XA Airline announced that it will not immediately charge $15 per bag on all its flights, not for extra luggage but for the first bag! Crude oil had crushed from $48 to $14 per barrel in the previous 6 months. . XA Airline new baggage policy applied to all ticketed passengers except first class and business class. On top of incremental airline charges for food and snacks introduced the previous year, this new announcement stunned the travel public. Since XA Airline and many other major carriers had belittled that policy as part of their overall marketing campaign against deep discounters, XA Airline executives faced a dilemma.

Discussion

a. How should the airline respond when presented with an overweight bag by not charging any additional amount to its future passengers? Will this not affect the Airline Profitability?

b. Make a list of some of the issues that will need to be resolved if XA Airlines decides to routinely charge different prices to customers in the same class of service with additional luggage's?

c. What would you do if you were the CEO of XA Airline while all other Airlines are charging additional $10 per bag on all its flights for extra bags only? Define and justify your Pricing strategy.