Continuous pricing algorithms for airline RM: revenue gains and competitive impacts

Traditionally, airlines have been limited to a set of fixed fare classes and, in turn, price points, distribute their products. The advent IATA’s new distribution capability (NDC) will soon enable quote any from continuous range. In theory, such pricing could increase revenues by extracting more the consumer surplus, through its ability offer granular fares, closer customer’s willingness-to-pay (WTP). this article, we describe several algorithms that lead quotation single These either rely on traditional for purpose forecasting and optimization (class-based), or completely abandon notion classes, instead assuming different WTP distributions within each booking period prior departure (classless). We how these build upon differ RM counterparts. Performance heuristics is then benchmarked against class-based RM, competitive impacts are analyzed when adopted one airline asymmetrically both symmetrically hypothetical 2-carrier network passenger origin–destination simulator (PODS). find generally revenue-positive, revenue gains can be as high 2.0% first-mover reach up 1.2% adopt method. addition, show depend number structure used baseline, they smaller under lower demand-to-capacity ratios.