Revenue Management

Applied Mechanics and Materials Vols. 229-231 (2012) pp 2775-2778 © (2012) Trans Tech Publications, Switzerland doi:10.4028/www.scientific.net/AMM.229-231.2775

Airline Revenue Management: Optimization Using Origin-Destination Strategy Controlled by Nested Heuristics Ajyuk J. Raj1, a, N. Ganesh Kumar2, b, S. Jayaraj3, c
1

M.E., Department of Mechanical Engineering,

PSG College of Technology, Coimbatore-641004, Tamil Nadu, India.
2

Assistant Professor, Department of Mechanical Engineering,
3

PSG College of Technology, Coimbatore-641004, Tamil Nadu, India. Professor, Department of Mechanical Engineering NIT Calicut, Calicut-673601, Kerala, India. a [e-mail], [e-mail], [e-mail]

Keywords: Revenue Management, Airline, Optimization, Nested Heuristics

Abstract. Effective revenue management practice can be the single most important factor in distinguishing between success and failure of an airline and spell the difference between profitability and loss for a particular flight. This paper deals with usage of Deterministic Linear Program to optimize the network as a whole and uses LINGO to solve the DLP as it has 120 variables and 127 constraints and is impossible to solve manually. Optimization strategies taken into consideration are: Leg Based Expected Margins, Seat Revenue (EMSR), and Deterministic Linear Program (DLP). In the seat inventory control process Nested Heuristics is used for an improved and accurate result. Introduction Revenue Management (Fig.1) is an economic discipline appropriate to many service industries in which “market segment pricing” is combined with statistical analysis to expand the market for the service and increase the revenue “revenue” per unit of available capacity. If the market is characterized by customers willing to pay different prices for the product, it is often possible to target different customer segments by the use of product differentiation. This creates the opportunity

References: [1] Elizabeth L. Williamson, "Williamson Airline Network Seat Inventory Control: Methodologies and Revenue Impacts", Massachusetts Institute of Technology, Cambridge, 1992. [2] Ajyuk J. Raj, Manu Joseph and Rajeesh V. R. “Airline Revenue Management-An Application in Passenger Industry”, Project Report, College of Engineering Trivandrum, 2008. [3] Peter P. Belobaba, "Air Travel Demand and Airline Seat Inventory Management", Report FTLR87-8, Flight Transportation Laboratory, Massachusetts Institute of Technology, Cambridge, 1987. [4] Elizabeth L. Williamson, "Comparison of Optimization Techniques for Origin-Destination Seat Inventory Control", Massachusetts Institute of Technology, Cambridge, 1986.