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Empirical Investigation of Revenue Management Applicability - Thesis Example
Finance & Accounting
Pages 15 (3765 words)
Revenue Management in the Airline Industry I. Introduction It has always been business instinct to increase profitability with the utmost efficiency like in the way seasonal products are sold at higher prices when demand is at peak and at lower prices when there appears to be no demand for it at all…
American Airlines stated that revenue management aims to “maximize passenger revenue by selling the right seats to the right customers at the right time” (qtd. in Yu 69). However, not only did the RM concept spread like wildfire in the airline industry, it also garnered adequate reputation in other industries. Revenue management as it is applied can entirely aid in pricing decisions and optimize revenues. II. Historical Brief The law of supply and demand has always been institutional in the business literature and practice. Even as commerce started to flourish, merchants already had to make demand-management decisions specifically in terms of structure, pricing, and quantity in the hope of maximizing profit and avoiding loss (Talluri and van Ryzin 4). However the old idea of RM as businesspeople perceive it three decades ago until now is different in the sense that revenue management focuses on the way decisions are made through a technology-based system (not theoretical therefore) which should be more responsive to the uncontrollable and hardly predictable variables and constraints in a certain industry (Talluri and van Ryzin 4). The airline services sector was the first to employ the principle of revenue management. ...