Maximizing revenue in the airline industry under one-way pricing

M F Anjos (), R C H Cheng and C S M Currie
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M F Anjos: University of Southampton
R C H Cheng: University of Southampton
C S M Currie: University of Southampton

Journal of the Operational Research Society, 2004, vol. 55, issue 5, 535-541

Abstract: 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.

Keywords: air transport; revenue management; simulation; yield management (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (8)

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DOI: 10.1057/palgrave.jors.2601721

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