The other side of revenue management: managing airport infrastructure and airside operations

Abstract

Revenue management has roots in the marketing of US airline passenger service following the deregulation of the industry in 1978. The business model is largely credited for opening opportunities to low-cost air travel worldwide, but condemned for deleterious effects on service and increased costs to consumers in many markets as industry consolidation occurred and airlines redesigned route and fare structures competitively. In this paper, we discuss the challenges of 'right-sizing' airport infrastructure and managing airside operations effectively in response to airlines' revenue-management practices. An historical review of dramatic changes at St. Louis Lambert International Airport will highlight motivations and risks of large capital expenditures and related revenues. A new analytical model to support adaptive airport planning and management is presented for non-financial measures of airside performance affected by airline revenue-management practices.