Pitfalls of airline revenue management observations

Given the high competition and the inherent variability of most markets, airlines learnt to quickly react to changes in their passenger Origin–Destination (O&D) flows, either by changing route capacities, frequencies, or by implementing Revenue Management (RM) techniques, such as changes in pricing and inventory control. However, properly assessing RM actions proves to be very difficult even with the most sophisticated systems of monitoring and reporting. Even analyzing the impact of granular strategies, such as restricting/relaxing availability for particular price points of particular O&Ds – Points of Sale, can be easily misled by censored data and comparison with unreliable detruncation methods, inaccurate estimations of optimal figures, or unexpected repercussions of other such strategies within the airline or its competitors. The aim of this article is to discuss the challenges of using airline bookings and cancellations data to assess RM performance and underline the differences between systems, market reality and user intervention.