Assignment: Airline pricing and elasticity in corona times The current corona pandemic affected globally the demand for airline tickets in a dramatic way. Passenger figures dropped massively, and some airlines are in financial trouble. E.g., Lufthansa the biggest German airline needed governmental support. Please have a look at price and demand development during the last months: 1. Please select a certain O&D pairing and do research on a. The number of passengers b. Price per ticket, selected class (,e.g., ea’) c. Pre-corona and during corona 2. Please model simple demand, price functions far that 08D pairing a. Pre-corona b. During corona c. and discuss the changes, which took place 3. Please calculate —wilt the simple model function I of 2. — the corresponding elasticities (at the ave.., .uring corona) and discuss the change far the chosen O&D pairing 4. Please use a simple cost function for a flight with fixed and variable elements, e.g., the one we used during the lectures. Apply this function on the O&D pair-ing you chose under 1. Discuss the ideal price for an airline pre-corona and during corona, i.e. at which price will the profit be maximized (or loss mini-mized)? Please do not take into account other effects, e.g. slot rights etc. 5. Finally derive and describe the dilemma of airlines in such times of dramatic demand drops. Why do they still fly and do not stop all operations? Hint: Do a research an cost structures and the flexibility of fixed and variable costs. Again, please do not take into account other effects, e.g. slat rights etc.

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