Revenue Sharing in Airline Alliance Networks

Abstract

This paper takes an axiomatic approach to the revenue sharing problem for an airline alliance network. We propose a simple sharing rule that allocates the revenue of each flight equally among the carriers of the flight. We show that it is the only rule satisfying the axioms of separability, the null airline property and equal treatment of equals. We show that the rule coincides with the Shapley value of the game associated with the problem. We provide two extensions of the rule, allowing it to depend on the lengths or the capacities of the flight legs. We also consider the maximum revenue problem for the airline alliance. We propose a simple integer linear programming model. We examine its Owen set. Lastly, we provide an algorithm to compute both the optimal solution and the revenue sharing solution given by the simple sharing rule for the maximum revenue problem.