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An applied process for airline strategic fare optimization

Author

Listed:
  • Richard Ratliff

    (Sabre)

  • Ben Vinod

    (Sabre)

Abstract

Sabre has developed a new decision support prototype for proactive pricing and price leadership to help airlines achieve their overall marketing objectives. The strategic pricing business process described in this article is recognized as important and introduces a new paradigm for establishing fare levels for airline pricing departments. Our proposed approach is analogous to revenue opportunity modeling but applied to airline pricing. It involves perfect hindsight review of price and sales information from prior seasons and applying methods such as price elasticity, game theory and optimization models to estimate the price-level changes needed to further improve revenue, share or yields. By knowing the direction and magnitude of recommended changes in previous seasons, these hindsight review tools help pricing managers make better price-setting decisions for future seasons.

Suggested Citation

  • Richard Ratliff & Ben Vinod, 2016. "An applied process for airline strategic fare optimization," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(5), pages 320-333, October.
    • Handle: RePEc:pal:jorapm:v:15:y:2016:i:5:d:10.1057_rpm.2016.32
    DOI: 10.1057/rpm.2016.32
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    References listed on IDEAS

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    1. Lawrence R. Weatherford, 1997. "Using Prices More Realistically as Decision Variables in Perishable-Asset Revenue Management Problems," Journal of Combinatorial Optimization, Springer, vol. 1(3), pages 277-304, October.
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    Cited by:

    1. Miju Ahn & Xiaodong Luo & Sergey Shebalov, 2020. "Variable pricing: an integrated airline pricing and revenue management model," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(6), pages 421-435, December.
    2. Ben Vinod & Richard Ratliff & Vikram Jayaram, 2018. "An approach to offer management: maximizing sales with fare products and ancillaries," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 17(2), pages 91-101, April.

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