Implications of seat assignment flexibilization for airline revenue management

Alex Monestier ()
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Alex Monestier: Airdream Interiors Inc.

Journal of Revenue and Pricing Management, 2016, vol. 15, issue 6, No 5, 488-499

Abstract: Abstract This paper aims to prompt the airline industry to explore a new way of using existing airline cabin layouts that improves profitability and comfort. The century old paradigm, that passengers take a seat for an entire flight, is a way of utilizing airliner cabins that heuristically means poor comfort for most passengers and low financial returns (Return on Invested Capital – Weighted Average Capital Cost industry wide of −2.3 per cent (2013) and −1.2 per cent (2014), and EBIT of 3.5 per cent (2013) and 5.1 per cent (2014) of revenues Earnings Before Interest and Tax) – Source IATA). The author shows the benefits of allowing a place-exchange market to operate during flights. This market proves to be a superior value extraction tool and opportunity for airlines, which can substantially increase their profits by enabling widespread comfort to their customers. As a consequence, airline economics are greatly improved. As a corollary, this dramatically increases the amount of viable routes.

Keywords: profitability; revenue; Airdream; comfort; Cuddle-Class; paradigm (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1057/s41272-016-0067-8

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