The impact of dynamic capacity management on airline seat inventory control

Dynamic capacity management is the reassignment of aircraft to a flight schedule in response to the realisation of demand. Through better matching of the supply and demand for seats, airlines are able to carry more passengers, and the revenue management policy should be adjusted accordingly. This paper proposes a derivative (EMSRd) of the widely used EMSRb booking limit calculation method, which takes into account the effect of possible future capacity changes. The EMSRd approach only depends on the fleet assignment problem through the probability distribution of the aircraft type that operates each flight, and can be solved efficiently once these have been estimated. Numerical experiments show potential revenue improvements of over 1 per cent.