Maximizing revenue in the airline industry under one-way pricing
Maximizing revenue in the airline industry under one-way pricing
The paper describes a methodology that has been implemented in a major British airline to find the optimal price to charge for airline tickets under one-way pricing. An analytical model has been developed to describe the buying behaviour of customers for flights over the selling period. Using this model and a standard analytical method for constrained optimization, we can find an expression for the optimal price structure for a flight. The expected number of bookings made on each day of the selling period and in each fare class given these prices can then be easily calculated. A simulation model is used to find the confidence ranges on the numbers of bookings and these ranges can be used to regulate the sale of tickets. A procedure to update the price structure based on the remaining capacity has also been developed.
air transport, revenue management, simulation, yield management
535-541
Anjos, M.F.
8c21de9c-8bc1-4fce-9d64-179fd2288b73
Cheng, R.C.H.
a4296b4e-7693-4e5f-b3d5-27b617bb9d67
Currie, C.S.M.
dcfd0972-1b42-4fac-8a67-0258cfdeb55a
2004
Anjos, M.F.
8c21de9c-8bc1-4fce-9d64-179fd2288b73
Cheng, R.C.H.
a4296b4e-7693-4e5f-b3d5-27b617bb9d67
Currie, C.S.M.
dcfd0972-1b42-4fac-8a67-0258cfdeb55a
Anjos, M.F., Cheng, R.C.H. and Currie, C.S.M.
(2004)
Maximizing revenue in the airline industry under one-way pricing.
Journal of the Operational Research Society, 55 (5), .
(doi:10.1057/palgrave.jors.2601721).
Abstract
The paper describes a methodology that has been implemented in a major British airline to find the optimal price to charge for airline tickets under one-way pricing. An analytical model has been developed to describe the buying behaviour of customers for flights over the selling period. Using this model and a standard analytical method for constrained optimization, we can find an expression for the optimal price structure for a flight. The expected number of bookings made on each day of the selling period and in each fare class given these prices can then be easily calculated. A simulation model is used to find the confidence ranges on the numbers of bookings and these ranges can be used to regulate the sale of tickets. A procedure to update the price structure based on the remaining capacity has also been developed.
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Published date: 2004
Keywords:
air transport, revenue management, simulation, yield management
Organisations:
Operational Research
Identifiers
Local EPrints ID: 29633
URI: http://eprints.soton.ac.uk/id/eprint/29633
ISSN: 0160-5682
PURE UUID: b95c5b96-5120-46a6-bf58-8d49bbf089e7
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Date deposited: 11 May 2006
Last modified: 16 Mar 2024 03:30
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Author:
M.F. Anjos
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