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Maximizing revenue in the airline industry under one-way pricing

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Journal of the Operational Research Society

Abstract

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.

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Authors and Affiliations

  1. University of Southampton, Southampton, UK

    M F Anjos, R C H Cheng & C S M Currie

Authors
  1. M F Anjos
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  2. R C H Cheng
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  3. C S M Currie
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Corresponding author

Correspondence to M F Anjos.

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Anjos, M., Cheng, R. & Currie, C. Maximizing revenue in the airline industry under one-way pricing. J Oper Res Soc 55, 535–541 (2004). https://doi.org/10.1057/palgrave.jors.2601721

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  • DOI: https://doi.org/10.1057/palgrave.jors.2601721

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