Every business exists to earn profits, for survival and growth. The airline industry is one of the most dynamic businesses where the revenues are earned from two sources: one, by the charges on the freight carried and, second, by the charges on the passenger tickets. Often, the airline takes a combined consideration of these revenue streams to determine total profits earned by the airline. Since pricing of the flight tickets is generally a difficult exercise in a dynamic environment, there is a need to develop certain policies. These policies are broad guidelines within which the airlines are required to operate and take decisions on the prices of the flight tickets.

The policies are beneficial because these are framed in consultation with the top management of the airlines and is a indication on what shall be the guiding principles to be followed in case of some confusion with respect to any subject that comes under the policy framework. Policies have a direct bearing on the way business is to be operated. When it comes to determination of the cheap flights prices, the policies tell clearly whether the prices of the tickets shall be reduced or not? So, due to this policy, the airline might be willing to travel with vacant seats rather than reducing the air fare to very low levels. Similarly, on the other hand, there could be policies which provide total flexibility of pricing the cheap flights as per the demand levels.

The discounts and other attractive deals that you get from the airlines or the agencies on the flight tickets are also provided for by the broad policy guidelines which might be for achieving a higher and specific objective, such as capturing the high percentage of market share. These are tactical and short term maneuvers which are essentially done to achieve the short term objectives but are also a part of the overall strategy for achieving long term objectives. Since these policy measures cannot go against the airline business cycles, there are benefits to be reaped by orienting policies to earn maximum revenues and profits during some peak times and merely survive in the lean times.

Market conditions, in short, the demand and supply conditions of the market, also influence the prices of flight tickets considerably but the facilitation and the limitation of such a determination is also influenced by the policy framework under which the carrier operates.  On a macro scale, the prices are also influenced by the policies of the government on regulation of the operation of airlines.