An Airline Seat Management Model for a Single Leg Route When Lower Fare Classes Book First

Richard D. Wollmer
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Richard D. Wollmer: California State University, Long Beach, and Douglas Aircraft Company, McDonnell Douglas Corporation, Long Beach, California

Operations Research, 1992, vol. 40, issue 1, 26-37

Abstract: It is common practice for airlines to charge several different fares for a common pool of seats. This paper presents a model that has been used to address the problem of when to refuse booking requests for a given fare level to save the seat for a potential request at a higher fare level. This model assumes that lower fare passengers book before higher fare passengers book. This occurs quite frequently in practice, where lower fare passengers are usually vacationers and higher fare passengers are usually business travelers. In fact, many airlines mandate this practice by imposing advance booking requirements on lower fare classes to prevent business travelers from using them. We present an algorithm that finds a seat management policy that maximizes mean revenue by establishing a critical value for each fare class. Booking requests for a particular fare level are accepted if the number of empty seats is strictly greater than its critical value and rejected otherwise. This critical value is a decreasing function of the fare price and is equal to zero for the class with the highest fare.

Keywords: probability; stochastic model applications: optimize given fare class demand distribution; transportation; costs: airline revenue maximization (search for similar items in EconPapers)
Date: 1992
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