Airline Revenue Management with Shifting Capacity

K. Pak, Rommert Dekker and Gerard Kindervater

Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: Airline revenue management is the practice of controlling the booking requests such that the planes are filled with the most profitable passengers. In revenue management the capacities of the business and economy class sections of the plane are traditionally considered to be fixed and distinct capacities. In this paper, we give up this notion and instead consider the use of convertible seats. A row of these seats can be converted from business class seats to economy class seats and vice versa. This offers an airline company the possibility to adjust the capacity configuration of the plane to the demand pattern at hand. We show how to incorporate the shifting capacity opportunity into a dynamic, network-based revenue management model. We also extend the model to include cancellations and overbooking. With a small test case we show that incorporating the shifting capacity opportunity into the revenue management decision indeed provides a means to improve revenues.

Keywords: convertible seats; dynamic capacity management; revenue management; seat inventory control; shifting capacity (search for similar items in EconPapers)
JEL-codes: C51 M M11 R4 (search for similar items in EconPapers)
Date: 2003-12-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Airline Revenue Management with Shifting Capacity (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ems:eureir:1074

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