step-by-step explanation:

Airlines generally provide lower prices to customers who book well in advance to fill empty seats and maximize revenue. This pricing strategy is known as yield management or revenue management. By offering lower prices early on, airlines can ensure a stable stream of bookings leading up to the departure date. Since the demand for airline seats is often uncertain and varied, this approach encourages early bookings, allowing airlines to better forecast and optimize their capacities.

The early bird pricing also acts as an incentive for customers planning their travel. It provides a win-win situation where the traveler saves money, and the airline can reduce the risk of flying with too many empty seats, which can be financially inefficient. Conversely, as the travel date approaches, prices may increase due to higher demand, reduced availability, and travelers' willingness to pay more for last-minute bookings – particularly those traveling for business or urgent matters where flexibility is a necessity.