This thesis addresses two issues which arise in the context of airline revenue management. In the first part of the thesis, we develop an incentive mechanism to prevent revenue leakage caused by customers buying down. In the second part of the thesis, we discuss the revenue sharing problem between alliance partners and develop a mechanism by which the combined revenue can be distributed fairly among them. Situations which give rise to impossibility and possibility results are established. The practice of revenue management, employs the principle of differential pricing of a product based on various product restrictions. These product restrictions segment the market in such a manner so as to maximize the revenue. Airline industry which pioneered the practice of revenue management generally prices low for those who book early and high for those who book late for essentially the same seat. The low-fare products are targeted towards the market segment comprising of those customers who have a low valuation (reservation price) for the product (who are typically leisure customers, also called as low-fare customers).The high-fare product, on the other hand is targeted at the market segment comprising of customers who have a high valuation (reservation price) for the product (business class customers, also called as high-fare customers). However, it may happen that customers with high valuation for the product may also buy the low-fare product if it is available. This behavior of high-fare customers buying a low-fare product due to its availability is called the customer buy-down behavior. Such a customer behavior causes revenue leakage to the airline industry. Revenue management literature that primarily focuses on pricing and seat inventory control does not account for the customer buy-down behavior. In Part I of the thesis we address this issue of customer buy-down behavior. We develop an incentive mechanism in the form of a new product bundle which would attract only the high-fare customer. High fare customers such as business class customers typically have repeated travel plans, while low fare customers such as leisure travelers typically do not travel repeatedly. The proposed incentive mechanism takes advantage of this characteristic of high fare customers that distinguishes them from the low fare customers. In general, high fare product permits cancellation and does not impose any travel restrictions, and a low fare product, on the other hand does not permit cancellation and has other travel restrictions associated with them. A high fare customer with potential future travel plan might associate uncertainties with respect to travel dates and his ability to procure a low fare ticket for future travel. This uncertainty is exploited in the proposed product bundle. The new product bundle permits the customer to cancel the ticket for the future journey and relaxes the restrictions associated with the requested day and the future travel day. Such incentives would attract only the high fare customer and the low-fare customer will not be enticed by this product bundle. This is because the low fare customer is a one-off traveler. Thus, the acceptance of the product bundle by the customer reveals that he is a high-fare customer and its denial reveals that he is truly a low-fare customer. We determine the optimal price to be charged for each of the days (requested day and the future travel day) and the refund value for the future travel day. We find that multiple optimal solutions exist, and its existence indicate a win-win situation for both the customer and the seller. The customer benefits through the incentives offered and the seller benefits in the form of additional revenue that is achieved in the process of preventing revenue leakage. In Part II of the thesis, we discuss the revenue sharing problem between alliance partners of a network. Airlines form alliances and coordinate through activities such as code sharing, scheduling of flight arrival and departure times, arrival and departure gates, frequent flyer programs, airport lounges and ground facilities among several others. Code sharing is a key feature among the coordinated activities of alliance partners. Parallel code sharing refers to code sharing between carriers operating on the same route to increase frequency of services and to strengthen market position. Complementary code sharing refers to carriers using each other’s flights to provide connecting services, where they do not offer a full service on their own. The main objective of the complementary code share flights is to increase scope of the partner’s network, allowing them to supply service on markets where they did not operate before. When complementary code shared flights aim at maximizing their combined revenue, it might lead to inequitable distribution of revenue and may cause an alliance partner to lose revenue. In Part II of the thesis, we address this issue of achieving a fair division of the combined revenue generated by the alliance network. The common assumption in revenue sharing methods that are generally practiced is that airline’s valuation of seats in the alliance network is common knowledge. However, in reality it is not true. We therefore consider the valuations of the carriers of their respective products as private information and the price of the product over the entire network to be common knowledge. Under such an information environment, we formulate the problem in the bargaining framework. We discuss the implementation of two solution concepts; namely the Shapley value and the Core of a cooperative game. For the two person cooperative game, the Shapley value equally distributes the surplus among the two parties, while the core allocations of two person cooperative game consists of all possible proportions of the distribution of the surplus. In a bargaining set up, the parties communicate their valuations through sealed bids and agree upon a transfer rule. We analyze two situations. In the first situation we assume that the two parties do not associate any cost towards failure to arrive at an agreement. We determine the optimal bids for the two parties and prove that these optimal bids do not implement any desired point on the core i.e., desired proportion of the distribution of the surplus (which includes the Shapley value).This impossibility result motived the analysis of the second situation, in which we assume that the two parties associate costs towards failure to arrive at an agreement. We once again determine the optimal bids and prove that for a certain structure of the bargaining costs, any desired point on the core, including the Shapley value can be implemented by enticing the players to reveal their true valuations.

published_or_final_version / abstract / Transport Policy and Planning / Master / Master of Arts in Transport Policy and Planning

Revenue Management (RM) is an important tool for matching supply and demand by segmenting customers into different segments based on their willingness-to-pay and allocating scarce capacity to the different segments in a way that maximizes firm revenues. The benefits of RM are well accepted in the hospitality industry, and the technical aspects of RM form a rich analytical research stream. However, the research is missing a holistic examination of important elements of effective RM. The literature shows that market segmentation, pricing, forecasting, capacity allocation, IT use, organizational focus, aligned incentives, organizational structure, and education and training contribute to effective RM. We group these elements into two concepts: RM technical capability and RM social support capability and propose that these nine elements positively impact RM performance. We develop scales to measure our constructs and collect responses in the hotel industry. Our survey yields interesting results. In line with expectations, we find evidence that forecasting and organizational focus positively impact RM performance. On the other hand, the results show evidence that improved organizational structure negatively impacts RM performance. We provide a few explanations for this non-intuitive result and proposals for future research.

No description available.

No description available.

Mannheim, Univ., Diss., 2008.

Thesis (Ph.D.)--Civil and Environmental Engineering, Georgia Institute of Technology, 2008. / Committee Chair: Garrow, Laurie Anne; Committee Member: Castillo, Marco; Committee Member: Ferguson, Mark; Committee Member: McCarthy, Patrick; Committee Member: Meyer, Michael.

Diss. Univ Karlsruhe, 2006.

LAN Airlines es una aerolínea basada en Santiago de Chile con 79 años de experiencia y más de 15.000 empleados alrededor del mundo. Sirve a más de 15 millones de pasajeros al año, tienen ingresos anuales de más de 3.500 millones USD, un valor en la bolsa de casi 4 mil millones de USD y rentabilidad neta cercana al 8%. Su estrategia comercial hace que el revenue management sea el núcleo de su negocio. Esta memoria tiene el objetivo crear un simulador de entrenamiento que permita brindar un entorno libre de riesgo y de costo cero para practicar RM. Esta disciplina agrega entre un 3% y 7% a los ingresos de una empresa y entre un 50% y 100% a las utilidades. Mucho de lo fundamental para el éxito en su aplicación viene de la técnica y la teoría. Sin embargo, su necesidad de entender el mercado y la demanda lo hace depender fuertemente del capital humano. Actualmente el proceso de entrenamiento se basa en la prueba y error en la realidad, con un tutor y marcha blanca que puede tener altos costos por errores con las tarifas reales de la empresa. Un simulador puede ayudar a reducir los costos y hacer más efectivo el aprendizaje. Además, permite que los tiempos de entrenamiento bajen al enseñar de manera práctica, lo que eleva la tasa de retención de los analistas de un 5% en clases típicas hasta un 80%. Se propone una metodología enfocada hacia escenarios determinados del RM. LAN ha elegido algunas de sus buenas prácticas y se requiere que el simulador permita el entrenamiento en dichas situaciones. De esta manera, se entiende que el objetivo es que el simulador reacciones consecuentemente con el mundo real en estos escenarios, mas no modelar exactamente la demanda real de LAN. Un prototipo del simulador fue sometido a pruebas bajo cada escenario de RM requerido. Sólo una de ellas falla y gatilla un rediseño específico. Una vez completado, el simulador cumple lo requerido y está listo como diseño. Es clave para el éxito de esta memoria la metodología en base a escenarios concretos de RM. Permitió tener condiciones claras de prueba y evaluación de la simulación. Resta su implementación productiva en la aerolínea y diseño de jornadas de entrenamiento para que se utilice. Se prueba que la simulación es una herramienta útil y rentable, al lograr reproducir las condiciones de trabajo necesarias para entrenar a los analistas de LAN en RM.

M.Ing. (Engineering Management) / Revenue Assurance is an emerging discipline in the Communication Service Provider (CSP) industry. It is a fast changing and maturing field driven by proactive CSPs and industry providers of Revenue Assurance technology and services. Two practice guideline bodies, the TeleManagement Forum and the Global Revenue Assurance Professions Association (GRAPA), have issued various practice guidelines, maturity assessment models, and the first attempts to certify practitioners in this discipline. The discipline, however, lacks a working set of definitions. Industry writing is of commercial value with little contribution from an academic perspective. This study provides a provisional taxonomy as basis for introducing a working' set of definitions to support academic enquiry into the discipline of Revenue Assurance. The study employed Grounded Theory and document analysis techniques to code and analyse data available in the public domain. The result is a set of grounded concepts, re-conceptualised into a taxonomy, which provides structure to academia as primary users. It is hoped that the proposed taxonomy will provide a common base of understanding, which will guide future dialogue and expansion of the field, with contributions from both industry and academia.