Estimation of sell-up potential in airline revenue management systems

The growth of Low Fare Carriers (LFCs) has encouraged many airlines to remove fare restrictions (such as advance purchase requirements and Saturday-night stays) on many of their fare class products, leading to the simplification of fare structures in competitive markets. In the most extreme case, these markets have fare structures that are unrestricted; the fare class products differ only by price since they AL1 lack restrictions. In these unrestricted markets, passengers buy the lowest possible fare product since there are no longer any restrictions that prevent them from doing so. A forecasting method known as "Q-forecasting" takes into account the sell- up potential of passengers in forecasting the demand in each of the fare products in such markets. Sell-up occurs when passengers upon being denied their original fare class choice, decide to pay more for the next available fare class so long as the price remains below their maximum willingness to pay. Quantifying this sell-up potential either using estimated or input values is thus crucial in helping airlines increase revenues when competing in unrestricted fare markets. A simulation model known as the Passenger Origin-Destination Simulator (PODS) contains the following 3 sell-up estimation methods: (i) Direct Observation (DO), (ii) Forecast Prediction (FP), and (iii) Inverse Cumulative (IC). The goal of this thesis is thus to investigate and compare the revenue performance of the 3 sell-up estimation methods. These methods are tested in a 2-airline (consisting of AL1 and AL2) unrestricted network under different RM fare class optimization scenarios.

Department dc:contributor.department

Massachusetts Institute of Technology. Operations Research Center.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Guo, Jingqiang Charles

Advisor dc:contributor.advisor

• Peter Belobaba.

• Operations Research Center.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/45800

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/45800