Revenue Management of the Base Fare

This chapter provides an end-to-end overview of revenue management of the base fare. The decision support models assume that demand is considered independent from one booking class to the next. Overbooking models based on quality of service constraint and the economic model are reviewed. Demand untruncation is the first step toward forecasting unconstrained demand. Traditional demand forecasting methods and customer choice modeling approaches are reviewed. Discount allocation controls with leg/segment revenue management and origin and destination revenue management are examined in detail. The discussion on expected marginal seat revenue and network optimization models are followed with a discussion of inventory control methods supported in airline reservations systems. Various types of nested inventory controls, virtual nesting, and continuous nesting are discussed. Connectivity, a key enabler for revenue management from the agency channel, defined by the level of participation by a carrier in a GDS, is reviewed followed with a discussion of airline alliances, and the importance of accurate seat availability. The chapter concludes with a discussion on revenue management of groups, the role of revenue integrity, and the impact of revenue management on adjacent travel verticals and other industries.