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Research Topic
Revenue Management System In Airline Industry
Revenue Management (RM)
Introduction & Background
In the early 1970s, some airlines began offering restricted discount fare products that
mixed discount and higher fare passengers in the same aircraft compartments. For
example, BOAC (now British Airways) offered earlybird bookings that charged lower
fares to passengers who booked at least twenty- one days in advance of flight departure.
This innovation offered the airline the potential of gaining revenue from seats that would
otherwise fly empty; however, it presented them with the problem of determining the
number of seats that should be protected for late booking, full fare passengers. If too few
seats were protected, the airline would spill full fare passengers; if too many were
protected, flights would depart with empty seats. No simple rule, like protecting a fixed
percentage of capacity, could be applied across all flights because passenger booking
behavior varied widely with relative fares, itineraries, season, day of week, time of day,
and other factors. It was evident that effective control of discount seats would require
detailed tracking of booking histories, expansion of information system capabilities, and
careful research and development of seat inventory control rules.

Literature Review
Davis M 1994, yield management techniques are reportedly quite valuable. On an
estimate American airline made an extra $500 million per year based on its yield
management techniques. According to an estimate the pricing system used by American
airlines change the prices more then half a million per day.
Deneckere and McAfee 1996, Revenue management techniques provide tools to use
consumer surplus through dynamic pricing. Nevertheless there is little doubt that
dynamic price discrimination is economically important. The pricing system by most
major airlines is opaque to the customer. The only thigh which customer came to know
about the airline is the quality of service. By applying the dynamic pricing techniques and
by providing best services to the customer, airlines can increase the revenue and also the
loyalty of the customer to the brand.
Geraghty, Kevin 2004, Revenue management offered us a way to capture revenues that
were being left on the table. Revenue management implements the basic principle of
supply and demand economics in a tactical way to generate incremental revenues.
Airlines monitor through the use of specialized software how seats are being reserved and
react accordingly, for example by offering discounts when it appears as if seats will
otherwise be vacant. During peak season airline charge the passenger as much as they can
and offer products to those who are willing to pay more while in lean season various
marketing techniques like free companion scheme, discounted one way fares, returned

fares, excursion fares and basket scheme etc. are being offered by airline according to
their marketing model.
Andy Boyd,2003,One-way airlines segregate customers is by imposing advance
purchase requirements and Saturday night stays for cheap tickets. These restrictions act as
``gates'' that separate price-sensitive leisure travelers from time-sensitive business
travelers. The challenge for other industries is to find the right gates. The sensitivity of
demand can be controlled to some extent if an airline has a good no of loyal customers
and an ability to attract new customers even at the time of low demand.
Sengupta A,2006,Airlines that use revenue management periodically review
transactions for services already supplied and for services that are to be supplied in
future. They may review information such as past statistics, up coming events like sports,
holidays, festival or unexpected past events such as terrorist attacks and other information
SUCH as competitive information (including prices), seasonal patterns, and other
pertinent factors that affect sales. The success of an airline depends upon the capability
of the air line to forecast the future and deploy the maximum capacity on the routes with
comparatively high demand but by taking the cost of operation into consideration.
Belobaba 2003, Airline who is busy in maintaining its load factors by decreasing its fare
with analyzing that it can harm its future policies. These airlines are more susceptible to
go out of the picture. Revenue management system provides enables airlines to satisfy
customer and made profits to the greater possible extent without any lose of image.