Airline seat inventory control benefiting from currency differentials to enhance revenues

C.E Love,W.W Horsfall,J Kingwill,W.W Bird

doi:10.5784/7-2-469

Abstract

The purpose of this paper is to develop an airline seat inventory control model which will capitalise on currency differentials that exist between city pairs. The approach taken here is to maximise Expected Marginal Seat Revenues as proposed by Belobaba for non-nested fare classes. the basic Expected Marginal Seat Revenue model is extended to explicitly include the effects of overbooking. Data from the South African Airways return flight between Cape Town and London is utilised to demonstrate the model.

Highlights

In the post-deregulation airline environment, all carriers have struggled to contain http://orion.journals.ac.za/costs in the face of strong downward pressure on airline fares
For a comprehensive review of the yield management problem refer to Belobaba [2]
\Vhile the fare charged is an important aspect of yield management, for the most n. given fare structure

Summary

Introduction

In the post-deregulation airline environment, all carriers have struggled to contain http://orion.journals.ac.za/. Work done on correlated demand in nested structures requires that (beginning with the lowest class) sales in each class must be successively closed off prior to the sales in any higher classes This is because in nested two-class structures we are determining only one control limit with the higher class having a prcemptive right to all the available unsold seats. This is obviously a highly unrealistic assumption for our two city scat sale problem. The probability density function for the total number of requests for reservations, r; received by the airline in fare class i by the close of booking for a particular flight is defined as p;(ri). The upper part of the figure shows the demand curves with r 1 and r 2 coincident with S1 and S2

Extension of the EMSR model to include point-of-sale control

The Overbooking Proble1n

Conclusions