Airline network revenue management: Considerations for implementation

As airlines began forming hub-and-spoke networks, network-based revenue management (RM) systems have increased in overall importance. In an airline's quest to maximize system revenue, a network RM-based system differentiates between the local (using only one resource) and connecting or flow (using multiple resources) passengers. Although these systems are theoretically optimal, they are difficult to implement in practice directly. Implementation of such systems often requires assumptions that, when not correct, may lead to suboptimal decisions. This article is meant to highlight the major difficulties a practitioner may encounter during the transition to a network-based RM system. We begin with a brief overview of a common set of network-based RM models and then address three areas in which such a system may expose a carrier to revenue leakage, including: (i) forecasting, (ii) optimization and (iii) distribution. The aim of this article is to explain each of these areas and their respective difficulties with implementing a network RM system. Furthermore, we provide significant detail for each of the problem areas such that: (i) fellow researchers may consider these details when working within the field of network RM and (ii) practitioners may decide how to address such issues during the implementation of a network RM system within their organization.