lect24 - O&D Control: What Have We Learned? Dr. Peter P....

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1 O&D Control: What Have We Learned? Dr. Peter P. Belobaba MIT International Center for Air Transportation Presentation to the IATA Revenue Management & Pricing Conference Toronto, October 2002
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2 O-D Control: What Have We Learned? Summary of results from over a decade of research 4 Supported by PODS Consortium simulations at MIT 4 Theoretical models and practical constraints on O-D control O-D control can increase network revenues, but impact depends on many factors 4 Optimization, forecasting and effective control mechanism 4 Your airline’s network and RM capabilities of competitors 4 Operational realities such as airline alliances, low-fare competitors, and distribution system constraints
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3 What is Origin-Destination Control? The capability to respond to different O-D requests with different seat availability on a given itinerary 4 Based on network revenue value of each request 4 Irrespective of yield or fare restrictions Can be implemented in a variety of ways 4 EMSR heuristic bid price (HBP) 4 Displacement adjusted virtual nesting (DAVN) 4 Network probabilistic bid price control (PROBP) Control by network revenue value is key concept
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4 RM System Alternatives RM System Data and Forecasts Optimization Model Control Mechanism FCYM Base Leg/class Leg EMSR Leg/class Limits Heuristic Bid Price Leg/bucket Leg EMSR Bid Price for Connex only Disp. Adjust. Virt. Nesting ODIF Network LP + Leg EMSR Leg/bucket Limits Prob. Netwk. Bid Price ODIF Prob. Netwk. Convergence O-D Bid Prices
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5 PODS RM Research at MIT Passenger Origin Destination Simulator simulates impacts of RM in competitive airline networks 4 Airlines must forecast demand and optimize RM controls 4 Assumes passengers choose among fare types and airlines, based on schedules, prices and seat availability Recognized as “state of the art” in RM simulation 4 Realistic environment for testing RM methodologies, impacts on traffic and revenues in competitive markets 4 Research funded by consortium of seven large airlines 4 Findings used to help guide RM system development
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6 Network Revenue Gains of O-D Control Airlines are moving toward O-D control after having mastered basic leg/class RM fundamentals 4 Effective leg-based fare class control and overbooking alone can increase total system revenues by 4 to 6% Effective O-D control can further increase total network revenues by 1 to 2% 4 Range of incremental revenue gains simulated in PODS 4 Depends on network structure and connecting flows 4 O-D control gains increase with average load factor 4 But implementation is more difficult than leg-based RM
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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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lect24 - O&D Control: What Have We Learned? Dr. Peter P....

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