A multi-flight recapture heuristic for estimating unconstrained demand from airline bookings

A new approach is described for airline revenue management (RM) demand unconstraining considering market recapture effects across multiple flights and fare classes. A good heuristic involving customer choice models is shown to provide a computationally efficient method for estimating demand, spill a...

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Bibliographic Details
Published in:Journal of revenue and pricing management 2008-06, Vol.7 (2), p.153-171
Main Authors: Ratliff, Richard M, Venkateshwara Rao, B, Narayan, Chittur P, Yellepeddi, Kartik
Format: Article
Language:English
Subjects:
Air fares
Airline industry
Airlines
Business and Management
Demand
Forecasting
Linear programming
Pricing policies
Research Paper
Studies
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Summary:A new approach is described for airline revenue management (RM) demand unconstraining considering market recapture effects across multiple flights and fare classes. A good heuristic involving customer choice models is shown to provide a computationally efficient method for estimating demand, spill and recapture from historical bookings and availability data. By jointly estimating spill on closed alternatives and recapture onto open ones, the pervasive problem of double counted demands in RM system forecasts is avoided. Initial implementation experience shows the new methodology can be readily integrated into existing demand forecasting systems and should reduce forecast errors.
ISSN:1476-6930
1477-657X
DOI:10.1057/rpm.2008.12