Revenue management and exchange rate fluctuations: A simulation based on Air Tahiti Nui's experience

Fare classes may contain prices in different currencies for an international airline. This paper questions whether booking controls are sensitive to exchange rate movements. The analysis illustrates that a stronger national currency results in the closing of foreign points of sale earlier because of a direct effect on the value of foreign fares and an indirect effect on bid prices. Bid prices, as an average of national and foreign fares, are decreasing when the home currency strengthens against a foreign currency. The experience of Air Tahiti Nui shows that Revenue Managers carefully monitor exchange rate when fluctuations are bigger than the relative spread between the mean fare of consecutive fare classes.