Revenue Management in the Airline Industry - Thesis Example

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Revenue Management in the Airline Industry

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. The efficiency of reservation control systems was based on quantitative researches which centered on “controlled overbooking” (McGill and van Ryzin 233). Overbooking depended on the probability of the number of passengers who shows up during boarding time (McGill and van Ryzin 233); and which is technically necessary in effort to replenish the could-be lost in revenues in case of cancellations or no-shows among passengers (Belobaba et al. 93).
In an industry with low marginal costs, fixed capacity, perishable product, irregular demand, and varied market segments such as the aviation industry, excess inventory may be minimized by forecasting through historical data in order to maximize revenues (Dunne and Lusch 42). ...
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The present research paper "Revenue Management in the Airline Industry" aims to discuss brief history of airline industry, its characteristic and describe revenue management techniques and methods in airline industry…
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