Article ID: | iaor200962678 |
Country: | United Kingdom |
Volume: | 7 |
Issue: | 2 |
Start Page Number: | 153 |
End Page Number: | 171 |
Publication Date: | Jun 2008 |
Journal: | Journal of Revenue and Pricing Management |
Authors: | Venkateshwara Rao B, Narayan Chittur P, Ratliff Richard M, Yellepeddi Kartik |
Keywords: | yield management |
A new approach is described for airline revenue management (RM) demand unconstraining considering market recapture effects across multiple flights and fare classes. A good heuristic involving customer choice models is shown to provide a computationally efficient method for estimating demand, spill and recapture from historical bookings and availability data. By jointly estimating spill on closed alternatives and recapture onto open ones, the pervasive problem of double counted demands in RM system forecasts is avoided. Initial implementation experience shows the new methodology can be readily integrated into existing demand forecasting systems and should reduce forecast errors.