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Journal of Revenue and Pricing Management

, Volume 18, Issue 6, pp 465–482 | Cite as

Joint forecasting for airline pricing and revenue management

  • Kavitha Balaiyan
  • R. K. AmitEmail author
  • Atul Kumar Malik
  • Xiaodong Luo
  • Amit Agarwal
Research Article
  • 111 Downloads

Abstract

We develop three parametric forecasting models that jointly estimate the volume component and the choice component of airline demand. These models—JFM-WPA, JFM-PA, and JFM-WTPU—account for (a) demand volume by considering the average demand of an O–D market, booking curve, seasonality and day-of-the-week indices, and (b) customer behavior by including the maximum willingness-to-pay of the customer and the choice attributes of the available options. We use a mixed logit function to formulate the willingness-to-pay and customer choice behavior. JFM-WPA excludes price from the set of choice attributes. JFM-PA considers price as one of the choice attributes. The utilities of maximum willingness-to-pay and choices are combined in JFM-WTPU. We propose a sequential method to estimate the forecasting models. We utilize the data generated by Airline Planning and Operations Simulator (APOS) from real airline historic data. We compare the models and present the results. These demand models can also be used as an input for optimization models, for joint seat allocation and pricing.

Keywords

Revenue management Demand forecasting Customer choice model Mixed logit Discrete-choice model Sequential estimation Maximum willingness-to-pay APOS simulator 

Notes

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Copyright information

© Springer Nature Limited 2019

Authors and Affiliations

  • Kavitha Balaiyan
    • 1
  • R. K. Amit
    • 1
    Email author
  • Atul Kumar Malik
    • 2
  • Xiaodong Luo
    • 3
  • Amit Agarwal
    • 3
    • 4
  1. 1.Department of Management StudiesIIT MadrasChennaiIndia
  2. 2.Fair Isaac CorporationBangaloreIndia
  3. 3.Sabre Inc.SouthlakeUSA
  4. 4.Sabre Inc.BangaloreIndia

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