Yield Management in the Airline Industry

Abstract

"This is it! This is a shot across our bow! If we don't invent a way to deal with (yield management), we're history!" - Donald Burr, Former CEO of People's Express. Immersed in the age of the internet, most prospective travelers have searched for, and have purchased airline tickets online. In doing so, a varying range of prices and restrictions were inevitably discovered. One week, a roundtrip ticket on a given flight may be quoted at $280, a week later at $360, and a week prior to the flight, $840! The constant fluctuation in price is due to the practice of yield management, sometimes referred to as revenue management. The airline industry was the first to develop and implement this system, and its use has resulted in substantial revenue gains for the industry as a whole.

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