Deregulation in the Airline Industry (Unit 1.

1)

1. List three causes of deregulation in the North American airline industry.

Introduction of wide-body aircraft (increased airline capacity); increased fuel
costs; downturn in the economy.

2. What aspects of the airline industry continue to be regulated in most

countries? Circle all that apply.
(a) Domestic routes of national carriers.
(b) Domestic fare levels of national carriers.
(c) The cities foreign international carriers may serve.
(d) The number of flights foreign international carriers may operate within
a country.
(e) None of the above.

3. What were some effects of deregulation? Circle all that apply.

(a) Establishment of a more robust linear route system.
(b) Widespread expansion of hub-and-spoke networks.
(c) Decrease or elimination of service to smaller markets.
(d) Increased competition.
(e) Increased fares.
(f) Rapid growth in air travel.
(g) None of the above.

4. What is the term for strategically located airports used as transfer points for
passengers and cargo travelling between an immediate region and other
parts of the country or world?
(a) Banks.
(b) Hubs.
(c) Networks
(d) Spokes.
(e) None of the above.

5. List two advantages of establishing hub-and-spoke networks.

Allow airlines to expand into new markets; higher load factors on flights to
and from small cities.

6. Write the missing words in the spaces provided.

From the traveller's perspective, the most important consequence of
deregulation and increased competition in the airline industry was the
introduction of Discount fares.

7. True or false. Most of the tickets sold by US airlines are discounted.

(a) True.
(b) False.
8. Describe how frequent flyer programs work.
Customers enrolled in the program are credited with points for every mile
flown with the airline. They must accumulate a certain number of points to
claim rewards such as free tickets and upgrades.

Why Do We Need Revenue Management? (Unit 1.2)

1. Explain what is meant by perishable capacity.

If an aircraft departs with empty seats, the opportunity to earn money for
those seats is lost forever. The airline's product, an airline seat, is wasted
or perishes if not sold at flight departure.

2. Explain what is meant by fixed capacity.

For airlines, capacity, or the number and size of aircraft, is basically fixed.
They can increase their capacity by acquiring new aircraft, but this process
can take a few years. In the meantime, individual airlines have to work with
a given number of aircraft and aircraft seats. Aircraft capacity is fixed

3. What are the usual characteristics of seasonal variations in demand for air
travel? Circle all that apply.
(a) Consumer demand increases during the off-peak season.
(b) Demand often exceeds capacity during the off-peak season resulting
in potential customers being turned away.
(c) Consumer demand is at its highest during the shoulder season.
(d) Consumer demand decreases during the peak summer season.
(e) None of the above.

4. Define variable pricing and explain why it is used in the airline industry.
Variable pricing means that airlines charge different prices for seats in the
same cabin to appeal to different types of customers. By varying the
availability of these different prices, airlines influence demand. They make
more discount seats available to increase demand during low demand
periods. Conversely, they limit the availability of discount seats to reduce
demand during high demand periods. When demand exceeds capacity,
airlines can sell a higher percentage of seats at higher prices to customers
who are willing to pay these prices.

5. What are typical characteristics of the market segment made up of

business travellers? Circle all that apply.
(a) May need to purchase or cancel the airline seat at the last minute.
(b) Willing to pay a higher price for a premium product.
(c) Very willing to modify the time or date of departure to secure a better
price.
(d) None of the above.
6. True or false. Business travellers are generally more price-sensitive than
leisure travellers.
(a) True.
(b) False.

7. What term is used to describe a situation where an airline sells too many
discount seats, a flight is sold out well in advance of departure, and last-
minute, high-value customers are turned away?
(a) Denied boarding.
(b) Spill.
(c) Spoilage.
(d) Stifle.

Airline Reservations and Product Distribution (Unit 1.3)

1. Write the missing words in the spaces provided.

Airlines need to distribute schedule, product and price information to their
potential customers.

2. What are the traditional means of airline product distribution? Circle all that
apply.
(a) Airline reservation systems.
(b) Global distribution systems.
(c) Travel websites on the Internet.
(d) Individual airline websites.
(e) None of the above.

3. What type of company takes pricing information, including various

purchase and travel restrictions, from different airlines and reformats it for
distribution to the global distribution systems (GDSs)?
(a) Traditional travel agency.
(b) Online travel agency.
(c) Global distribution system.
(d) Fare distribution company.
(e) None of the above.

4. What information can airline agents access on their own computer

reservation systems? Circle all that apply.
(a) Schedules.
(b) Prices.
(c) Aircraft configuration.
(d) Seat allocations.
(e) Current bookings.
(f) Remaining seats available for each fare product.
(g) None of the above.
5. List two examples of global distribution systems.
Sabre, Galileo, Worldspan, Amadeus, Abacus, TravelSky, etc.

6. How has the Internet affected the airline industry

Alternative means of ticket distribution; increased competition; more
transparent airline pricing; better informed customers; elimination of
geographical boundaries (global reach)

Airline Travel Demand (Unit 2.1)

1. What will understanding the characteristics of passenger demand and its

variations help you do? Circle all that apply.
(a) Control unpredictable variations in demand.
(b) Better predict future demand.
(c) Take measures to influence demand.
(d) Maximise revenue.
(e) None of the above.

2. List four factors that influence passenger demand for air travel.
Different seasons; time-of-day and day-of-week; holidays and special
events; natural disasters, weather, war, and acts of terrorism; economic
conditions; schedule changes; time of booking; price

3. True or false. Group bookings tend to be made well in advance of the

departure date. There can be significant attrition in group bookings.
(a) True.
(b) False.

4. What factors causes variations in demand that are predictable?

Circle all that apply.
(a) Acts of terrorism.
(b) Peak summer season.
(c) Time-of-day or day-of-week.
(d) Natural disasters.
(e) Holidays or special events.
(f) None of the above.

5. Define a passenger no-show and describe problems associated with

no-shows and cancellations.
A no-show refers to a customer who has booked a seat in advance but
does not show up to board the flight. If the airline is unable to re-sell a seat
that is empty due to a no-show or last-minute cancellation, the seat will fly
empty and the opportunity to earn incremental revenue for the seat will be
lost.
6. Explain what is meant by the price elasticity of demand.
The price elasticity of demand is the relationship between the price offered
and the quantity demanded. Generally speaking, demand for an airline
seat increases as the price decreases.

7. Write the missing word in the space provided.

Generally speaking, as the price of an airline seat increases, the demand
for that seat Decreases.

Demand Strategies (Unit 2.2)

1. How can airlines improve their reservation or waiting list systems to

maximise revenue when there is excess demand for a flight? Circle all that
apply.
(a) Give customers seeking low fares higher priority in the reservation system.
(b) Inform customers seeking low fares of other flight options.
(c) Employ a system that overrides the waiting list order for higher-paying
customers.
(d) Ensure that the reservation and waiting list systems are operating
efficiently so that potential customers avoid long waiting times.
(e) None of the above.

2. List four marketing variables (the “four Ps”) airlines can adjust to influence
demand.
Price; product; place; promotion

3. What is the term for the percentage of people flying in a market who chose
to fly a given airline?
(a) The airline's market niche.
(b) The airline's market segmentation.
(c) The airline's market size.
(d) The airline's market share.
(e) None of the above.

4. In what circumstance might an airline have maintained its market share but
experienced a decrease in its market size? Circle all that apply.
(a) Due to an economic turndown, the total number of people flying is reduced.
(b) The airline has lost customers to its competitor but the total number of
people flying has increased.
(c) The airline has captured some of its competitors' customers by reducing
fares however, the total market size has decreased.
(d) None of the above.

5. True or false. An airline that targets higher-paying business travellers may

achieve higher yields than a low-cost carrier even if their passenger loads
are lower than those achieved by a low-cost carrier.
(a) True.
(b) False.

Forecasting Demand in a Airline Industry (Unit 2.3)

1. What will more accurate forecasts of passenger demand help an airline

do? Circle all that apply.
(a) Make better seat allocation decisions.
(b) Increase stifle and spill.
(c) Determine the optimal use of available aircraft capacity across the network.
(d) Determine which prices to adjust and when.
(e) None of the above.

2. Describe how airlines forecast passenger demand.

Airlines use historical booking data to predict future demand. This data is
subjected to statistical analysis to determine the probability of different
levels of demand in the future.

3. Why do airlines need to cluster data by specific time periods when

analysing historical demand? Circle all that apply.
(a) There is great variation in seasonal demand.
(b) Demand can vary by time of day.
(c) Demand can vary by day of week.
(d) Airlines want to make precise demand forecasts for specific time periods.
(e) None of the above.

4. Write the missing words in the spaces provided.

A normal distribution curve with a particular mean and standard deviation,
sometimes referred to as a bell curve, is used to determine probability.

5. Write the missing word in the space provided.

Pooling together and analysing historical data on demand for an entire year
would produce a distribution curve with a very large standard deviation.

6. True or false. Since advanced revenue management systems can

accurately forecast future demand, the role of the revenue analyst is now
obsolete.
(a) True.
(b) False.

7. What generation of computerised revenue management systems

described in module 2 was the first to incorporate automated monitoring
capabilities that could alert the revenue analyst of potential problems?
(a) First generation.
(b) Second generation.
(c) Third generation.
(d) Fourth generation.
(e) Fifth generation.
(f) None of the above.

8. Write the missing words in the spaces provided.

The task of accurately forecasting demand is easier if all departments work
together. People who are closer to the customer, the marketplace and the
economic trends can contribute to the organisation's understanding of future
challenges and opportunities.

Airline and Customer Costs (Unit 3.1)

1. True or false. Variable costs remain the same regardless of the number of
passengers accommodated on a flight.
(a) True.
(b) False.

2. What cost(s) is(are) considered to be a variable airline cost? Circle all that
apply.
(a) Fuel.
(b) Take-off and landing fees.
(c) Block hour costs.
(d) Pilot's salary.
(e) None of the above.

3. List various costs that passengers incur while obtaining and utilising air
travel.
Costs associated with travel to the airport and parking; time and effort
associated with investigating flight options and purchasing an airline seat;
psychological burdens associated with flying; sensory burdens associated
with the discomfort of travelling.

4. What cost(s) is(are) considered to be a non-monetary cost of air travel for

the passenger? Circle all that apply.
(a) Cost of travel to the airport.
(b) Cost of parking.
(c) Time involved in investigating options and purchasing an airline seat.
(d) Stress of flying.
(e) Discomfort of waiting for a flight.
(f) None of the above.
5. List measures airlines can take to reduce non-monetary passenger costs.
Reducing the time and effort involved in the purchase, delivery, and
utilisation of a service; eliminating unnecessary physical effort; minimising
psychological burdens; decreasing the unpleasant sensations people may
encounter during travel.

The Price-Demand Relationship and Inventory Control (Unit 3.2)

1. Write the missing words in the spaces provided.

Differential pricing, also called variable pricing, is used by airlines
to provide products (tickets for air travel) at different prices that will appeal
to different market segments and control demand or flights.

2. What is the term for dividing customers into groups with common
requirements and characteristics?
(a) Market niching.
(b) Market segmentation.
(c) Market sizing.
(d) Market sharing.
(e) None of the above.

3. List at least three of the six traditional fare categories or air travel market
segments discussed in module 3.
1) One-way business class fares; (2) fully flexible fares; (3) unrestricted,
discounted, one-way, walk-up fares; (4) restricted, deeply-discounted, one-
way fares; (5) restricted, discounted, round trip, minimum Saturday night
stay; (6) restricted, deeply-discounted, round trip, tactical sell-off fares

4. What is the term used in module 3 to describe a change in demand in

response to a change in price?
(a) Demand elasticity.
(b) Market elasticity.
(c) Price elasticity.
(d) Demand segmentation.
(e) Market segmentation.
(f) Price segmentation.
(g) None of the above.

5. In which of the following market segments would a change in price have

the most impact on demand?
(a) Business class fares.
(b) Fully flexible fares.
(c) Discounted round trip fares.
(d) None of the above.
6. List three disadvantages of variable pricing.
Customer resentment at not being eligible for the lower priced fare;
customer perceptions that fare rules and restrictions are too cumbersome;
increased competition and weakened competitive position as the result of
competitor price reductions

7. What is the term used in module 3 for the restrictions or requirements that
customers must meet in order to qualify for certain low-priced tickets?
(a) Fences.
(b) Hoops.
(c) Incentives.
(d) Obstacles.
(e) None of the above.

8. What is an example of a non-physical fence? Circle all that apply.

(a) Advance purchase requirements.
(b) Minimum stay requirements.
(c) Customer age requirements (e.g., adult, child, or senior).
(d) Service categories (leisure class or business class).
(e) Cancellation and change penalties.
(f) None of the above.

9. Describe the basic goal of revenue or inventory management.

The basic goal is to maximise revenue by obtaining the optimal mix of
passenger types on each flight departure using a differential pricing
strategy. The seat allocations at different prices are based on
understanding the requirements of the different customer segments,
historical demand, and current market conditions. Revenue analysts
monitor sales and update seat allocations in response to current demand
and availability.

Pricing Strategies (Unit 3.3)

1. List some of the factors that airlines consider when determining ticket
prices.
Cost of providing the service; ceiling price for each market segment;
competitors' prices and market positioning; economic conditions; customer
behaviours.

2. List the three basic pricing strategies used by airlines.

Cost-based pricing; competition-based pricing; value-based pricing.

3. What pricing strategy is an airline using when its ticket prices are
determined primarily by customer perceptions of the benefits and service
level being provided?
(a) Competition-based pricing.
(b) Cost-based pricing.
(c) Value-based pricing.
(d) None of the above.

4. Describe the impact of the Internet on pricing in the airline industry.

Increases pressure on airlines to offer competitive prices; makes it more
difficult for airlines to monitor their competitors' online prices.

5. What is an example of a company mentioned in module 3 that monitors

online pricing and sells this and other competitive marketing intelligence to
airlines? Circle all that apply.
(a) ATPCO.
(b) QL2.
(c) Infare
(d) SITA.
(e) None of the above.

6. List two new pricing or marketing opportunities enabled by the Internet.

Airlines can do one-to-one marketing with individual customers or groups
of customers via email; customers can buy unbundled product attributes à
la carte when purchasing a ticket on some airline websites.

What are Booking Classes (Unit 4.1)

1. What are booking classes? Circle all that apply.

(a) Special categories within a computer reservation system to which
different fare products are assigned.
(b) Rules and restrictions associated with different fare products.
(c) Different sections of an aircraft cabin corresponding to different fare
products.
(d) None of the above.

2. Describe how the use of booking classes in airline reservation systems has
evolved.
Airlines initially had just two booking classes, one for each cabin in the
aircraft. With the introduction of discount fares and increased market
segmentation, airlines increased the number of fare products and
expanded their reservation systems to handle a larger number of booking
classes. Computerised revenue management systems were developed to
optimise the seat allocations in each booking class.
 Booking Class Basics (Unit 4.2)

1. What is the main criterion used in the assignment of fare products to a

hierarchy of booking classes?
(a) Cabin of the aircraft.
(b) Cancellation policy.
(c) Minimum stay requirements.
(d) Yield.
(e) None of the above.

2. Write the missing words in the spaces provided.

The different fare products should be assigned in the hierarchy of booking
classes so that their average - value falls within the fare - range of the class
in question. The fare products are then distinguished by fare basis codes
based on their booking class.

3. What type of restrictions would most likely be associated with a first class
fare product in the highest booking class? Circle all that apply.
(a) 3–7 day advance purchase.
(b) Minimum Saturday night stay.
(c) Cancellation penalty.
(d) Non-refundable.
(e) None of the above.

4. What type of service attributes would most likely be associated with a

first class fare product in the highest booking class? Circle all that apply.
(a) Coach cabin service.
(b) Wider seats.
(c) Business lounge access.
(d) Priority check-in.
(e) None of the above.

5. Describe a problem associated with booking class assignment, the

possible causes, and the effect on revenue management.
Problems arise when the fare product values in a given booking class do
not fall within the expected value range for that class. This can be due to
poor communication and coordination between different groups within the
airline. For example, the sales department often wants to assign
discounted products to higher booking classes than warranted for the
purpose of increasing availability for the products. Because seat allocation
optimisation models built into computerised revenue management systems
assume the airline's fare products have been assigned correctly, the result
may be booking class seat allocations that do not maximise revenue.
 Booking Class Structures (Unit 4.3)

1. What are the two main booking class structures or control types used to
manage seat availability?
(a) Hybrid control.
(b) Independent control.
(c) Nested control.
(d) Parallel control.
(e) None of the above.

2. True or false. Independent booking class control is the control structure

used by most airlines.
(a) True.
(b) False.

3. Write the missing words in the spaces provided.

Serial or Linear nesting of booking classes relates nested classes to each
other in a structure. Each booking class is given access to the seat seat
inventories in the classes below.

4. Assume an example with a 100-seat aircraft and 20 seats assigned to each

of 5 booking classes. From the highest-to lowest-value booking class,
these 5 classes are Y, M, B, H, and V. With an independent control system
used to manage inventory, how many seats are initially allocated in M
class?
(a) 100
(b) 80
(c) 60
(d) 40
(e) 20
(f) None of the above

5. Assume an example with a 150-seat aircraft and 30 seats assigned to each

of 5 booking classes. From the highest-to lowest-value booking class,
these 5 classes are Y, M, B, H, and V. With a linear nested control system
used to manage inventory, how many seats are initially allocated in B
class?
(a) 150
(b) 120
(c) 90
(d) 60
(e) 30
(f) None of the above
6. True or false. Allocating seats in a descending fashion using a nested
booking class structure helps maximise the flight'
s revenue potential.
(a) True.
(b) False.

7. What is true of parallel nesting? Circle all that apply.

(a) Relates nested classes to the base class, but not to each other.
(b) Allows lower-value nested classes to remain open while higher-value
nested classes are closed.
(c) The full-fare base class has access to the entire inventory of seats in
the cabin and remains open until every seat has sold.
(d) None of the above.

8. When might an airline use a hybrid nesting approach to manage booking

classes?
Since the Internet has gained popularity as a distribution channel for airline
bookings, a hybrid nesting structure has emerged to help manage
inventory somewhat differently across different distribution channels.

Seat Allocation per Booking Class(Unit 5.1)

1. Describe the benefits of effective discount seat allocation control.

If no inventory controls are in place, early demand for lower-value booking
classes on a flight may lead to spill. This results when later demand for
higher-value classes is turned away. Demand is turned away when seats
have already been sold at discount fare levels. Although the flight is sold
out, the revenue potential is not realised. If more seats had been protected
for customers willing to pay a higher fare, the revenue generated for the
flight would have been higher. Discount seat allocation control helps to
increase or maximise revenue by filling flights with the most profitable mix
of customers.

2. Write the missing words in the spaces provided.

Discount seat allocation control involves determining the Optimal seat
allocations or authorised selling leves for each booking class based on the
best forecasts of passenger demand .If done well, this process will help
increase revenue by avoiding revenue dilution spill, and stifle.

3. What factors might a revenue analyst take into consideration when

adjusting seat allocations per booking class on a particular flight? Circle all
that apply.
(a) Historical booking class data for that flight.
(b) Historical load factor data for that flight.
(c) Historical booking data for other flights on the same type of aircraft.
(d) Computer generated forecasts of customer demand.
(e) Current economic conditions.
(f) Fixed costs including aircraft fuel.
(g) None of the above.

4. Match each generation of revenue management system (RMS) described

in module 5 with its innovation.
First generation - Database management system; Second generation -
Automated monitoring capabilities; Third generation - Fully automated
booking limit systems; Fourth generation - Network optimisation

Revenue Management Systems Approach to Seat Protection (Unit 5.2)

1. What is the basic concept used by revenue management system (RMS)

optimisation models to determine booking class seat allocations?
(a) Authorised revenue levels.
(b) Anticipated revenue dilution.
(c) Expected marginal seat revenue.
(d) Incremental revenue protection.
(e) None of the above.

2. What is EMSR and how is it calculated?

EMSR, or expected marginal seat revenue, is the revenue expected when
an incremental booking is accepted in a particular booking class. To
determine the EMSR, multiply the probability of getting the booking by the
average fare value in the class.

3. If the probability of booking the next seat in a booking class is 50 percent

and the average fare in the booking class is $400, what is the EMSR?
(a) $800.
(b) $600.
(c) $400.
(d) $300.
(e) $200.
(f) $100.
(g) None of the above.

4. Write the missing words in the spaces provided.

Revenue management systems begin by forcasting the expected demand for
each class on each flight leg by applying statistical models to historical
booking data for the same class. The RMS enters the demand forecasts into a
seat allocation optimisation model. The model uses EMSR analysis to
determine protection levels for nested booking class structures. The
protection level in each class is determined by the expected marginal
revenue of an incremental booking in that class.

5. What is the basic approach to calculating the number of seats to protect

in each nested booking class once you know the EMSR for each incremental
seat?
Decide whether or not to protect a seat in a class for each incremental
booking based on its EMSR. This is done by comparing the EMSR value to
the fare range of the class.

6. When should you protect a seat in a given booking class? Circle all that
apply.
(a) If the EMSR equals the average fare for the booking class in question.
(b) If the EMSR falls into the value range between the average fare of the
booking class and the average fare of the class below it.
(c) If the EMSR is greater than or equal to the average fare for the booking
class immediately above the class in question.
(d) None of the above.

7. True or false. In a nested booking class hierarchy, the protection numbers

for each class also include the seats allocated to the classes below it.
(a) True.
(b) False. (allocation numbers, not protection numbers, for each class the
allocations for the classes below)

8. When might an airline choose to override recommended seat allocations?

Circle all that apply.
(a) When demand forecasts are low.
(b) When demand forecasts are high.
(c) When capacity has been guaranteed for the redemption of frequent flyer
points.
(d) When there are staff travel needs.
(e) When there are commitments to wholesalers and consolidators.
(f) None of the above.
 Revenue Optimisation and Seat Inventory Control (Unit 5.3)

1. What terminology is used to designate a specific market between two

cities? Circle all that apply.
(a) City pair.
(b) Leg.
(c) Segment.
(d) Origin and destination.
(e) None of the above.

2. Write the missing words in the spaces provided.

If a passenger's outbound or return itinerary involves a single aircraft that
lands at one or more airports along the way where other passengers can
embark or disembark, each take-off and landing or “hop” constitutes a leg of
the flight. If, on the other hand, a passenger's itinerary involves transferring
from one aircraft to another at a hub or connection point , the portion of the
itinerary involving each separate aircraft is referred to as a segment of the
trip.

3. According to module 5, by what percentage has traditional revenue

management using leg-based seat inventory control been estimated to
increase airline revenue?
(a) 1 to 2 percent.
(b) 4 to 6 percent.
(c) 5 to 8 percent.
(d) 8 to 12 percent.
(e) None of the above.

4. True or false. Maximising revenue on flight legs independently ensures

that an airline has maximised revenue over the network as a whole.
(a) True.
(b) False.

5. True or false. A revenue management system using leg-based seat

inventory control would be able to discern when it would be beneficial to
accept a lower class passenger travelling on a multi-leg through flight
instead of a higher class passenger travelling on a single-leg flight.
(a) True.
(b) False.

6. What type of seat inventory control would take the revenue contribution
of a passenger's entire origin and destination (O&D) itinerary into
consideration and maximise revenue over the entire network of flights?
Circle all that apply.
(a) Leg-based control.
(b) O&D-based control.
(c) Partial O&D seat inventory control.
(d) Segment controls.
(e) None of the above.

7. True or false. For a passenger wishing to book an itinerary that requires a

connection between two or more flights, the availability of seats in any
booking class over the itinerary is limited by the least number of seats on
any single flight leg in that itinerary.
(a) True.
(b) False.

8. Give two examples of limitations to leg-based seat inventory control

when connecting flights are involved.
Leg-based seat inventory control cannot discern whether there is a greater
total network revenue potential by accepting a lower booking class request
on a multi-leg itinerary compared to accepting a higher booking class
request on a single-leg (local) itinerary; leg-based seat inventory control
cannot discern whether it should give preference to two single-leg requests
over a multi-leg request when each of the requests involve the same
booking class.

9. List three approaches to O&D seat inventory control.

“Greedy” approach; displacement adjusted virtual nesting approach; bid
price control approach

Why do Airlines Overbook Flights (Unit 6.1)

1. What is spoilage? Circle all that apply.

(a) The situation resulting from spill.
(b) Passengers denied boarding due to overbooking.
(c) Seats that fly empty due to passengers who do not show up at
departure to board the flight.
(d) Seats that fly empty due to last-minute cancellations.
(e) None of the above.

2. What is the term for being turned away from a flight even though you
have a confirmed reservation?
Denied boarding

3. According to module 6, what percentage of seats on their sold-out flights

in 1990 did American Airlines estimate would be empty if the airline only
booked to capacity?
(a) 5%.
(b) 10%.
(c) 20%.
(d) 30%.
(e) None of the above.

4. What is overbooking and why is it practiced by many airlines?

Overbooking involves accepting more bookings than the aircraft can
actually accommodate. It is done to minimise the revenue loss when seats
fly empty due to passenger no-shows and last-minute cancellations. An
authorised selling level is established that compensates for the number of
seats expected to be spoiled due to no-shows.

5. Write the missing words in the spaces provided.

If an airline overestimates the passenger no-shows and sets the authorised
selling level; too high, there will not be enough seats on the aircraft to
accommodate all the passengers. Some of the passengers will have to be
bumped or denied boarding. Denied boardings can be voluntary or
involuntary depending upon the circumstances. Most airlines will attempt to
identify passengers who volunteer to be bumped before identifying those
who will be denied boarding involuntarily. In both cases, passengers
receive financial compensation.

6. What are examples of tangible costs associated with overbooking? Circle

all that apply.
(a) Customer ill will.
(b) Direct financial compensation.
(c) Flight vouchers for future travel.
(d) Meal, hotel and transfer costs.
(e) Loss of passenger loyalty.
(f) Damage to the airline's image in the eyes of the public.
(g) Cost of a ticket on a competitor's flight.
(h) None of the above.

7. True or false. Seat inventory control determines the appropriate

allocation
of seats among the various fare classes, or the authorised selling levels
per booking class. The practice of overbooking determines the authorised
selling levels for a cabin. The amount of revenue lost due to spoilage can
be substantial, and because of this overbooking is an essential part of
revenue management.
(a) True
(b) False
 How Do You Set Overbooking Limits (Unit 6.2)

1. Explain how to calculate show and no-show rates.

The show rate is calculated by dividing the number of passengers who
show up at the airport on time to board the flight by the number of
passengers booked prior to departure. Multiply this number by 100 to
express the show rate as a percentage. The no-show rate is calculated by
subtracting the show rate from 100%.

2. True or false. Each booking class may have distinct no-show behaviour
based on the passenger segment characteristics. The expected
compartment show rate is the weighted average of the booking class show
rates.
(a) True.
(b) False.

3. What is involved in determining optimal overbooking rates? Circle all that

apply.
(a) Analyse historical data to forecast no-show rates for the flight.
(b) Calculate expected opportunity costs.
(c) Determine denied boarding costs associated with each booking level.
(d) Set an optimal overbooking rate that will minimise spoilage costs.
(e) None of the above.

4. List four factors that impact the cost of overbooking.

Flight frequency; flight departure times; competitor scheduling; equipment
size; day of week; special travel periods

5. What factors may increase the risk of overbooking? Circle all that apply.
(a) Frequent flights.
(b) Later departure times.
(c) More competition in the market.
(d) Less busy day of week.
(e) Special events and peak travel periods.
(f) Larger aircraft size.
(g) Less premium cabin space availability.
(h) High average revenue per passenger.
(i) High no-show and cancellation rates.
(j) None of the above.

6. What overbooking strategy would an airline most likely use based on the
following factors: low-frequency service, last flight, expensive protection,
high denied boarding cost and low spoilage cost?
(a) Aggressive overbooking.
(b) Medium overbooking.
(c) Conservative overbooking.
(d) None of the above.

7. List possible effects of overbooking on airline operations.

Overbooking may increase operational problems and costs associated with
denied boardings due to departure delays, passenger rollovers onto
alternate flights, and related staffing issues.

8. What steps can airlines take in advance to better handle operational

problems associated with overbooking? Circle all that apply.
(a) Plan for denied boardings by preparing advance booking reports and
addressing staffing issues.
(b) Establish policies with regard to the qualifications for voluntary versus
involuntary denied boarding as well as the appropriate compensation
methods and amounts for each.
(c) Assist airport operations in developing rules for blocking space,
overbooking, and flight delays.
(d) Develop and implement revenue management departmental
procedures for handling problems.
(e) None of the above.

Other Overbooking Measures and Considerations (Unit 6.3)

1. Describe the problems associated with pre-departure cancellations.

Booking attrition due to pre-departure cancellations during the booking
cycle can result in spoilage. A flight may sell out well in advance of the
departure date. Due to net cancellations after this date, however, the flight
may reopen. When this occurs, it may be too late for customers to seats at
a discounted price. It may also be too late to realise demand that existed
earlier in the booking cycle due to characteristic booking patterns
associated with the market involved. The flight, therefore, may depart with
spoiled seats.

2. According to module 6, what term is used to designate the strategy used

by airlines to compensate for pre-departure cancellations?
(a) Attrition.
(b) Decrement.
(c) Group management.
(d) Upgrading.
(e) None of the above.

3. Why would an airline increase the authorised selling level (AU) by the
number of net pre-departure cancellations that have occurred in the past?
(a) To compensate for the cancellations.
(b) To compensate for passenger no-shows.
(c) To prevent the flight from closing prematurely.
(d) To stimulate demand for the flight.
(e) To prevent turning away demand that can be accommodated later in
the booking cycle given the cancellation rate.
(f) None of the above.

4. Define multi-cabin upgrading.

Multi-cabin upgrading is a virtual exchange of seats between cabins used
to accommodate excess demand in a lower cabin when seats are available
in the higher cabin and the probability of selling these seats is low. If the
flight oversells, passengers from the lower cabin can be accommodated in
the higher cabin.

Group Travel (Unit 7.1)

1. True or false. The pre-departure cancellation behaviour of groups is

distinctive.
(a) True.
(b) False.

2. Identify the two basic categories of group travel and give examples of
each.
Ad hoc groups involve individual requests, usually from travel agents. Ad
hoc groups are typically travelling to special events or occasions. Program
(series) groups involve requests for blocks of seats on a series of flights
over a period of time. These requests are typically made by travel agents,
tour operators, and wholesaler-consolidators and the seats are resold to
the end customers as part of comprehensive travel packages.

3. What is characteristic of group travel? Circle all that apply.

(a) Book blocks of seats early in the booking cycle.
(b) Book seats later than individual travellers.
(c) High pre-departure cancellation rates.
(d) High yield traffic; generally book in higher booking classes.
(e) None of the above.

4. What are the primary risks of booking groups early in the booking cycle?
Groups may displace individual high-yield customers because they
typically book earlier in the booking cycle. If a group cancels a large portion
of their seats prior to departure and late in the booking cycle, the airline
may have difficulty reselling the seats.
 Group Request Evaluation (Unit 7.2)

1. What is group evaluation?

Group evaluation is the process that results in either accepting or denying
a group request for seats. It involves determining a minimum acceptable
fare for a group of a given size.

2. Who might participate in group evaluation? Circle all that apply.

(a) Agents at a centralised group desk.
(b) Agents in the airline's local sales offices.
(c) Revenue analysts or route controllers.
(d) A group department within revenue management.
(e) None of the above.

3. What information can a computerised group revenue management

system(GRMS) provide?
A GRMS is designed to work in concert with the main revenue
management system. It tracks group activity and can provide reports on
seat utilisation patterns (a function of pre-departure cancellations) for
specific clients.

4. What do airlines use expected marginal seat revenue (EMSR) analysis to

determine? Circle all that apply.
(a) Line decrement.
(b) Displacement cost associated with a group booking request.
(c) Projected attrition rate of group bookings.
(d) Protection levels for each booking class on a fight.
(e) New authorised selling levels to compensate for passenger no-shows.
(f) None of the above.

5. True or false. The EMSR is determined by dividing the statistical

probability
of a booking by the average value of fare products in that class.
(a) True.
(b) False.

6. True or false. The average displacement cost per seat is determined by

dividing the total cost of displacing individual customers yet to book by the
total number of seats requested.
(a) True.
(b) False.

7. What factor affects the amount of displacement? Circle all that apply.
(a) Group size.
(b) Group's projected attrition rate.
(c) Desired itinerary (day of week and time of day).
(d) Current bookings on the flight(s).
(e) None of the above.

8. Describe how to use authorised selling levels to determine the best price
for a group of a given size.
Compare the group size to the seat allocation levels for each booking class
on the flight. The lowest price is that offered in the lowest class with a seat
allocation level equal to or greater than the group size.

9. Suggest two strategies for lowering the price for a group of a given size.
The group may consider booking on an alternative, lower demand flight
because, more often than not, a larger number of seats will be allocated in
lower booking classes. It may be possible to accommodate the group in a
lower booking class and, therefore, lower the price. Also, the group may
consider splitting into two smaller groups and fly on different flights. With a
smaller group size on each flight, the group may fall within the seat
allocation number in a lower booking class and, therefore, lower its price.

Group Attrition (Unit 7.3)

1. According to module 7, what percentage of group bookings made a year

in advance have traditionally remained in place at the end of the booking
cycle?
(a) 95%.
(b) 85%.
(c) 75%.
(d) 65%.
(e) None of the above.

2. Why do group bookings have high cancellation rates?

Many group bookings are speculative. A tour operator may book a large
quantity of inventory but cancel many of these bookings if tour sales do not
meet initial expectations.

3. List three factors that may affect group seat utilisation patterns.
Proximity to the date of departure; customer type or market segment; origin
and destination (O&D) market and point of sale; time of day, day of week
and period of travel

4. True or false. The length of time between booking and departure is

clearly an important factor in the utilisation behaviour for group clients. The
closer the bookings occur relative to the time of departure, the greater the
likelihood of a higher, more predictable utilisation rate.
(a) True.
(b) False.

5. What is the term used for the characteristic pattern associated with group
cancellation behaviour and to what can it be attributed?
Step decrement - Travel agencies, tour operators, and wholesaler-
consolidators who book large quantities of inventory very early in the
booking cycle will decide over time that they do not need all of the seats. At
various points in the booking cycle they will cancel whole blocks of seats at
one time. Designated firming periods in their contracts with the airlines also
contribute to this step decrement pattern.

6. Write the missing words in the spaces provided.

The attrition pattern associated with individual pre-departure cancellations
is referred to as line decrement. As individuals cancel, the number of
bookings drops gradually over time. In contrast, when groups cancel
bookings they cancel whole blocks of seats at a time, causing the number of
bookings to drop abruptly by a large number. This is referred to as step
decrement.

7. What steps can an airline take to compensate for group seat utilisation
patterns? Circle all that apply.
(a) Allocate additional seats to the lower booking classes to accommodate
group requests.
(b) Make additional seats available for sale as early as possible in the
booking cycle.
(c) Access historical performance data on group clients.
(d) Restrict the percentage of seats on a flight that can be used for
programme groups.
(e) Adjust the overbooking profile to reflect the group's expected utilisation
rate and pattern of cancellation.
(f) None of the above.

8. Define group evaluation hedging.

Group evaluation hedging is an approach to group evaluation that
calculates a flight's remaining seat availability using the number of seats
that are expected to be used instead of the actual number of seats that are
requested.

9. Write the missing words in the spaces provided.

Hedging bases seat availability on the number of expected seats the group
will use instead of the actual number of seats requested by the group. By
collecting and maintaining. Accurate historical utilization data , revenue
analysts have the information needed to apply techniques that compensate
for predictable group attrition and help maximise potential for the revenue
airline.

Airline Scheduling Process (Unit 8.1)

1. According to module 8, what three airline departments form a revenue

management triangle?
Pricing, inventory control, and scheduling

2. Why is scheduling important to an airline?

An airline's flight schedule defines its core product. Airlines need to ensure
that the right capacity is assigned to the right markets at the right times in
order to attract as many customers as possible and maximise profitability.

3. Identify at least two external factors discussed in module 8 that may

affect the development and management of an airline schedule.
Airlines need to monitor a wide range of opportunities and threats in the
marketplace during the development and management of a schedule. They
need to be ready to adjust capacity in response to external influences such
as changes in anticipated customer demand, special events, economic
upturns or downturns, natural disasters, pandemics, terrorism, and war.

4. True or false. Since most major airlines operate extensive hub-and-spoke

networks, it is important to adopt a leg-based perspective when developing
and optimising airline schedules. This perspective will help airlines
maximise revenue.
(a) True.
(b) False.

5. What is a schedule bank?

Schedule banks are specific time periods at a hub airport during which a
large number of arrivals and departures are timed to connect with each
other.

6. Write the missing words in the spaces provided.

Schedule banks are specific time periods at a hub airport during which a
large number of arrivals and departures are timed to connect with each
other. This coordination of arrivals and departures is done to maximise
connection opportunities. When developing and optimising schedules,
airlines need to consider the
revenue opportunities associated with new routes, different connectiong
opportunities, and different hub orientations. Revenue analysts and route
controllers need to understand the major schedule banks operating in their
markets.

7. What is the chronological order of the three main phases involved in

airline scheduling as described in module 8?
(a) Schedule development, network planning, and capacity adjustment.
(b) Schedule development, capacity adjustment, and network planning.
(c) Capacity adjustment, schedule development, and network planning.
(d) Network planning, schedule development, and capacity adjustment.
(e) None of the above.

8. Match the timeline, responsibilities, and groups involved during each

phase of airline schedule design and management.
Timeline Responsibility Group
Long term Strategic planning Top level management
Medium term Schedule design Network planning group
Short term Management Current schedule group

9. What questions might be considered during the fleet planning and

network designing process?
What are the financial implications of adding or deleting O&D markets?
What aircraft should we add to the fleet and where should we deploy them
to generate the most profit? Should we purchase or lease new aircraft and
how should these acquisitions be financed? What additional revenue
opportunities or threats should we consider at this point in time? What are
our budgets and financial targets?

Schedule Design and Fleet Assignment (Unit 8.2)

1. Who is responsible for schedule design and fleet assignment in the

medium term timeframe?
(a) Senior management.
(b) Network planning group.
(c) Current schedule group.
(d) Airline crew.
(e) None of the above.

2. Describe the benefits of a consistent core schedule.

Frequent air travellers prefer a consistent, predictable schedule. A
consistent core schedule provides stability in future booking patterns. A
consistent core schedule helps with the budgeting and planning tasks
performed in other areas of the airline.
3. List five steps involved in the schedule design process.
Review the financial performance of existing routes; review historical
demand and current trends; identify competitive or market changes;
evaluate new route opportunities; consider fleet availability

4. What is a core requirement when designing a schedule? Circle all that

apply.
(a) Provide frequent flights in key markets.
(b) Provide both business and economy cabin seats in competitive and
business markets.
(c) Increase flight frequency or capacity in markets with high demand.
(d) Honour any contractual obligations.
(e) None of the above.

5. True or false. When an aircraft arrives at an airport it is required to

remain on the ground for a minimum period of time.
(a) True.
(b) False.

6. List three main categories of operational constraints that need to be

considered during schedule design.
Maintenance requirements; airport configuration restrictions; capacity and
policy issues; operational constraints resulting from regulatory bilateral
agreements between countries

7. Write the missing words in the spaces provided.

Maintenance requirements are tremendously important. All aircraft require
maintenance every few days. A mandatory number of aircraft must remain
overnight at a maintenance base. This may prevent an airline from adding
overnight flights or from scheduling flights that terminate at a non-
maintenance base.

8. According to module 8, what is one of the most significant issues facing

civil aviation?
(a) Bilateral agreements between countries.
(b) Lack of aircraft capacity.
(c) Lack of airport capacity.
(d) Worker legislation.
(e) None of the above.

9. List two decision support tools discussed in module 8 that can be used
during schedule design.
A fleet assignment model that helps determine the best fleet distribution to
optimise the network schedule; a tool used to evaluate passenger spill and
recapture
10. What measure is used to evaluate or compare airline schedules? Circle
all that apply.
(a) Coverage throughout the day.
(b) Connectivity into hubs.
(c) Frequency and timings versus the competition.
(d) Service to all large markets.
(e) Profitability.
(f) None of the above.

Schedule and Capacity Adjustment (Unit 8.3)

1. Write the missing words in the spaces provided.

One strategy used by the current schedule group to ensure financial targets
are met is the minimisation of unprofitable flights and the redistribution of
capacity in high-frequency markets. The current schedule group evaluates
the financial and operational implications of cancelling a
flight. They identify markets with strong growth and look for opportunities
to add capacity.

2. Why might an airline choose to operate unprofitable flights? Circle all that
apply.
(a) The revenue saved by cancelling the flights is greater than the cost
entailed by cancellations.
(b) The law requires airlines to provide service into particular regions.
(c) To maintain a market presence and discourage new entrants.
(d) An airline is involved in a market share battle.
(e) None of the above.

3. What department is responsible for protecting passengers booked on a

cancelled flight?
The revenue management (RM) department is responsible for protecting
passengers booked n a cancelled flight.

4. How might revenue management objectives be compromised when a

flight is cancelled and the passengers are protected on alternative flights?
When a flight is cancelled and passengers are protected on alternate
flights, RM objectives may be compromised because, more often than not,
the result is high-yield spill.

5. True or false. The pricing department is in charge of redistributing

capacity between markets in response to current market conditions. In
addition to adding or cancelling flights, this could also involve gauge changes
on existing flights.
(a) True.
(b) False.

6. True or false. The cost of gauge changes can increase considerably if the
change occurs after the crew scheduling deadline 6 to 7 weeks before the
month of departure.
(a) True.
(b) False.

7. Describe the implications of crew planning deadlines on ad hoc flight

cancellations and gauge changes.
In some countries, pilot and in-flight crews have collective agreements that
specify crew planning deadlines 6 to 7 weeks before the month of
departure. If any cancellations (or aircraft type changes that prevent the
crew from working) are made after these deadlines, the crew originally
assigned to the flight must still be paid.

8. What are the implications of making an inter-fleet gauge change versus

an intra-fleet change?
Crews may only be trained to work on aircraft from a single manufacturer. If
an airline makes an inter-fleet change after the crew scheduling deadline
has passed, a new crew may be required while the original crew must still
be paid. Making an intra-fleet change, however, can be done at little cost at
almost any point before the 48-hour window. With intra-fleet changes,
crews remain flexible.

9. What strategy for handling increased passenger demand resulting from

special events is dependent on the availability of aircraft? Circle all that
apply.
(a) Developing schedules based on accurate demand forecasts for annual
events.
(b) Forcing buy-up on existing capacity.
(c) Adding flights.
(d) Upgauging the aircraft on existing flights.
(e) None of the above.
 Performance Measurement (Unit 9.1)

1. True or false. An airline revenue management department can easily

implement and maintain an effective performance measurement system
independently of other departments.
(a) True.
(b) False.

2. What is always needed to successfully implement and maintain a

company-wide performance measurement system? Circle all that apply.
(a) Commitment by the airline's upper management.
(b) Dissemination of information about performance expectations and
results.
(c) Development and use of performance measures.
(d) A crisis situation.
(e) None of the above.

3. List six performance measures used in airline revenue management.

Spill, stifle, spoilage, denied boarding, advance bookings, seat allocations,
passenger traffic, aircraft capacity, revenue, and yields.

4. Write the missing words in the spaces provided.

A performance measurement system should specify the data requiriments
(e.g., data source, quantity, and population), frequency of measurement,
calculation methods (e.g., equations and definitions of key terms), and final
report specifications (e.g., data comparisons and chart or graph types). In
order to be useful, raw data should be transformed into understanble
information that is readily avalible to airline employees working in various
epartments.

5. Describe the characteristics of a successful performance measurement

system.
A successful performance measurement system is comprised of a
balanced set of a few key performance indicators that relate to strategic
organisational goals and objectives; performance measures should be
logical and clearly defined; data sources must be credible and cost
effective; performance measures should provide timely, relevant, concise
information that can be used by decision-makers at all company levels

6. True or false. To be effective, a performance measurement system should

involve the timely sharing of information with employees, customers,
stakeholders, vendors, and suppliers.
(a) True.
(b) False.
7. True or false.
Module 9 describes the flow of information on performance
within an organisation. According to this description, business strategies
and financial targets are first communicated upward. Forecasts based on
current and historical information as well as feedback on actual results is
then communicated both downward and across the organisation.
(a) True.
(b) False.

Establishing and Updating Performance Measures (Unit 9.2)

1. Define a key performance indicator.

Key performance indicators are measurable units that are linked to
company objectives.

2. Write the missing words in the spaces provided.

The initial or baseline value of a performance measure is used as a
benchmark or reference to which future values will be compared. The
airline's target value for the measure may be a minimum or maximum value
or a range . Baseline values should be from a comparable time period. This
may be the previous week, a previous year, or a period when a similar
business strategy was in place.

3. True or false. If an airline takes the time to determine the best set of
performance measures, they will very rarely need to update them.
(a) True.
(b) False.

4. True or false. It is important to provide senior managers and decision-

makers with raw data on past and current performance.
(a) True.
(b) False.

5. Differentiate between data and information.

Airline revenue management (RM) departments often have warehouses
full of raw data. Airlines need to analyse and transform that data into
meaningful information. Timely, relevant, concise information is critical to
an airline's decision-makers both on the front lines and in the executive
area.

6. What is exception reporting?

Exception reporting is a useful tool that issues alerts to indicate when
performance measures are outside a designated range.
 Performance Measurement Reports (Unit 9.3)

1. Write the missing words in the spaces provided.

An airline's revenue management group relies on regular reports of
performance measures such as spill, stifle, spoilage and denied boardings.
The revenue management (RM) group monitirs performance and exceptions
on an ongoing basis. They produce monthly post-audit report that can
identify current opportunities and threats or show the results of past
corrective actions.

2. True or false. It is the responsibility of the revenue management group to

identify a single best performance measure that can be used in most
circumstances.
(a) True.
(b) False.

3. What key performance indicator is generally included in airline RM

performance measurement reports? Circle all that apply.
(a) Competitors' sales targets.
(b) Seat allocations by booking class distribution.
(c) Focus group data.
(d) Market research.
(e) Advance bookings.
(f) Passenger load factor.
(g) Yield by passenger and seats
(h) None of the above.

4. What performance report discussed in module 9 should document

increases or decreases in flight frequency as well as increases or
decreases in equipment capacity (upgauges or downgauges)?
(a) Advance Booking Report.
(b) Denied Boarding and Spoilage Report.
(c) Schedule Comparison Report.
(d) Historical Demand Report.
(e) None of the above.

5. What performance report documents the number of oversold seats,

denied
boardings, and spoilage?
(a) Advance Booking Report.
(b) Passenger Load Factor Report.
(c) Spill and Stifle Report.
(d) Historical Demand Report.
(e) None of the above.
 Tradicional Airline Ticket Distribution (Unit 10.1)

1. List the four main participants or elements of traditional airline ticket

distribution discussed in module 10.
Airlines; global distribution systems; travel agencies; the customer

2. Describe how airlines handled reservations in the 1950s.

Airlines operated centralised reservation centres that used manual
processes to book and keep track of reservations. Reservation agents
wrote on physical cards that represented airline seats and used a
chalkboard to track sold-out flights

3. What was the name of the first computerised passenger reservations

system created by a partnership between American Airlines and IBM?
(a) Abacus.
(b) Amadeus.
(c) Apollo.
(d) ATPCO.
(e) None of the above.

4. What is true of global distribution systems (GDSs)? Circle all that apply.
(a) Include inventory for multiple airlines.
(b) Distributed to independent travel agencies.
(c) Evolved independently from the computer reservation systems (CRSs)
originally developed by major airlines for internal use.
(d) Eliminated the need to call the airline directly to make reservations.
(e) None of the above.

5. Who developed the GDS called Abacus?

(a) A consortium of Southeast Asian airlines.
(b) A consortium of European airlines.
(c) American Airlines and IBM.
(d) United Airlines.
(e) None of the above

6. What was an advantage of GDSs from the airline's point of view?

(a) Outsourcing labour-intensive reservation work originally saved the
airlines millions of dollars.
(b) Enabled them to distribute their product to more customers around the
world.
(c) Enabled them to customise how they marketed their product to
individual customers.
(d) Distribution costs were a minor, fixed cost for the airlines.
(e) None of the above.
7. List the four major functional components of a GDS.
Inventory display and management; pricing and fare searching; ticketing
and document generation; database reporting

8. Write the missing words in the spaces provided.

Over time the GDSs also began to provide consolidated information from a
wider range of travel service providers such as hotel, tour and cruise
operators, car rental companies, and railway companies. In addition to
having the capability of electronically searcheing, booking and issuing
airline tickets, travel agents could now help their corporate and leisure
clients with all aspects of their trip. By the 1990s, approximately 80% of all
airline tickets were sold through GDSs at 130.000 travel agents worldwide.

9. True or false. By the 1990s, airline ticket distribution costs were growing
faster than airline passenger revenue.
(a) True.
(b) False.

10. List two sources of revenue for the GDS companies.

Fees charged to the airlines per segment; subscription rates charged to
travel agencies

11. Explain the importance of screen display position in GDSs.

Only a limited number of flights can be displayed on a computer screen at
one time. Because 80 to 90 percent of GDS bookings involve flights that
appeared on the first screen, and because 70 percent of these bookings
involve the first flight on that screen, airlines with flights in certain positions
have a tremendous competitive advantage

Effect of the Internet (Unit 10.2)

1. True or false. The travel industry was one of the first to go online.
(a) True.
(b) False.

2. What did using the Internet allow customers to do? Circle all that apply.
(a) Research travel destinations.
(b) Compare the ticket prices of different airlines more easily.
(c) Book their airline tickets.
(d) Reduce the cost of an airline seat by booking flight online.
(e) None of the above.
3. True or false. Early online reservation functions included bookings,
payment transactions, and electronic ticketing (e-ticketing).
(a) True.
(b) False.

4. Write the missing words in the spaces provided.

Most airlines now have branded website where they can sell directly to the
customer using their own software and, therefore, avoid paying travel
agency and GDS fees. In addition to customer booking and e-ticketing, many
airline websites offer seat selection, in-flight merchandise, and special, web-
only fares. Customers can provide a profile and sign up for e-mail services
that alert them to promotions tailored to their interests.

5. Name one new online travel agency and one traditional brick and mortar
travel agency that now offer services online.
Travelocity, Expedia, Orbitz, and Opodo are examples of new online travel
agencies; CWT (Carson Wagonlit Group) and Amex (American Express
Travel Services Group) are examples of brick and mortar travel agencies
that now offer services online.

6. What elements of travel product distribution were made possible by the

Internet? Circle all that apply.
(a) Online travel agencies.
(b) Global distribution systems.
(c) Airline branded websites.
(d) Airline internal computer reservation systems.
(e) Airline call centres.
(f) Travel destination websites, usually run by tourism associations.
(g) Websites of other travel service providers in the hospitality, ground
travel and leisure business.
(h) None of the above.

7. How has the Internet enabled airlines to reduce their distribution costs?
Most airlines have branded websites where they can sell directly to the
customer using their own software and, therefore, avoid paying travel
agency and GDS fees. Many airlines have also restructured their
compensation agreements with both travel agencies and GDSs.

8. True or false. Outside of North America and Europe there is greater

reliance on travel agencies and global distribution systems (GDSs). This is
due to established business practices and other cultural norms as well as
due to the lack of penetration by the Internet.
(a) True
(b) False
 Trends in Product Distribution (Unit 10.3)

1. Describe recent trends in the GDS response to the online travel market's
growth.
They have addressed some of their disadvantages when compared to
Internet-based distribution channels. This includes addressing
synchronisation issues, issues related to unbundled ancillaries and access
to the true price of travel, and issues related to the risk of travel agency
cheating

2. Describe recent trends in the airlines' approach to product distribution.

Airlines have been responding to opportunities offered by Internet-based
distribution channels and adopting strategies more closely aligned with the
customers' preferences, traits, and behaviours. By getting closer to the
customer, airlines can more effectively market and manage their products.
They are using data collected on customer choice behaviour to make
marketing and availability decisions, strengthen the customer-airline
relationship, and ultimately increase revenue.

3. True or false. The implementation of married segment and journey data

functionality eliminated the risk of travel agency cheating.
(a) True.
(b) False.

4. List three issues GDSs have addressed in an attempt to lessen the

disadvantages of their systems in light of the growing presence of Internet-
based distribution channels.
Synchronisation problems; problems with access to the true price of travel;
the risk of cheating by travel agents

5. What is true of the unbundled selling approach described in module 10?

Circle all that apply.
(a) Customers choose fare products based on the attributes associated
with each product.
(b) Customers can add certain attributes (ancillaries) which will increase
their price of travel.
(c) Depending on the value customers place on the ancillaries offered,
when they are in the decision-making process with regard to the
purchase of ancillaries, they may decide to “buy up” to a higher-value
fare product.
(d) All current global distribution systems (GDSs) support this type of
approach.
(e) None of the above.
 People (Unit 11.1)

1. What is a key ingredient for an effective revenue management (RM)

organization according to module 11? Circle all that apply.
(a) Appropriate revenue management systems (RMSs) and tools.
(b) A large RM department.
(c) The right people in the right places.
(d) Effective business processes.
(e) High salaries and good benefits.
(f) None of the above.

2. True or false. According to module 11, computerised revenue anagement

systems are the most valuable resource in a RM organization.
(a) True.
(b) False.

3. What are three example questions a RM manager might ask about the RM
staff when focused on building a strong team?
In what areas do team members perform well? In what areas do they need
to improve? Do they possess the required skill sets and are they properly
trained? Do they need refresher training? Are they knowledgeable about the
airline industry? Are they analytical? Do they have the right tools? Do they
make good decisions? Do they get support from their superiors when
needed? Are they communicating effectively with other departments that
have influence on revenue?

4. List three of the RM positions discussed in module 11.

RM director or head of RM; revenue manager or supervisor of a specific
inventory control group; revenue analyst or controller in charge of
inventory control for a specific route or a series of flights; pricing manager
or supervisor of a specific pricing group; pricing analyst in charge of pricing
for a specific route or series of flights.

5. Match the job title with a key skill required for that position.
Revenue management director–proven leadership skills in heading a
commercial unit; pricing analyst–understanding of the industry's
competitive and regulatory environments; revenue manager–in-depth
understanding of RM principles, systems, and tools

6. In the RM organization, whose job is it to monitor, analyse, communicate,

and respond to competitive fare actions and market practices?
(a) RM director.
(b) Revenue manager.
(c) Revenue analyst.
(d) Pricing manager.
(e) Pricing analyst.
(f) None of the above.

7. In a RM organization that encompasses pricing and inventory control

functions, what is part of the job description of a revenue analyst? Circle all
that apply.
(a) Manage and provide central coordination of pricing activities for an
assigned market group with the goal of meeting or exceeding revenue
objectives.
(b) Provide timely seat prices based on changes in the marketplace.
(c) Optimise revenue by flight on assigned routes through
analysis/forecasting of passenger demand and fares.
(d) Achieve optimal seat inventory and network revenue maximisation in
support of commercial strategies.
(e) None of the above.

8. What training topic area is recommended in module 11 for all employees

in RM? Circle all that apply.
(a) Basic concepts and RM theory.
(b) Mathematical models and algorithms within RM theory and their
effective use for forecasting demand.
(c) Demand forecasting and initial seat allocation strategies.
(d) Market analysis and the prioritisation of activities.
(e) Inventory adjustment in response to competitive threats or market
opportunities.
(f) None of the above.

9. Explain why training and team-building are important in a RM

organization.
The more knowledgeable the RM staff, the better they can perform.
Knowledge and superior performance enhances the airline's chance of
generating incremental revenue. Revenue management personnel always
operate within a team environment. The more skilled they are in working
with others, the more the company benefits. A strong, cohesive, and
motivated team fosters employees who are happier and more productive.
Business Process (Unit 11.2)

1. Write the missing words in the spaces provided.

Revenue management (RM) systems and robust tools. Too many processes
will create business processes and yet lacking processes will create
bureaucracy. The processes established chaos should reflect the level of
comunication required between the RM group and other groups with which
the RM group interacts on a frequent basis. It is important that RM reports
be accurate, relevant and timely .

2. What key groups form the revenue management triangle discussed in

module 11? Circle all that apply.
(a) Pricing.
(b) Upper level management.
(c) Flight operations.
(d) Scheduling.
(e) Reservations.
(f) Inventory control.
(g) None of the above.

3. According to module 11, with whom would the RM group interact most
frequently? Circle all that apply.
(a) Flight operations.
(b) Airport staff.
(c) Reservations and sales employees.
(d) Finance and law.
(e) None of the above.

4. Give two examples of how actions taken by one group could affect
another area of the airline.
The pricing group reducing prices or the scheduling group downgauging a
flight would both affect the inventory group's seat allocations; reservations
staff may require inventory adjustments to handle special requests; airport
staff should be advised if a flight is likely to have denied boardings; sales
staff may need inventory adjustments to complete a sale of group seats;
planning groups influence pricing and inventory decisions that have an
impact on RM
5. What is true about a typical airline revenue management organization
with regard to communication? Circle all that apply.
(a) Revenue management personnel members communicate frequently
with each other.
(b) Revenue management personnel communicate only infrequently with
staff in other departments.
(c) Revenue management personnel typically meet weekly to review
advance bookings, identify and discuss opportunities and threats, and
formulate action plans.
(d) Revenue management personnel typically meet monthly to review
performance of each market or route group.
(e) Revenue management personnel typically meet every two years to
establish initial allocation strategies based on the company's business plan.
(f) None of the above.

6. Write the missing words in the spaces provided.

Problems occur when interdepartmental communication is lacking. To avoid
such problems, a structured , regular process of communication should be
instituted. The frequency of communication depends on the content and
purpose. The mode of communication also depends on the e-mail content
and purpose and may include structured, meetings or formal executive
reports .

7. True or false. Currently, airline decision-makers are highly dependent on

the management information generated from revenue management
systems.
(a) True.
(b) False

Building a Revenue Management Optmization (Unit 11.3)

1. List the three types of organizational structures used in a revenue

management (RM) organization as discussed in module 11.
System-based RM organization; market-based RM organization; multi-
functional RM organization

2. Match the RM organizational structure with its description.

System-based–centralises all revenue optimisation functions; market-
based–involves the market management, pricing, and inventory control
functions; multi-functional–the manager is responsible for pricing, inventory
control, scheduling, and marketing
3. What is true of a system-based RM organization according to module 11?
Circle all that apply.
(a) Centralises all revenue optimisation functions and focuses on inventory
control.
(b) Integrates the approach to inventory control for network revenue
optimisation.
(c) The inventory control personnel have greater opportunity to participate
in pricing and scheduling decisions.
(d) Technical consistency may be lost over time because inventory control
is decentralised.
(e) There may be a particularly heavy workload.
(f) None of the above.

4. According to module 11, what are the advantages associated with a

market-based RM organization? Circle all that apply.
(a) Consistent technical application of revenue management systems
(RMSs) and procedures across the network.
(b) Integrated approach to inventory control for network revenue
optimisation.
(c) Effective team approach that addresses market opportunities and
threats in specific geographical areas.
(d) Inventory control personnel have more opportunities to participate in
pricing and scheduling decisions.
(e) Easier to build a strong and cohesive team leading to quick turnaround
times.
(f) None of the above.

5. According to module 11, what are the disadvantages associated with a

multi-functional RM organization? Circle all that apply.
(a) Inconsistencies if the communication among the managers is not
effective.
(b) Uninvolved staff with regard to marketing decisions such as pricing
changes.
(c) A potentially less than optimal inventory strategy due to the lack of
direct involvement in other marketing levers.
(d) Polarisation, or silos, between inventory control and other market lever
groups.
(e) The loss of technical consistency over time because inventory control
is decentralised.
(f) Heavy workloads.
(g) None of the above.
6. Write the missing word(s) in the space(s) provided.
A well-designed RM department only serves the company for a specific time
period, based on its current objectives, strategies and resources. As these
elements change, the organization will become less than optimal and require
some modification. Before making changes to a RM organization, the
manager needs to define the new objectives and fully understand the
effectiveness and limitations of the existing business processes as well as the
strengths and weaknesses of the staff .

7. True or false. According to module 11, if your RM department is market-

based, is having trouble with the consistency of technical applications, and
is not realising the full network potential, switching to a multi-functional RM
organization may rectify the situation.
(a) True.
(b) False.

8. Describe the importance of understanding RM across the airline.

RM can provide strategic, financial and competitive advantages. As more
people at all levels of an airline develop a better understanding of RM, they
can use this knowledge to make better decisions and work together to
meet and exceed common goals.