ABSTRACT
This chapter introduces the concepts of airline pricing policy and revenue management. Revenue management is essentially the combination of methods, analysis, and techniques that an airline applies to the types of service it offers in order to maximize the aircraft revenue. Airlines employ revenue management not only to sell as many high-priced seats as efficiently as possible, but to also keep airplanes full. Revenue management is a quantitative technique which allows an airline manager to handle the supply of aircraft seats and passenger demand to maximize revenues. American Airlines was able to generate revenue from both low-revenue and high-revenue passengers, while People Express could only accommodate low-revenue passengers with its single-fare class reservations system. One of the most important factors for the implementation of a revenue management system is the effective use of "fences," or barriers that limit the use of discounted seats to passengers who might otherwise be willing to pay a much higher fare.
