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Integrated Pricing And Seat Allocation For Airline Network Revenue Management
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Book Synopsis Integrated Pricing and Seat Allocation for Airline Network Revenue Management by : Baskar Mohan
Download or read book Integrated Pricing and Seat Allocation for Airline Network Revenue Management written by Baskar Mohan and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: The airline industry is facing unprecedented challenges in generating sufficient revenues to stay in business. Airlines must capture the greatest revenue yield from every flight by leaving no seats unsold and not over filling the cabin with discount fares. To succeed in doing the above airlines must be able to accurately forecast each of their market segments, manage product andprice availability to maximize revenue and react quickly to competitive changes in the market place. Thus seat inventory control and ticket pricing form the two major tools of revenue management. The focus of this paper is to consolidate the ideas of seats inventory control and pricing in order to maximize the revenues generated by an airline network. A continuous time yield management model for a network with multiple legs, multiple fare classes and dynamic price changes for all fare classes is considered.
Book Synopsis Airline Revenue Management by : Curt Cramer
Download or read book Airline Revenue Management written by Curt Cramer and published by Springer Nature. This book was released on 2021-11-10 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book provides a comprehensive overview of current practices and future directions in airline revenue management. It explains state-of-the-art revenue management approaches and outlines how these will be augmented and enhanced through modern data science and machine learning methods in the future. Several practical examples and applications will make the reader familiar with the relevance of the corresponding ideas and concepts for an airline commercial organization. The book is ideal for both students in the field of airline and tourism management as well as for practitioners and industry experts seeking to refresh their knowledge about current and future revenue management approaches, as well as to get an introductory understanding of data science and machine learning methods. Each chapter closes with a checkpoint, allowing the reader to deepen the understanding of the contents covered.This textbook has been recommended and developed for university courses in Germany, Austria and Switzerland.
Book Synopsis Optimal Pricing and Seat Allocation in the Airline Industry Under the Market Competition by : Syed Asif Raza
Download or read book Optimal Pricing and Seat Allocation in the Airline Industry Under the Market Competition written by Syed Asif Raza and published by . This book was released on 2007 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pricing and Revenue Optimization by : Robert Phillips
Download or read book Pricing and Revenue Optimization written by Robert Phillips and published by Stanford University Press. This book was released on 2005-08-05 with total page 470 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the first comprehensive introduction to the concepts, theories, and applications of pricing and revenue optimization. From the initial success of "yield management" in the commercial airline industry down to more recent successes of markdown management and dynamic pricing, the application of mathematical analysis to optimize pricing has become increasingly important across many different industries. But, since pricing and revenue optimization has involved the use of sophisticated mathematical techniques, the topic has remained largely inaccessible to students and the typical manager. With methods proven in the MBA courses taught by the author at Columbia and Stanford Business Schools, this book presents the basic concepts of pricing and revenue optimization in a form accessible to MBA students, MS students, and advanced undergraduates. In addition, managers will find the practical approach to the issue of pricing and revenue optimization invaluable. Solutions to the end-of-chapter exercises are available to instructors who are using this book in their courses. For access to the solutions manual, please contact [email protected].
Download or read book Revenue Management written by I. Yeoman and published by Springer. This book was released on 2010-12-08 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pricing is about deciding your market position whereas revenue management is the strategic and tactical decisions firms take in order to optimize revenues and profits. This book offers insights into research, theories, applications and innovations and how to makes these work in different industries.
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 Network Value Concept in Airline Revenue Management by : Stephane J-C Bratu
Download or read book Network Value Concept in Airline Revenue Management written by Stephane J-C Bratu and published by . This book was released on 1998 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt: A connecting passenger occupies a seat on each of the flight leg of his itinerary. Moreover, for a given fare class, the fare of a connecting passenger is lower than the sum of the fares of the local passengers on the traversed legs. If the demand is high, giving availability to a connecting passenger may displace local passengers and the airline would lose revenue. The objective of this thesis is to evaluate methods that airlines can use to better estimate the network revenue value of connecting passengers for the purpose of determining seat availability. In this thesis we analyze and compare two different ways of estimating the network revenue value of the connecting passengers. The first approach consists of estimating the displacement cost of the connecting passenger on all the traversed legs by the shadow prices associated with the capacity constraints of a network linear program (LP). The second one is a prorated fare convergence technique developed in this thesis. The fares of the connecting passengers are prorated on each of the traversed legs using an estimation of the expected marginal revenue of the last seat on the legs. The existence and uniqueness of the limit for each prorated fare sequence are also proven. We have compared the performance of different seat inventory control models that incorporate these two network revenue estimation techniques. The optimization/booking simulation uses demand forecasts from an airline's Yield Management historical database. The seat inventory control methods that use the network revenue value concepts perform up to 1.50% better than the existing fare class control approach at a high demand scenario (82% average load factor). Moreover, the prorated fare convergence technique performs better than the LP shadow price displacement cost approach especially if the demand is controlled by a bid price mechanism. Indeed, for a high demand scenario and a relatively high number of reoptimizations along the booking process, the prorated fare convergence method performs 0.12% better than the shadow price approach for a bid price control mechanism. Finally, the revenue difference between the two methods is both significant and robust with respect to demand variations.
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 Managing Airline Networks by : Markus Franke
Download or read book Managing Airline Networks written by Markus Franke and published by Routledge. This book was released on 2020-12-28 with total page 197 pages. Available in PDF, EPUB and Kindle. Book excerpt: Includes a description of basic network types, performance indicators for profitable networks, efficient processes and success factors for network management, and common optimisation models and tools. Descriptive overviews are supported by practical examples, and lead to a deep-dive case study. A section on trends in network management outlines new demand forecasting models, ‘Big Data’ applications, Machine Learning and AI use cases, and alternative optimisation models for airlines.
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 Airline Network Seat Inventory Control by : Elizabeth Louise Williamson
Download or read book Airline Network Seat Inventory Control written by Elizabeth Louise Williamson and published by . This book was released on 1992 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the airline industry, it is customary for carriers to offer a wide range of fares for any given seat in the same cabin on the same flight. In order to control the number of seats made available in each fare class, airlines practice what is called seat inventory control. Traditionally, airline seat inventory control has been the process of allocating seats among varies fare classes on a flight leg in order to maximize expected revenues. Reservations for travel on a flight leg are accepted based on the availability of a particular fare class on that flight leg. A passenger's ultimate destination, overall itinerary, or total revenue contribution to the airline is not taken into account. The typical route structure of a large airline, however, is built around a complex network of connecting flights. Maximizing revenues on individual flight legs is not the same as maximizing total network revenues. The objective of this dissertation is to address the seat inventory control problem at the network level, taking into account the interaction of flight legs and the flow of traffic across a network. Beginning with the traditional network formulation of the seat inventory control problem, practical approaches for actually controlling seat inventories at the origin-destination and fare class (ODF) level are first discussed. To avoid problems associated with forecasting ODF itinerary demand, network methods based on aggregated demand estimates are then presented. Taking the network seat inventory control problem one step closer to fit in with current reservations control capabilities, several leg-based heuristics are introduced. These heuristics take into account information about different ODF passenger demand and traffic flows while optimization and control of seat inventories remains at the flight leg level. In order to effectively measure the revenue potential of the different network seat inventory control methods introduced, an integrated optimization/booking process simulation was developed. Specific issues related to realistically modeling the booking process are discussed and the multi-period, computer-based, mathematical simulation described in detail. With the use of this integrated optimization/booking process simulation, the revenue impacts of the different network seat inventory control methodologies are then evaluated using real airline data for both a connecting hub network and multiple flight leg networks. Overall performance of each method is examined by comparing the revenue obtained with that of current leg-based control approaches and the maximum revenue potential given perfect information. The performance of the different methods evaluated varies with both the network and the actual demand patterns, however, significant revenue impacts over current seat inventory control approaches can be obtained. One approach which consistently performs well is a deterministic network approach in which ODF seat allocations are nested by shadow prices. Depending on the network structure, other leg-based OD control heuristics also perform well. The benefits of network seat inventory control are a function of the load factor across a network. Below an average load factor of about 85%, revenue impacts over effective leg-based control are non-existent. However, as the average load factor increases, revenue impacts on the order of 2-4% are obtainable.
Book Synopsis Advances in Airline Revenue Management and Pricing by : Sanne Vincent de Boer
Download or read book Advances in Airline Revenue Management and Pricing written by Sanne Vincent de Boer and published by . This book was released on 2003 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) We propose several approaches for dynamic picing and resource allocation. Numerical experiments suggest that coordination of pricing and resource allocation policies in a network while taking into account the uncertainty of demand can lead to significant revenue gains. Finally, in our conclusions we propose an integrated approach to airline revenue management that combines all four aspects that we studied here, and suggest directions for future research.
Book Synopsis Mathematical Programming for Network Revenue Management Revisited by : Sanne De Boer
Download or read book Mathematical Programming for Network Revenue Management Revisited written by Sanne De Boer and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mathematical programming models for airline seat inventory control provide booking limits and bid-prices for all itineraries and fare classes. E.L. Williamson [Airline network seat inventory control: methodologies and revenue impacts, Ph.D. thesis, Massachusetts Institute of Technology, Cambridge, MA, 1992] finds that simple deterministic approximation methods based on average demand often outperform more advanced probabilistic heuristics. We argue that this phenomenon is due to a booking process that includes nesting of the fare classes, which is ignored in the modeling phase. The differences in the performance between these approximations are studied using a stochastic programming model that includes the deterministic model as a special case. Our study carefully examines the trade-off between computation time and the aggregation level of demand uncertainty with examples of a multi-leg flight and a single-hub network.
Book Synopsis On the Incorporation of Upgrades Into Airline Network Revenue Management by : Jochen Gönsch
Download or read book On the Incorporation of Upgrades Into Airline Network Revenue Management written by Jochen Gönsch and published by . This book was released on 2015 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recently, the standard dynamic programming model of network revenue management has been extended for integrated upgrade decision-making. However, opposed to the original model, heuristically breaking the extended model down into a series of single-leg problems by dynamic programming decomposition in order to allow for real-world application is not possible. This is because the model's state space does not incorporate resources but commitments reflecting already sold products and capacity consumption is only resolved at the end of the booking horizon, thereby considering upgrade options. In this paper, we consider arbitrary airline networks with upgrades being performed separately on each flight leg. We show that in this case, there are two reformulations of the extended model. First, we prove that an ad hoc formulation, in which upgrades are technically performed immediately after a sale, is completely equivalent. Second, we present another reformulation whose idea is adapted from linear programing-based production planning with alternative machine types. We prove that the resulting dynamic program is also equivalent. The advantage of both reformulations is that their state space is based on either real or virtual resources instead of the commitments used in the postponement formulation. Thus, dynamic programming decomposition techniques can again be applied. Despite the formal equivalence of both reformulations, applying decomposition techniques leads to different approximations and thus to potentially different results when applied in practice. Therefore, we finally numerically examine the approaches regarding revenue performance and discuss airline revenue management settings in which they differ.
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 Airline Pricing and Fare Product Differentiation by : Theodore Charles Botimer
Download or read book Airline Pricing and Fare Product Differentiation written by Theodore Charles Botimer and published by . This book was released on 1993 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: Airlines offer combinations of price level and purchase restrictions, or fare products, designed to best maximize revenues on their flights. This dissertation provides the first comprehensive examination of the differentiated fare product structure on the market today in terms of passenger demand, airline revenue, and societal welfare. The role of pricing in the airline revenue management function is established first. The types of price discrimination currently practiced by airlines, as defined in the economics literature, are then identified. Although the terms airline product differentiation and price discrimination have previously been used interchangeably, the two practices are shown to differ and exist simultaneously in the current industry environment. Next, airline revenue management techniques and, in particular, fare product differentiation are examined from the standpoint of economic efficiency. This dissertation concludes that both efficiency in exchange and Pareto optimality are unattainable under the current structure of airline fare product differentiation as a result of the costs incurred by passengers due to applied purchase restrictions. It is found, however, that a differentiated fare product structure with a wide range of price levels coupled with effective revenue management techniques can provide airline seats to those consumers who value them most when demand exceeds supply. Efficiency in allocation can thus be achieved in the current industry environment. Virtually every existing yield management seat allocation model assumes that consumers view differentiated airline fare products as separate products with uncorrelated demands that compete for space on a fixed capacity aircraft. Such formulations ignore the dependence of the demand for a given fare product on the price levels and characteristics of the other available (competing) fare products. In this dissertation, a model of product differentiation that considers the interrelationships of the available airline fare products as well as the cost incurred by consumers of accepting more restricted (and less flexible) products is presented. This generalized cost model of airline fare product differentiation explicitly incorporates the techniques of fare product differentiation and price discrimination currently used by airlines. The generalized cost model is extended to incorporate the "buy down" or diversion of passengers to lower-priced fare products as a result of their ability to meet the additional purchase restrictions imposed by airlines. Moreover, diverting passengers may be induced to "sell up" to higher-priced fare products when booking limits are applied to the lower-priced products. The generalized cost model contributes the first behavioral motivation of both passenger diversion and sell up. The dissertation demonstrates the use of booking limits as devices to control and limit the revenue dilution effects of passenger diversion. The effects of pricing and other fare product design decisions are quantified for any set of OD market conditions using the generalized cost model. The model provides insight into the underlying effects of the tradeoffs made by airlines when making pricing and marketing planning decisions. In summary, this research provides the first cohesive look at the relationships between price level, purchase restrictions, demand, and revenue in the context of airline product differentiation and yield management.
Book Synopsis Optimization Models for Joint Airline Pricing and Seat Inventory Control by : Claire Jia Ling Cizaire
Download or read book Optimization Models for Joint Airline Pricing and Seat Inventory Control written by Claire Jia Ling Cizaire and published by . This book was released on 2011 with total page 157 pages. Available in PDF, EPUB and Kindle. Book excerpt: Pricing and revenue management are two essential levers to optimize the sales of an airline's seat inventory and maximize revenues. Over the past few decades, they have generated a great deal of research but have typically been studied and optimized separately. On the one hand, the pricing process focused on demand segmentation and optimal fares, regardless of any capacity constraints. On the other hand, researchers in revenue management developed algorithms to set booking limits by fare product, given a set of fares and capacity constraints. This thesis develops several approaches to solve for the optimal fares and booking limits jointly and simultaneously. The underlying demand volume in an airline market is modeled as a function of the fares. We propose an initial approach to the two-product, two-period revenue optimization problem by first assuming that the demand is deterministic. We show that the booking limit on sales of the lower-priced product is unnecessary in this case, allowing us to simplify the optimization problem. We then develop a stochastic optimization model and analyze the combined impacts of fares and booking limits on the total number of accepted bookings when the underlying demand is uncertain. We demonstrate that this joint optimization approach can provide a 3-4% increase in revenues from a traditional pricing and revenue management practices. The stochastic model is then extended to the joint pricing and seat inventory control optimization problem for booking horizons involving more than two booking periods, as is the case in reality. A generalized methodology for optimization is presented, and we show that the complexity of the joint optimization problem increases substantially with the number of booking periods. We thus develop three heuristics. Simulations for a three-period problem show that all heuristics outperform the deterministic optimization model. In addition, two of the heuristics can provide revenues close to those obtained with the stochastic model. This thesis provides a basis for the integration of pricing and revenue management. The combined effects of fares and booking limits on the number of accepted bookings, and thus on the revenues, are explicitly taken into account in our joint optimization models. We showed that the proposed approaches can further enhance revenues.
