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Dynamic Revenue Management In Airline Alliances
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Book Synopsis Dynamic Revenue Management in Airline Alliances by : Christopher P. Wright
Download or read book Dynamic Revenue Management in Airline Alliances written by Christopher P. Wright and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Major airlines are selling increasing numbers of interline itineraries, in which flights operated by two or more airlines are combined and sold together. One reason for this increase is the rapid growth of airline alliances, which promote the purchase of interline itineraries and therefore virtually extend the reach of each alliance member's network. This practice, however, creates a difficult coordination problem: each member of the alliance makes revenue management decisions to maximize its own revenue, and the resulting behavior may produce sub-optimal revenue for the alliance as a whole. Airline industry researchers and consultants have proposed a variety of static and dynamic mechanisms to control revenue management decisions across alliances (a dynamic mechanism adjusts its parameters as the number of available seats in the network changes). In this paper, we formulate a Markov-game model of a two-partner alliance that can be used to analyze the effects of these mechanisms on each partner's behavior. We begin by showing that no Markovian transfer pricing mechanism can coordinate an arbitrary alliance. Next, we examine three dynamic schemes, as well three forms of the static scheme widely used in practice. We derive the equilibrium acceptance policies under each scheme and use analytical techniques, as well as numerical analyses of sample alliances, to generate fundamental insights about partner behavior under each scheme. The analysis and numerical examples also illustrate how certain transfer price schemes are likely to perform in networks with particular characteristics.
Book Synopsis Modeling and Analysis of Revenue Management in Airline Alliances by : Christopher Pember Wright
Download or read book Modeling and Analysis of Revenue Management in Airline Alliances written by Christopher Pember Wright and published by . This book was released on 2010 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt: "From the most basic code-share agreements to the largest international alliances, airlines are using itineraries that bundle seats on their own flight legs with those of other airlines as a way to generate more revenue. With this growing practice comes an increasing need for researchers to look at how airlines can best manage the sharing of revenue between the airlines involved. This dissertation represents a first step toward meeting that need. In three chapters, we model and analyze the process of revenue management in airline alliances. In Chapter 2, we begin by creating a model for the revenue management decisions faced by two partners in an alliance. We formulate a finite-horizon Markov game, over which the two airlines make accept/deny decisions on requests for itineraries on not only their own networks, but on their partners' networks, as well. The key distinctions between our model and previous single network models are the presence of gaming mechanics and the existence of both intraline itineraries - those on a single airline's network - and interline itineraries - those on both partners' networks. This model is used as the basis for the remainder of the dissertation and also can serve as the framework for any future research in the area. In the remainder of Chapter 2, we examine the game of complete information, in which both partners know each other's demand and revenue forecasts, as well as their inventory levels. Specifically, we consider three dynamic schemes that change the revenue shares received by each airline over the horizon based on the state of the system, and contrast them with existing static schemes with fixed revenue shares. We determine the equilibrium behavior for each scheme and provide insight into when each may perform well. We then show that, while well selected static schemes can perform similarly well, the dynamic schemes are far less susceptible to changes in the demand faced by the alliance. In Chapter 3, we acknowledge the limitations of the complete information assumption due to legal, computational and competitive reasons, and focus on a game of incomplete information, in which partners do not know each other's inventory levels or forecasts. We only allow them to share bid prices, a commonly calculated quantity in modern revenue management systems. Through the selection of particular sharing scheme and a clever heuristic assumption, we are able to decouple the alliance problem into two single network problems connect by the posted bid prices. The assumption - that the partner's bid prices will remain constant over the horizon - is loosely based upon a result in the literature that is supported by numerical simulation. We show that the application of this heuristic leads to very favorable results despite the limited information shared between the partners. In addition, because it decouples perfectly into single network problems, any one of the numerous existing approximation schemes for that problem can be employed. This is particularly beneficial since many of the approximation methods are already being utilized in practice, facilitating the adoption of our heuristic for handling interline itineraries. In Chapter 4, we take the constant bid price assumption one step further, looking at its application in the single airline network problem. We describe some schemes from the literature that are logically consistent with the schemes shown in Chapter 3. We also provide a new approximation method that in sample problems is shown to provide high performance (% of optimal revenue) and stable bid prices. This scheme utilizes a simultaneous-perturbation stochastic approximation method in searching for the optimal vector of bid-prices. After examining their relative performance in the single-network environment, we point out the characteristic of these schemes that may lend themselves to performing well when combined with the decoupling alliance heuristics provided in Chapter 3. Simulations of these schemes suggest that these characteristics can have greater influence on alliance revenues than the performance of the schemes in single networks"--Leaves v-vi.
Book Synopsis Alliance Revenue Management in Practice by : Himanshu Jain (S.M.)
Download or read book Alliance Revenue Management in Practice written by Himanshu Jain (S.M.) and published by . This book was released on 2011 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: The primary motivations for the formation of airline alliances have been to increase revenues and decrease costs for alliance partners. A major advantage comes through increase in the number of destinations served by an airline at little costs, by using codesharing. Airlines share seat inventory on each other's codeshare flights which complicates their revenue management practice and leads to sub optimal revenue gains. This thesis analyzes the challenges related to alliance revenue management in practice and proposes innovative and feasible solutions to increase revenues for the combined alliance. The four key dimensions of the alliance revenue management problem are analyzed: recording & forecasting, seat allocation method or optimizer, codeshare valuation in the optimizer and availability control of codeshare bookings. The performance of different techniques is quantified using the Passenger Origin-Destination Simulator (PODS). It is found that sharing of information between partners to different degrees can be used to improve revenues. A new valuation scheme called dynamic valuation is developed in an effort to increase the combined alliance revenues by using bid price sharing, a method of sharing information related to codeshare legs. Dynamic valuation leads to additional revenue gains in the range of 0.30% to 0.50% over other techniques. This can translate into an incremental revenue gain, up to $ 100 M per year, for larger airlines in alliance partnerships. Dynamic valuation also provides a basis for further development of models related to revenue sharing proportions of alliance partners. The challenges and risks involved in implementing dynamic valuation are discussed.
Book Synopsis Fair Revenue Sharing Mechanisms for Strategic Passenger Airline Alliances by : Demet Çetiner
Download or read book Fair Revenue Sharing Mechanisms for Strategic Passenger Airline Alliances written by Demet Çetiner and published by Springer Science & Business Media. This book was released on 2013-04-03 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: A major problem arising in airline alliances is to design allocation mechanisms determining how the revenue of a product should be shared among the airlines. The nucleolus is a concept of cooperative game theory that provides solutions for allocating the cost or benefit of a cooperation. This work provides fair revenue proportions for the airline alliances based on the nucleolus, which assumes a centralized decision making system. The proposed mechanism is used as a benchmark to evaluate the fairness of the revenue sharing mechanisms, where the alliance partners behave selfishly. Additionally, a new selfish revenue allocation rule is developed that improves the performance of the existing methods.
Book Synopsis Revenue Management for Airline Alliances by : Jérémy François Jean Darot
Download or read book Revenue Management for Airline Alliances written by Jérémy François Jean Darot and published by . This book was released on 2001 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Managing Strategic Airline Alliances by : Birgit Kleymann
Download or read book Managing Strategic Airline Alliances written by Birgit Kleymann and published by Routledge. This book was released on 2017-03-02 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: Strategic airline alliances are an important topic in airline management today, stimulated by poor access of international airlines to large domestic markets such as the USA and EU and the increasing importance of network scope. Outright mergers of international airlines have proved to be difficult for political, cultural and legal reasons, making alliances the best available form to strengthen strategic positions and streamline networks. However, there are a number of difficulties associated with an alliance such as long-term stability, political climate, cultural conflict and how much capital alliance partners should sink into the integration. The main purpose of the book is to convey in an accessible form to a wide audience, the results of recent academic research on strategic airline alliances. The authors systematically cover: policy, regulation and consumer issues; management, marketing and strategic issues; the mechanics of airline alliances; the airline alliance group as an organisation in its own right; different forms of alliances and clusters; success and failure factors of airline alliances. The book successfully: - provides an analytical framework for understanding the dynamics of airline alliance groups - examines both the level of the individual airline and the alliance group itself - applies recent insights from organisation theory. The readership includes airline managers, policy-makers, academic researchers and others interested in evolving multilateral alliances. It can also be used as a course book both in aviation management training and in more general modules on alliances for advanced students in air transport management.
Book Synopsis Airline Alliance Revenue Management by : Alyona Michel
Download or read book Airline Alliance Revenue Management written by Alyona Michel and published by . This book was released on 2012 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: Airlines participating in alliances offer code share itineraries (with flight segments operated by different partners) to expand the range of origin-destination combinations offered to passengers, thus increasing market share at little cost. The presence of code share flights presents a problem for airline revenue management (RM) systems, which aim to maximize revenues in an airline's network by determining which booking requests are accepted. Because partners do not jointly optimize revenues on code share flights, alliance revenue gains from implementing advanced RM methods may be lower than an individual airline's gains. This thesis examines seat availability control methods that alliance partners can adopt to improve the total revenues of the alliance without formally merging. Partners share information about the opportunity costs to their network, called "bid prices", of selling a seat on their own flight leg, a mechanism termed bid price sharing (BPS). Results show that BPS methods often improve revenues and work best for networks with certain characteristics and partners with similar RM systems that exchange recently calculated bid prices as often as possible. Gains are typically only achieved if both alliance partners participate in the code share availability decision (called dual control) rather than one partner only, but implementation of dual control is more difficult for airlines in practice. In the best case scenario, gains of up to .40% where achieved, which can translate into $120 million per year for the largest airlines. In our simulations, BPS with dual control and frequent bid price calculation and exchange was the only method that produced consistently positive revenue gains in all the scenarios tested. Therefore, alliance airlines must consider the trade off between revenue gains and implementation difficulties of more frequent bid price exchange or dual control.
Book Synopsis Dynamic Capacity Control in Air Cargo Revenue Management by : Rainer Hoffmann
Download or read book Dynamic Capacity Control in Air Cargo Revenue Management written by Rainer Hoffmann and published by KIT Scientific Publishing. This book was released on 2014-05-12 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book studies air cargo capacity control problems. The focus is on analyzing decision models with intuitive optimal decisions as well as on developing efficient heuristics and bounds. Three different models are studied: First, a model for steering the availability of cargo space on single legs. Second, a model that simultaneously optimizes the availability of both seats and cargo capacity. Third, a decision model that controls the availability of cargo capacity on a network of flights.
Book Synopsis Decentralized Code-share Revenue Management in Airline Alliances by : Max Gerlach
Download or read book Decentralized Code-share Revenue Management in Airline Alliances written by Max Gerlach and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Evolution of Yield Management in the Airline Industry by : Ben Vinod
Download or read book The Evolution of Yield Management in the Airline Industry written by Ben Vinod and published by Springer Nature. This book was released on 2021-05-28 with total page 417 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book chronicles airline revenue management from its early origins to the last frontier. Since its inception revenue management has now become an integral part of the airline business process for competitive advantage. The field has progressed from inventory control of the base fare, to managing bundles of base fare and air ancillaries, to the precise inventory control at the individual seat level. The author provides an end-to-end view of pricing and revenue management in the airline industry covering airline pricing, advances in revenue management, availability, and air shopping, offer management and product distribution, agency revenue management, impact of revenue management across airline planning and operations, and emerging technologies is travel. The target audience of this book is practitioners who want to understand the basics and have an end-to-end view of revenue management.
Book Synopsis Revenue Management and Pricing Analytics by : Guillermo Gallego
Download or read book Revenue Management and Pricing Analytics written by Guillermo Gallego and published by Springer. This book was released on 2019-08-14 with total page 336 pages. Available in PDF, EPUB and Kindle. Book excerpt: “There is no strategic investment that has a higher return than investing in good pricing, and the text by Gallego and Topaloghu provides the best technical treatment of pricing strategy and tactics available.” Preston McAfee, the J. Stanley Johnson Professor, California Institute of Technology and Chief Economist and Corp VP, Microsoft. “The book by Gallego and Topaloglu provides a fresh, up-to-date and in depth treatment of revenue management and pricing. It fills an important gap as it covers not only traditional revenue management topics also new and important topics such as revenue management under customer choice as well as pricing under competition and online learning. The book can be used for different audiences that range from advanced undergraduate students to masters and PhD students. It provides an in-depth treatment covering recent state of the art topics in an interesting and innovative way. I highly recommend it." Professor Georgia Perakis, the William F. Pounds Professor of Operations Research and Operations Management at the Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts. “This book is an important and timely addition to the pricing analytics literature by two authors who have made major contributions to the field. It covers traditional revenue management as well as assortment optimization and dynamic pricing. The comprehensive treatment of choice models in each application is particularly welcome. It is mathematically rigorous but accessible to students at the advanced undergraduate or graduate levels with a rich set of exercises at the end of each chapter. This book is highly recommended for Masters or PhD level courses on the topic and is a necessity for researchers with an interest in the field.” Robert L. Phillips, Director of Pricing Research at Amazon “At last, a serious and comprehensive treatment of modern revenue management and assortment optimization integrated with choice modeling. In this book, Gallego and Topaloglu provide the underlying model derivations together with a wide range of applications and examples; all of these facets will better equip students for handling real-world problems. For mathematically inclined researchers and practitioners, it will doubtless prove to be thought-provoking and an invaluable reference.” Richard Ratliff, Research Scientist at Sabre “This book, written by two of the leading researchers in the area, brings together in one place most of the recent research on revenue management and pricing analytics. New industries (ride sharing, cloud computing, restaurants) and new developments in the airline and hotel industries make this book very timely and relevant, and will serve as a critical reference for researchers.” Professor Kalyan Talluri, the Munjal Chair in Global Business and Operations, Imperial College, London, UK.
Book Synopsis Revenue Management Under Competition Within Airline Alliances by : Alf Kimms
Download or read book Revenue Management Under Competition Within Airline Alliances written by Alf Kimms and published by . This book was released on 2014 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Network Revenue Management Under Competition Within Strategic Airline Alliances by : Waldemar Grauberger
Download or read book Network Revenue Management Under Competition Within Strategic Airline Alliances written by Waldemar Grauberger and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Dynamic Seat Allocations for Network Revenue Management in the Airline Industry by : Jingying Li
Download or read book Dynamic Seat Allocations for Network Revenue Management in the Airline Industry written by Jingying Li and published by . This book was released on 2000 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Dynamic Pricing Mechanisms for Airline Revenue Management by : Michael David Wittman
Download or read book Dynamic Pricing Mechanisms for Airline Revenue Management written by Michael David Wittman and published by . This book was released on 2018 with total page 228 pages. Available in PDF, EPUB and Kindle. Book excerpt: Even as the distribution and sale of commercial airline tickets has shifted in recent years from physical reservation offices to the Internet, many airline commercial processes remain highly reliant on pre-Internet technologies and standards. This legacy infrastructure compels airlines to publish a discrete set of prices in each market they serve, and to select prices for each itinerary from among only this limited set of possible price points. Recent advancements in distribution technology, such as the New Distribution Capability (NDC), offer airlines the chance to break away from these constraints. These new standards enable the creation of customized offers with prices that could be generated dynamically in real time. While airlines have shown interest in these new technologies, practical methods for integrating dynamic pricing into existing airline revenue management (RM) and distribution systems have yet to be defined and evaluated by academics or practitioners. In this work, we propose the first mechanisms for dynamic pricing designed specifically for use in the airline industry. By selectively providing increments or discounts based on demand segmentation and estimates of willingness-to-pay (WTP), our mechanisms can increase airline revenues by stimulating new bookings from price-sensitive travelers while encouraging more price-inelastic travelers to buy up to higher price points. Moreover, the methods are compatible with the pricing, RM, and distribution systems currently used by airlines today. Our dynamic pricing heuristics emerge from the development of a novel theoretical model of customer choice. Using the model, we introduce a new concept called "conditional WTP" to describe how a customer's willingness-to-pay for an itinerary can change depending on the other alternatives available in his choice set. We show how assuming an unchanging maximum WTP for air travel, as in past work on dynamic pricing, can lead to overestimation of WTP in competitive environments, and describe how an airline's estimates of conditional WTP play an integral role in our dynamic pricing mechanisms. We test our dynamic pricing methods in the Passenger Origin-Destination Simulator (PODS): a robust agent-based booking simulation that models the interactions between passengers and airlines. In a complex, competitive network, we find that our heuristics can increase airline revenues by up to 1 - 4% from traditional pricing and RM alone. Incrementing prices can result in revenue gains through an increase in yield, and discounting can lead to higher revenues through demand stimulation and share shift from other airlines. In both cases, we identify a phenomenon we call "forecast spiral-up" which increases yield by protecting more seats for higher-value fare classes. We also develop a variant of the heuristic in which multiple substitutable flights are priced simultaneously, leading to additional revenue gains. Finally, we provide the first in-depth assessment of the practical implications of dynamic pricing for the airline industry. We focus on airline concerns that dynamic pricing could lead to price wars, excessive discounting, and a race to the bottom. We also evaluate some of the potential legal implications and customer reactions that could emerge as dynamic pricing becomes more commonplace. These analyses provide new insight on how airline competition could potentially change as dynamic pricing is integrated into traditional airline processes.
Book Synopsis An Option Based Revenue Management Procedure for Strategic Airline Alliances by : Michaela Graf
Download or read book An Option Based Revenue Management Procedure for Strategic Airline Alliances written by Michaela Graf and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Transfer price optimization for option-based airline alliance revenue management by : Michaela Graf
Download or read book Transfer price optimization for option-based airline alliance revenue management written by Michaela Graf and published by . This book was released on 2010 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: