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Revenue Sharing In Airline Alliance Networks
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Book Synopsis Revenue Sharing in Airline Alliance Networks by : Yuntong Wang
Download or read book Revenue Sharing in Airline Alliance Networks written by Yuntong Wang and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 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 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 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 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 Effects of Concession Revenue Sharing Contracts and Airline Alliances in Airport Competition by : Adrián Nerja
Download or read book Effects of Concession Revenue Sharing Contracts and Airline Alliances in Airport Competition written by Adrián Nerja and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 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 International Aviation by : DIANE Publishing Company
Download or read book International Aviation written by DIANE Publishing Company and published by DIANE Publishing. This book was released on 1996-10 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: Between 1987 and 1993, the number of passengers traveling on U.S. airlines between the U.S. and foreign destinations increased 47%, while domestic traffic increased by only 6%. The airlines have entered into alliances with foreign airlines rather than starting new service to additional foreign cities. This report examines the effects of marketing alliances between U.S. and foreign airlines on airlines' traffic flows and revenues and on consumers, and identifies the key issues concerning such alliances that need to be addressed by the Dept. of Transportation.
Author :United States. Congress. Senate. Committee on Commerce, Science, and Transportation. Subcommittee on Aviation Publisher : ISBN 13 : Total Pages :150 pages Book Rating :4.0/5 (6 download)
Book Synopsis Competitive Implications of Domestic and International Alliances Among Airlines by : United States. Congress. Senate. Committee on Commerce, Science, and Transportation. Subcommittee on Aviation
Download or read book Competitive Implications of Domestic and International Alliances Among Airlines written by United States. Congress. Senate. Committee on Commerce, Science, and Transportation. Subcommittee on Aviation and published by . This book was released on 1999 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Airline Alliances by : Pablo Eduardo Fernandez de la Torre
Download or read book Airline Alliances written by Pablo Eduardo Fernandez de la Torre and published by . This book was released on 1999 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt: Airline alliances are one of the critical issues faced by the airline industry in the 1990s. In this thesis, an overview of the most significant impacts that the formation of alliances have brought to the industry-especially to airline management-is presented. Part I presents several frameworks to help understand why alliances have become so critical for the participating airlines. A definition of airline alliances, different typologies to classify them, the main motivations for their formation, and the recent trends in the industry are presented. The alliances' main objective is the increase of market coverage, though the strengthening of market position on certain routes and the reduction of costs are additional sources of competitive advantage they provide to the participating airlines. Alliances can also bring many benefits to customers in terms of improved service, although they represent a threat for sustainable competition. Part II analyzes two critical problems faced by airline management. First, it is analyzed the effect of the network connectivity through an alliance hub-to-hub linkage scheme on the increase in market share. The analysis shows that the alliance hub-to-hub link represents a significant source of additional traffic for the alliance. Accessibility, a measure developed for network connectivity, has proven to be a critical factor in increasing market share on the alliance hub-to-hub link. Scheduling coordination within alliances, therefore, should consider the maximization of accessibility as a critical driver of demand. The second problem analyzed is the introduction of codesharing into revenue management systems. There are four different problems associated with it, which are interrelated in practice. One of them, the valuation and seat inventory control process for codeshare traffic is analyzed in detail. Two main revenue management approaches to handle codesharing are presented: The proration approach and the fully integrated approach. The latter aims to maximize the combined revenue and implies higher complexity in its implementation, while the former has easier implementation. Under the proration approach, there is a significant source of revenue loss due to an incorrect valuation of the revenue contribution brought by codeshare traffic. Although a solution is proposed to solve this problem, a final answer should include a redefinition of the way codesharing agreements are currently established.
Book Synopsis Essays on Economics of Airline Alliances by : Xin Xie
Download or read book Essays on Economics of Airline Alliances written by Xin Xie and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation constitutes two essays in the field of industrial organization. Specifically, the research focuses on empirically assessing the market effects of airline alliances. The first essay examines how codesharing, a form of strategic alliances, by airlines affects market entry decisions of potential competitors. Researchers have written extensively on the impact that strategic alliances between airlines have on airfare, but little is known of the market entry deterrent impact of strategic alliances. Using a structural econometric model, this essay examines the market entry deterrent impact of codesharing between incumbent carriers in U.S. domestic air travel markets. We find that a specific type of codesharing between market incumbents has a market entry deterrent effect to Southwest Airlines, but not other potential entrants. Furthermore, we quantify the extent to which market incumbents' codesharing influences market entry cost of potential entrants. The second essay examines the effects of granting Antitrust Immunity (ATI) to a group of airlines. Airline alliance partners often want to extend cooperation to revenue sharing, which effectively implies joint pricing of their products (explicit price collusion). To explicitly collude on price, airlines must apply to the relevant government authorities for ATI (U.S. Department of Justice and Department of Transportation in the case of air travel markets that have a U.S. airport as an endpoint), which effectively means an exemption from prosecution under the relevant antitrust laws. Whether consumers, on net, benefit from a grant of ATI to partner airlines has caused much public debate. This essay specifically investigates the impact of granting ATI to oneworld alliance members on their price, markup, and various measures of cost. The evidence suggests that the grant of ATI facilitated a decrease in partner carriers' marginal cost, and increased (decreased) their markup in markets where their service do (do not) overlap. Furthermore, member carriers' price did not change (decreased) in markets where their services do (do not) overlap, implying that consumers, on net, benefit in terms of price changes.
Book Synopsis Selfish Revenue Sharing Mechanisms for Airline Alliances by : Demet Çetiner
Download or read book Selfish Revenue Sharing Mechanisms for Airline Alliances written by Demet Çetiner and published by . This book was released on 2011 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Strategic Alliances in the Aviation Industry by : Hendrik Vedder
Download or read book Strategic Alliances in the Aviation Industry written by Hendrik Vedder and published by GRIN Verlag. This book was released on 2008-12-09 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2008 in the subject Business economics - Business Management, Corporate Governance, grade: 1,9, European Business School - International University Schloß Reichartshausen Oestrich-Winkel (Chair of Strategic Aviation Management), course: Bacheloarbeit, language: English, abstract: “Companies are just beginning to learn what nations have always known: in a complex, uncertain world filled with dangerous opponents, it is best not to go it alone” (Ohmae, 1989, p. 143). This statement emphasises the significant developments in firms’ corporate strategy in the 1980s. As a response to the rise of globalisation, and thus, increased competition, companies throughout the world started collaborating with partners with interfirm cooperation. Their cooperative practices, though, were not equally relevant in all branches, but concentrated mainly on industries that were affected most by the in-creasing environmental dynamic and complexity. Therefore, firms in various industries, such as the automotive or telecommunication industry, established alliances with their competitors in order to stay competitive and to jointly expand into world markets. However, the aviation industry, in particular, has experienced downright alliance frenzy since that time. With the gradual liberalisation of international air transport, collabora-tions between carriers have steadily gained importance. Therefore, airline alliances have developed from purely horizontal links into more complex and integrated strategic alliances. These strategic alliances have been established mainly to bypass existing regula-tory restrictions and to adapt to customers' altered preferences by extending the airlines’ networks. However, with the incidents that occurred during the first years of the 21st century, such as the terrorist acts of 9/11, partner airlines were forced to react to the changed external conditions. This development highlights the high dependence of air-lines and their strategic behaviour on the external environment. Therefore, this thesis aims to analyse the external conditions that persuaded the airlines to align in complex strategic alliances, and how these factors influenced their objectives. Furthermore, the thesis reveals the extent to which the changes in the external environ-ment have induced a reorientation in the airlines’ alliance strategy.
Book Synopsis Analysis of Global Airline Alliances as a Strategy for International Network Development by : Antonio Tugores-García (S.M.)
Download or read book Analysis of Global Airline Alliances as a Strategy for International Network Development written by Antonio Tugores-García (S.M.) and published by . This book was released on 2012 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the late 1990s, network airlines worldwide have being enrolling in one of the three current Global Airline Alliances (GALs), oneworld, Star Alliance and SkyTeam. By 2011, airlines belonging to the three GALs transported over two-thirds of all international traffic. This thesis studies the reasons that cause an increasing number of airlines to join this collaborative scheme as a way to develop a wider network and to increase profitability by serving international connecting traffic. The evolution of GALs is characterized here by the analysis of the size of these alliances, as well as by the volume of partnerships and code share agreements between alliance partners during the period 2006-2011. The results of this study illustrate the differences between each of the GALs and the degree of dependence of airlines on alliances to develop their international networks. By most indicators, the largest alliance, Star Alliance, is the GAL in which member airlines rely more on their alliance partners when developing code share agreements with foreign airlines. In all three GALs, code share agreements between alliance partners are much less likely to be broken than with nonpartner airlines. Airlines operating in the transatlantic markets appear to be the most advanced firms in the marketing of code shared itineraries. The empirical analysis is complemented with a review of the theoretical benefits of GALs to airlines, alternative network models for international growth, the impact of alliances on customers' welfare, their potential anti-competitive effects on independent carriers, and the current regulatory framework affecting alliances on both sides of the North Atlantic. Overall, this work provides a holistic view of the GALs as a model for network development, to describe their policy implications, and to suggest key drivers in the future of airlines' network development strategies.
Book Synopsis Liberalization in Aviation by : Hartmut Wolf
Download or read book Liberalization in Aviation written by Hartmut Wolf and published by Routledge. This book was released on 2016-05-06 with total page 487 pages. Available in PDF, EPUB and Kindle. Book excerpt: The last few decades have witnessed substantial liberalization trends in various industries and countries. Starting with the deregulation of the US airline industry in 1978, regulatory restructuring took place in further network industries such as telecommunications, electricity or railways in various countries around the world. Although most of the liberalization movements were initially triggered by the worrying performances of the respective regulatory frameworks, increases in competition and corresponding improvements in allocative and productive efficiency were typically associated with the respective liberalization efforts. From an academic perspective, the transition from regulated industries to liberalized industries has attracted a substantial amount of research reflected in many books and research articles which can be distilled to three main questions: (1) What are the forces that have given rise to regulatory reform? (2) What is the structure of the regulatory change which has occurred to date and is likely to occur in the immediate future? (3) What have been the effects on industry efficiency, prices and profits of the reforms which have occurred to date? Liberalization in Aviation brings together renowned academics and practitioners from around the world to address all three questions and draw policy conclusions. The book is divided into five sections, in turn dealing with aspects of competition in various liberalized markets, the emergence and growth of low-cost carriers, horizontal mergers and alliances, infrastructures, and concluding with economic assessments of liberalization steps so far and proposed steps in the future.