Practical Pricing and the Airline Industry

Airline pricing and Revenue Management has a long history starting with the deregulation of the airline markets in the late 1970s. This chapter focuses on practical aspects from a traditional carrier’s point of view. Beside the basic concepts of market segmentation, demand forecasting, overbooking and availability optimization two main developments, from leg- to network-based Revenue Management and from independent to dependent demand structures are also described. As an example of airline-specific challenges some restrictions of legacy systems used in global distribution channels are mentioned. It is pointed out that most Revenue Management developments can be seen in the light of removing or relaxing wrong assumptions on which the first leg optimization methods have been based on.