Company Management Problems Faced By The Airline Industry

1491 Words6 Pages
Revenue management problems faced by the airline industry rely mostly on the sale of airline seats. This requires the development of a customer selection strategy that is revenue-based. Airline seats can be termed as "perishable" goods due to their nature of fluctuating value. If a seat remains unoccupied at the time of take-off then the total value of the perishable goods becomes zero. The airline industry caters to a variety of customers who have different needs, while irregular travelers, such as tourists, might not cancel their trips, travelling businessmen might want a flexible cancellation policy, these two different customer segments are, therefore, offered tickets at different fares in order to take advantage of customer…show more content…
This problem is usually resolved by the practice of overbooking. However, cancellations are also random. It is possible that a last minute cancellation may be for a flight, which may not be overbooked and result in an unoccupied seat. 2.3. Change in arrival rates with time: This means that various incentives regarding the pricing of seats are introduced by airlines. If a seat has been booked earlier, it is sold at lower rates as compared to peak selling times when seats are sold at high rates. These rates come down heavily at last minute bookings in order to compensate for unoccupied seats. 2.4. Concurrent arrivals of passengers: This means that passengers do not necessarily follow a schedule according to airline representative. Low-fare customers or random arrivals may arrive before a cancellation has been made. Overbooked customers may also arrive before a higher priority customer has arrived and may be denied service. These are situations that cannot be accurately speculated but can be controlled. The use of yield management system became more and more necessary especially in situations where high competition occurs even though the difficulties of its implementation and its complexity, yield management presents more advantages to airline companies, that use it, but the negative impact on the consumer generated by a non justified pricing differentiation should not be ignored. 1. Advantages: To obtain a maximum benefit, an

More about Company Management Problems Faced By The Airline Industry

Open Document