ABSTRACT
Chapter Overview
Revenue management (RM) can enhance total revenue by 4–5 per cent (Talluri and van Ryzin 2004), the precise figure depending upon the type of network operated, the airline’s starting point in the discipline, and the sophistication of competitors’ systems. RM does this by attempting to maximise revenue earned from a schedule of departures; the challenge lies in the fact that the largest network carriers can operate several thousand departures each day, serving tens of thousands of O&D markets with several million fares – many of which change daily yet are sold up to a year in advance. Such complexity can create a universe of several million fare products from which revenue has to be maximised. This chapter will:
define RM and identify its objectives;
outline the circumstances that favour deployment of a revenue management system (RMS);
describe quantity-based and price-based approaches to RM;
describe the essential differences between leg- and segment-based RM on the one hand and origin and destination (O&D) itinerary management on the other;
identify the critical components of an RMS; and
highlight differences between the revenue management of passenger and freight traffic.
