Maximizing revenue in the airline industry under one-way pricing
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- Anjos, M., Cheng, R. & Currie, C. J Oper Res Soc (2004) 55: 535. doi:10.1057/palgrave.jors.2601721
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The paper describes a methodology that has been implemented in a major British airline to find the optimal price to charge for airline tickets under one-way pricing. An analytical model has been developed to describe the buying behaviour of customers for flights over the selling period. Using this model and a standard analytical method for constrained optimization, we can find an expression for the optimal price structure for a flight. The expected number of bookings made on each day of the selling period and in each fare class given these prices can then be easily calculated. A simulation model is used to find the confidence ranges on the numbers of bookings and these ranges can be used to regulate the sale of tickets. A procedure to update the price structure based on the remaining capacity has also been developed.