This paper examines American Airlines' booking price patterns for roundtrip, non-stop flights between John F. Kennedy Airport (New York) and Los Angeles International Airport, using fare data collected on April 4, 2012. By tracking First Class and Economy fares across multiple departure windows — from same-day booking through six months out — the analysis reveals how the airline exercises pricing power based on booking lead time. The paper then applies the classic marketing mix framework (price, product, promotion, and place) to explain how American Airlines segments customers, differentiates its product offerings, leverages third-party travel platforms, and uses its route network to compete in the domestic aviation market.
American Airlines is "the nation's No. 3 airline by traffic" (Spector & Carey, April 4, 2012) and reaches "250 cities in 40 countries with, on average, more than 3,400 daily flights" (American Airlines, 2012). This analysis examines booking prices for a roundtrip flight between New York's John F. Kennedy Airport (JFK) and Los Angeles International Airport (LAX).
The parameters of this exercise are designed to ensure the most consistent results. Departure fares per person are in U.S. dollars (USD), based on a round-trip purchase with a non-stop flight. Data is based on a fixed seven-day trip, because changing the length of the trip affects the fare. Departure time each day is variable, as flight times are not always available on every day. American Airlines offers a First Class/Business option and an Economy option; in addition, there are six sub-fare choices: Economy Saver, Economy Supervisor, Economy Flexible, Instant Upgrade, First Special, and First Flexible. Because flights are not always available with all options, the lowest available fare was selected regardless of cabin class. All data was gathered on April 4, 2012.
Fares were tracked across four booking windows, measured in days from the date of data collection:
Days 0–6 (departure on April 4, 2012, returning April 11, 2012): First Class fares ranged from $2,015 to a high of $2,545; Economy fares ranged from $428 to a high of $2,545. Notably, the day-zero fare of $2,545 applied to both cabin classes without distinction.
Days 7–13: First Class fares reached a high of $1,805; Economy fares ranged from $190 to $391.
Days 14–20: First Class fares held constant at $1,710; Economy fares ranged from $145 to $290.
Days 21 and beyond (including an outlier observed for an October 1, 2012 departure): First Class fares ranged from $1,710 to $1,730; Economy fares ranged from $145 to $310 (American Airlines, 2012).
Firms evaluate a marketing mix — price, product, promotion, and place — to develop competitive strategies (Barringer & Ireland, 2006). On the dimension of price, it is not surprising that the highest fares appear in the 0–6 day booking window, when travelers are essentially captive. They must travel for a variety of reasons and have little choice but to pay the prevailing fare. Interestingly, day zero does not discriminate between First Class and Economy, with both priced at $2,545. Beyond the 0–6 day window, the airline's pricing power diminishes; First Class fares drop to as low as $1,710, and Economy fares fall to $145 (American Airlines, 2012).
Beyond pricing power in the early booking window, the airline uses price to differentiate between its First Class/Business and Economy customers. The business or luxury traveler is generally less concerned with cost savings than the economy traveler; an executive can expense the trip, while a family traveling on a personal budget is focused on minimizing out-of-pocket costs. This distinction in price sensitivity allows American Airlines to capture higher revenue from corporate and premium travelers while still filling seats with price-conscious consumers.
Product is a definitive segmentation mechanism. The First Class traveler seeks a unique, luxurious, and relaxing experience. The approximately $1,000 differential in fare over Economy signals that the customer expects a premium product — more space, enhanced meals, dedicated service, and overall comfort commensurate with the price paid.
"Product differentiation, travel sites, and route network"
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