lect20 - MIT ICAT MIT ICAT Network Revenue Management:...

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Unformatted text preview: MIT ICAT MIT ICAT Network Revenue Management: Origin-Destination Control 16.75J/1.234J Airline Management Dr. Peter P. Belobaba April 26, 2006 MIT ICAT MIT ICAT Presentation Outline Need for Network Revenue Management Limitations of Fare Class Yield Management What is O-D Control? Basic O-D Control Mechanisms: Revenue Value Buckets Displacement Adjusted Virtual Nesting Bid Price Control System Components and Alternatives Examples of O-D Simulation Results MIT ICAT MIT ICAT Background: Fare Class Control Vast majority of world airlines still practice fare class control: High-yield (full) fare types in top booking classes Lower yield (discount) fares in lower classes Designed to maximize yields, not total revenues Seats for connecting itineraries must be available in same class across all flight legs: Airline cannot distinguish among itineraries Bottleneck legs can block long haul passengers MIT ICAT MIT ICAT Yield-Based Fare Class Structure (Example) BOOKING FARE PRODUCT TYPE CLASS Y Unrestricted "full" fares B Discounted one-way fares M 7-day advance purchase round-trip excursion fares Q 14-day advance purchase round-trip excursion fares V 21-day advance purchase or special promotional fares MIT ICAT MIT ICAT Leg-Based Class Availability FLIGHT LE G INV E NTORIE S LH 100 NC E -FRA LH 200 FRA -HK G LH 300 FRA -JFK C LA S S A V A ILA B LE C LA S S A V A ILA B LE C LA S S A V A ILA B LE Y 32 Y 142 Y 51 B 18 B 118 B 39 M M 97 M 28 Q Q 66 Q 17 V V 32 V ITINE RA RY/FA RE A V A ILA B ILITY NC E /FRA LH 100 Y B NC E /HK G LH 100 Y B LH 200 Y B M Q V NC E /JFK LH 100 Y B LH 300 Y B M Q MIT ICAT MIT ICAT Leg Class Control Does Not Maximize Total Network Revenues (A) SEAT AV AILABILITY: SHORT HAUL BLOCKS LONG HAUL NCE/FRA NCE/HKG (via FRA ) NCE/JFK (via FRA ) CLA SS FA RE (OW) CLA SS FA RE (OW) CLA SS FA RE (OW) Y $450 Y $1415 Y $950 B $380 B $975 B $710 M $225 M $770 M $550 Q $165 Q $590 Q $425 V $135 V $499 V $325 (B) SEAT AV AILABILITY: LOCAL V S. CONNECTING PASSENGERS NCE/FRA FRA /JFK NCE/JFK (via FRA ) CLA SS FA RE (OW) CLA SS FA RE (OW) CLA SS FA RE (OW) Y $450 Y $920 Y $950 B $380 B $670 B $710 M $225 M $515 M $550 Q $165 Q $385 Q $425 V $135 V $315 V $325 MIT ICAT MIT ICAT The O-D Control Problem Revenue maximization over a network of connecting flights requires two strategies: (1) Increase availability to high-revenue, long-haul passengers, regardless of yield; (2) Prevent long-haul passengers from displacing high-yield short- haul passengers on full flights....
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This note was uploaded on 11/08/2011 for the course AERO 16.72 taught by Professor Hansman during the Fall '06 term at MIT.

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lect20 - MIT ICAT MIT ICAT Network Revenue Management:...

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