11 12 13 14 15 16 17 18 19 20 y Regulaciones

Chapter 11: Demand Forecasting
for Revenue Management
Prof. Caroline Ocasio

Introduction
 The main goal of Revenue Management

(RM) is to guarantee seat availability for
high-revenue passengers on each flight
to maximize the overall revenue of the
schedule
Introduction
 RM requires the existence of a rigorous

demand forecasting mechanism to
predict all demand streams on each
flight in the air carrier schedule
Example
 Airline has a hub in DEN and ORD

 There is a DEN-FRA and an ORD-LHR
 A seat on the DEN-ORD can be sold to
any passenger on the itinerary
 Suppose there is only one seat left on
the DEN-ORD flight – to which itinerary
this last seat should be reserved?
Who should take the last seat on
the LAX-DEN flight?
LAX-DEN-ORD-LHR LAX-DEN-FRA
 Revenue to the  Revenue to the airline:
airline: $1,300 $1,500
In this case, the last seat on the flight

LAX-DEN might be reserved for the
LAX-DEN-FRA passenger as it
contributes $1,500 to the airline’s
revenue
Problem Definition
 Consider the flight f

 In the air carrier schedule that is
scheduled to depart on day t in the
future
 It is required to estimate the number of
travelers Yci
 That are interested in fare class c in
each itinerary i that includes flight f
Problem Definition
 The different fare classes on each

itinerary reflect the differences in
passenger’s needs that are related to:
– the day of purchase
– Saturday-stay
– Change and cancellation policies
– And so on
Problem Definition
 Consider an air carrier that operates

1000 flights daily
 Over a year period, that is 365,000
flights, that will be open for bookings
and will need to be managed by the air
carrier
 Assume each flight serves 50 different
itineraries
Problem Definition
 Each itinerary has four different booking

classes
 There will be about 200 itinerary-fare
classes for each flight
 The total number of itinerary-fare
classes predicted everyday is about 73
million (365,000 x 200)
Factors affecting demand
 The demand of an itinerary fare class on any
flight is affected by many factors including:
– Market size
– Market type (leisure, business, both)
– Seasonality
– Day of the week
– Time of day
– Special events
– Price range
– Air carriers competition
– Schedule attractiveness, etc.
Forecasting Methodology
 Causal modeling
 Time-series analysis
 Adaptive neural network modeling
 Time-series analysis
– Is the most widely used
– Is used to predict a variable in the future
when several historical observations about
this variable are available
 Time-Series Analysis Objectives:

– It identifies the nature of the phenomenon
represented by the sequence of
observations
– It predicts future values of the time-series
variable
Limitations Analysis
 The impact of schedule change

 The impact of changing aircraft size
 The impact of changing fare structure
Expected Seat Revenue
 The expected seat revenue from each

seat can be calculated by multiplying
the seat fare by the probability of filling
the seat by a passenger
 The expected revenue declines as the

seat index increases
 This is because the chances of filling

more seats decrease given the current
level of demand for this itinerary-fare
class
 The expected seat revenue depends on
the fare value and the chances
(probability) of filling the seat
 The probability of filling the seat

increases only when there are more
passengers that are interested in the
flight
References
 Abdelghany, A. and K. (2009). Modeling

Applications in the Airline Industry. Burlington,
VT: Ashgate Publishing Company. ISBN:
978-0-7546-7874-8, or ISBN: 978-0-7546-
9725-1
Chapter 12: No-
show Rate and
Overbooking
Introduction
• For any flight, there is a chance that an

unknown number of passengers who have
confirmed bookings on the flight do not show
up on the day of departure
Introduction
• The reason for not showing up could be:

• A last minute cancellation of the travel plan
• Late arrival at the airport
• Flight misconnections
• Last minute itinerary change
• Last minute seat upgrade to an upper cabin
• An so on
Introduction
• The percentage of passengers that do not

show up for the flight without early notice to
the airline is defined as the No-show rate
• In practice, the no-show rate ranges from 4-

10% on each flight
Introduction
• The problem of the no-show rate is that the

airline does not have any control on the seat
that is left empty, and the airline has no
chance to re-sell this seat to another customer
The Flight Authorization
Level
• Due to the no-show rate, airlines are granted
to sell more seats than the physical capacity of
the flight
• This action by the airline is known as

“overbooking” which allows the airline to sell
more seats than the physical capacity of the
flight to account for the “no-show” rate
Level
• Overbooking is not illegal
• Most airlines overbook their scheduled flights

to a certain level in order to compensate for
“no-shows”
• When an airline overestimates their no-show

rate and overbooks their flights, over sale
occurs
Level
• When passengers are left behind due to an
overbooking, that is called “bumped” out of
the flight
• When an over sale occurs, passengers who are

not in a hurry are offered compensation in
exchange for giving up their seat voluntarily
Level
• Those passengers bumped against their will
are, with a few exceptions, entitled to
compensation
• Overbooking allows the airline to generate

more revenue for its busy flights that rarely
depart with empty seats
Actual Capacity
• The actual number of seats that the airline can
sell on a flight is known as actual capacity of
the flight or the authorization level
References
• Abdelghany, A. and K. (2009). Modeling
VT: Ashgate Publishing Company. ISBN: 978-0-
7546-7874-8, or ISBN: 978-0-7546-9725-1
Chapter 13: Seat Inventory Control for
Flight-based Revenue Management
Systems
Intro
 Flight-based RM systems are typically used by air carriers
that adopt a point-to-point network structure
Intro
 The seats on each flight are classified to different booking
(fare classes) that reflect the needs and characteristics of
travelers that are related to their willingness to pay:
 A Saturday stay
 An advance purchase
 The refund policy
Intro
 The objective of the seat inventory control is to determine
the number of seats to be allocated for each booking class
considered for the flight
 It is assumed that low passengers always book first
 There are no cancellations of bookings
 A rejected booking request is revenue lost by the air carrier
 The Expected Seat Revenue is calculated by multiplying the
probability of filling the seat of this demand stream by the
fare rate
 Littlewood (1972) suggests that the total flight revenue
would be maximized by closing down the sale of the low-fare
class when the certain or guaranteed revenue from selling
anther low-fare seat is exceeded by the expected revenue of
selling the same seat at a higher fare
References
 Abdelghany, A. and K. (2009). Modeling Applications in the Airline

Industry. Burlington, VT: Ashgate Publishing Company. ISBN: 978-0-
7546-7874-8, or ISBN: 978-0-7546-9725-1
Chapter 14: Seat Revenue Control for
Network-based Revenue Management
Systems
Intro
 The complexity of the seat inventory control problem
increases significantly for air carriers that adopt the hub-and-
spoke network structure
 Every flight serves both the local and connecting passenger

to/from other destinations
Intro
 Passengers on the flight are composed of a mix of traveler
groups that differ in their origin and destination, as well as
trip purpose and travel needs
Intro
 The main objective of the seat inventory control is to
guarantee that the seat availability for booking requests for
the high-revenue itineraries to maximize the overall revenue
of the schedule
The Network Effect
 It should be clear that for the seat inventory control for the
hub-and-spoke network structure, accepting any booking
request on any flight affects the decision to accept or reject
other booking requests on other flight
The Network Effect
 Seats are always available for a high-fare booking class as long
as there are seats available in any of the lower booking classes
Nesting with Network-based Models
 A booking control policy based on the deterministic linear
program can be constructed by setting booking limits for
each Origin-Destination Fare (ODF) equal to the optimal
number of passengers accepted for each itinerary fare class
Nesting with Network-based Models
 A nesting structure of booking classes is considered to always
accept a high-value demand when there is space available on
the flight
 The booking limits of the different itinerary-fare classes are

nested based on the contribution of each itinerary-fare class
to the total network revenue
References
 Abdelghany, A. and K. (2009). Modeling Applications in the Airline

Industry. Burlington, VT: Ashgate Publishing Company. ISBN: 978-0-
7546-7874-8, or ISBN: 978-0-7546-9725-1
Chapter 15: Ticket Distribution
Types of Ticket Distribution Channels
• Once the air carrier determines availability and
pricing of the different itinerary-fare classes of
the different flights, a distribution channel is
needed to link the product to the potential
customers
• Ticket distribution channels are the media
through which air carriers share travel
information, including available itineraries and
prices to their prospective customers
• The ticket distribution channels are classified as:
▫ Direct Distribution:
 The air carriers make direct contact with their
customers for ticket sales and no intermediaries are
involved in the sale process
▫ Indirect Distribution:
 Intermediaries are involved in the sales process
between the air carriers and the final customers
▫ Indirect Distribution:
 Intermediaries are generally classified into:
 Wholesalers buy ticket in bulk from the different air

carriers and sell them to the customers
 They gain reasonable discounts from the airline
companies by using their buying power
 Wholesalers can adopt retailers or sell directly to final
customers to sell tickets
Wholesalers
Can adopt retailers or sell directly to customer
Disadvantage: they give air carriers less control over their

tickets during during the booking horizon of the flights
Reduce the risk of air carriers having unsold seats on their

flights
• Indirect Distribution:
▫ The wholesalers intermediaries are more common

with charter air carriers and tour operators
▫ Agents are more common in the air carrier

industry and are paid a commission each time
they sell tickets on behalf of the air carrier and
they are paid incentives when they hit a
predefined target
• Indirect Distribution:
• Agents:
▫ Can functionally be classified into two main
categories
 The air carriers’ representative – promote
ticket sales for one air carrier only
 The travel agents – promote ticket sales for more
than one carrier
▫ They both communicate to customers via Internet,

telephone and walk-in sales offices
• Distribution Channels:
▫ These distribution channels differ in their
 Cost
 Market penetration
 Type of customers
 Ease of use
 Amount of information presented to customers
Computer Reservation Systems (CRS)
• CRS were developed in the early 1960s
• They extend the air carriers’ internal reservation

systems that automatically mark the air carriers’
seat availability
• Examples of internal reservation systems:
▫ APOLLO for United Airlines
▫ SABRE for American Airlines
▫ DATAS for Delta Airlines
▫ BABS for British Airways
• After deregulation travel agents did not have an

efficient system to serve their increasing
customers quickly and easy
• United provided their travel agents with their
own CRS (APOLLO)
• AA followed this by providing travel agents with
SABRE
• Global Distribution Systems (GDS) provided

travel information for a large number of air
carriers across the globe in one system
• Typically the air carriers would subscribed to
one or more GDS, which accessed real time seat
availability and ticket price information from the
air carriers’ internal computer reservation
systems
• The GDS charged air carriers a pre-specified fee

for each confirmed booking through the GDS,
and might charge a subscription fee to Travel
agents
• CRS provided a solid way for the air carriers who
owned them to increase their market share at
the expense of their rivals
• It is estimated that SABRE, GALILEO and

WORDLSPAN cover about 92% of the US
markets
Customers
Intermediaries
CRS
Air Carriers
• The GDS vendors tend to provide the service for
free to agents who attract more customers
• More incentives are also provided to travel

agents
• Air carriers today have created and provided
incentives to expand the use of various types of
Internet based applications that can bypass the
GDS and their associated booking fees
• Several Internet based travel agencies were
developed such as:
▫ Expedia (connected through WORLDSPAN)
▫ Priceline (also known as Opaque for distressed
inventory)
▫ Travelocity (a subsidiary of SABRE)
• These Internet-based agencies use the GDS to

book tickets, however they charge air carriers
less than traditional travel agencies
• Orbitz was originally formed by a group of
leading U.S. airlines in 1999 to participate in the
rapidly growing online travel industry.
• The airline investors in Orbitz consisted of

American Airlines, Continental Airlines, Delta
Air Lines, Northwest Airlines and United Air
Lines.
• The Orbitz website was launched in 2001.

• In November 2004, Orbitz was acquired by
Cendant and assumed responsibility for
Cendant's domestic online travel business,
which included:
▫ CheapTickets, a leading online travel brand
focused on the value-conscious traveler
▫ Flairview Travel, which operated the international
online hotel websites HotelClub.com
▫ RatesToGo.com.
• In February 2005, Cendant acquired ebookers, a
leading international online travel brand with an
online presence in 13 countries in Europe.
• Orbitz Worldwide was formed through the

combination of Orbitz and the online travel
assets of Cendant's travel distribution services
division and became a public company in July
2007.
References
• Abdelghany, A. and K. (2009). Modeling
VT: Ashgate Publishing Company. ISBN: 978-0-
7546-7874-8, or ISBN: 978-0-7546-9725-1
• Orbitz logo obtained from Orbitz.com
on November 3, 2010
Chapter 16: Sales Contracts

Introduction
 Business travel is estimated to account for about one-half of
all US domestic air carriers’ trips
 They also count for 2/3 of the air carrier industry’s

passenger revenues
 Several initiatives are implemented by air carriers to attract

corporate business travelers
And a Contract Was Born
 A contract is signed between the air carrier and different
corporations for this purpose
 Incentives are provided in the form of ticket discounts and

cabin upgrades
 The air carrier provides a fare discount to the employees of

the corporation when they select the air carrier for their
travel
 In return, the corporation has to guarantee that a portion of

its travel is done through the air carrier
 This type of agreement helps the corporation reduce their

travel expenses and allows the air carrier to increase travel
share in the different markets
 Contracts are initiated and renewed on a periodic basis
 Each contract is evaluated independently from other contract
 The air carrier and the corporation perform several rounds

of negotiation to determine the discount and the amount of
travel share in each market, possibly at the cabin class level
 The air carrier seeks to minimize the amount of discount

given to the corporation and maximize its guaranteed travel
share from the corporation’s travel budget
 The corporation seeks to obtain the best discount deal before

it commits its travel to any air carrier
What two things are considered when
signing a contract?
1) The value of the ticket discounts to be offered to each

corporation
1) The associated share of the corporation’s business travel

that the air carrier might obtain
How Air Carriers Determine Value of
the Discount?
 The air carrier determines the value of the offered discount
based on:
 The size of the corporation
 The corporation’s historical business travel pattern in different
markets
 The strength of the competition with other air carriers in these
markets
 Once all this is analyzed, the corporation then decides on the

expected discount after evaluating discount offers provided
by all competing air carriers
Travel Share
 Travel share usually depends on qualitative factors such as:
 The significance of the travel policy of the corporation
 Its ability to convince its employees to travel by the contracted
air carrier
Factors Affecting Contract Evaluation
 When the air carrier and the corporation decide on the
preliminary discount and the associated travel share, the air
carrier further analyzes these values to estimate the possible
increase to its revenue
 Three main factors are considered while evaluating any
proposed contract:
1) The dilution in revenue resulting from offering the

discounted fares should be less than the extra revenue
associated with attracting new demand
2) Because the attracted demand due to new contracts might
displace the current leisure or business travelers, the new
demand should be more profitable than the current
demand
 Three main factors are considered while evaluating any
proposed contract:
3) The revenue margin of any contract, which is defined as

the total revenue from the contract minus the total cost
divided by the total cost, should be greater than a
predefined threshold. This revenue is useful for the air
carrier as a measure to estimate the return rate of its
investment from the corporation contract
 After this analytical evaluation is performed, if the deal is not
profitable to the air carrier or it does not satisfy the revenue
margin threshold, another round of negotiation might start
with the corporation to improve the terms of the contract
References
 Flouris, Traint G. and Oswald, Sharon L. (2006). Designing
and Executing Strategy in Aviation Management. Burlington, VT:
Ashgate Publishing Company.

Chapter 17: Code Share Agreements
Intro
 Code share is a partnership agreement between

two air carriers:
 The operating carrier
 The marketing carrier
 The operating carrier allows the marketing carrier

to operate to promote and sell seats on some of its
flights
Any Benefits?
 Code share brings a benefit to both the marketing

and operating carriers of the agreement
 It allows the marketing carrier to increase network

coverage by gaining access to the routes of the
code-share partner
Any Benefits?
 The operating carrier uses the agreement to

increase its flights’ load factor and provides an
additional stream of revenue
 In terms of service, it provides relatively seamless

travel for customers when their travel requires
connecting between the flights of different air
carriers
Any Benefits?
 It is possible that the operating carrier participates

simultaneously in multiple code-share agreements
with different marketing carriers (alliance)
 Several marketing carriers promote the flights of

the operating carrier at the same time
Types of Code Share Agreement
 Vinod (2005) defined three different types of code-

share agreements:
 The hard block

 The soft block
 Free sale
The Hard Block
 The marketing carrier purchases a predetermined

number of seats at a predetermined price from the
operating carrier
 Then, the marketing carrier is free to sell those

seats at whatever price it chooses (subject to
regulatory issues)
The Soft Block
 The size of the block is not determined in advanced

and is expected to vary based on the operating
carrier’s anticipated demand level
The Free Sale
 This is also known as free flow agreement
 The operating carrier gives the marketing carrier access to its

seat inventory, which the marketing carrier can promote
under its own code
 In some cases, the operating carrier uses a seat inventory

control mechanism to block certain booking classes from
being accessed by the marketing carrier
Ethiopian Airlines and Turkish Airlines have
signed a code share agreement for flights
between Istanbul and Addis Ababa
operated by Turkish. The agreement took
effect on January 15.
A Free Sale Code Share Agreement has

been signed between Turkish Airlines and
Ethiopian Airlines (ET). Code share
operations will begin as of 15 January
2010. Within the framework of ET/TK
codeshare agreement, TK will be the
operating carrier on Istanbul-Addis Ababa
v.v. flights and ET will market these flights
by putting its own code and flight number. Extracted from nazret.com on November
8, 2010. Article originally published on
January 18, 2010.
Challenges of Code-share Agreements
 In order to gain the most out of code sharing, several

questions must be answered:
 Which air carriers would be most beneficial to enter into a
code-share agreement with?
 Which flights would be accessible to each code-share partner?
 How many seats would be for sale by the different partners on

each flight?
 In order to gain the most out of code sharing,

several questions must be answered:
 What fare price would be given to each partner on
each flight?
 How many in-return seats should be requested on

the flights of the different partners and the price of
these seats?
 Initially it was thought that the greater the extent of

the code share (in terms of flights, connections and
passengers), the more revenue for the air carrier
 Most code share are implemented based on the

assumption that the agreement will generate more
demand to fill empty seats on the participating
flights
 But in some cases the additional code-share

demand would displace non-code-share passengers
on the operating carrier’s flights
 So, it is crucial to each airline to evaluate the trade-

off between the incremental revenue from the
code-share agreement and the revenue loss due to
displacing non-code-share passengers
 The operating carrier must find the optimal seat

allocation among the different partners to maximize
its revenue and to minimize the chances of
displacing the non code share passengers
 In most cases, the terms of the agreement are

determined after cycles of negotiation between the
operating carrier and the marketing carriers, where
each carrier seeks to maximize its own expected
revenues
References
 Abdelghany, A. and K. (2009). Modeling

Applications in the Airline Industry. Burlington, VT:
Ashgate Publishing Company. ISBN: 978-0-7546-
7874-8, or ISBN: 978-0-7546-9725-1
Chapter 18: Ground Delay Programs
and Collaborative Decision Making
Ground Delay Program
 During normal operation conditions, the airline is expected to operate its
planned schedule smoothly with slight or no modification
 But when adverse weather conditions are anticipated, several safety

regulations are imposed by the aviation administration to guarantee safe
operation
 These safety regulations are usually in the form of a capacity reduction on
runways at airports that have adverse weather conditions
 This capacity reduction represent a decrease in the number of flights that

can land at the airport
 Accordingly, the airline schedule is expected to be disrupted due to the
imposed capacity reduction
 In the USA, flights that are scheduled to arrive at airports with adverse
weather conditions are issued a Ground Delay Program (GDP)
 A GDP (set by the FAA) delays the departure of flights at their origin stations
until weather conditions allow safe landing at their destination stations
 The idea behind GDP is that it is safer to hold a flight on the ground at its
origin than to let it takeoff and be subject to airborne and landing difficulties
at its destination due to the adverse weather conditions
 This is a key tool to balance and meter the flight arrivals by all carriers and
the capacity at airports experiencing a significant reduction in capacity
mainly to weather
 The GDP reduces the number of arrivals during the period of bad weather
conditions at the airport by increasing the time intervals between the flights
of all air carriers
 Under the GDP fewer time slots are allowed during this time period
 If feasible, more landing slots are to be used during the period of good
weather conditions
 An important question is how the new slots are distributed among the
different air carriers during the GDP
 Initially, the distribution is based on the rule of first come, first served
 Remember, air carriers provide the aviation administration with their
planned (static) schedule of flight arrivals at the different airports
 During the GDP, the available landing slots are allocated to the air carriers
based on this static schedule
 This approach has one major limitation
 An air carrier might end up not using a slot that is allocated to it

 EX: The air carrier might cancel the flight that is allocated to this slot due to an
aircraft mechanical problem or lack of other resources
 Not using this landing slot is a waste, because no other air carrier can benefit from
it (unless they know about it ahead of time so they can plan their schedule
accordingly)
 So any information about flight cancellations should be provided, but this is
not always true with air carriers as they find there are disincentives for
sharing their updated schedule information with the aviation administration
 It is in the air carrier’s best interest not to report a flight cancellation but
wait instead until the GDP is issued and a slot is given to the flight
 Then the air carrier cancels the flight and substitute another flight into the
vacant slot
 Air carriers know that the flights are allocated to slots based on the latest
estimated arrival time of the flight
 If the air carrier has a plan to delay a flight due to any reason such as an
aircraft mechanical problem, it is better for the air carrier not to report this
delay but wait instead until the GDP is issued then compare the proposed
delay to the delay from the GDP
 If the air carrier reports a proposed delay for one of its flights, this flight is
given greater delay or doubly penalized due to the GDP
 By not sharing the real-time schedule information between the aviation

administration and the air carriers, the aviation administration has limited
capabilities to monitor or adjust GDPs once they are initially issued
 The weather may improve or deteriorate all through the day, so having the
updated schedule information would help to better manage flight arrivals in
this constrained Collaborative Decision Making (CDM) paradigm
References
 Flouris, Traint G. and Oswald, Sharon L. (2006). Designing and Executing
Strategy in Aviation Management. Burlington, VT: Ashgate Publishing
Company.
References
 Flouris, Traint G. and Oswald, Sharon L. (2006). Designing and Executing
Strategy in Aviation Management. Burlington, VT: Ashgate Publishing
Company.
Chapter 19:
Impact of
Disruptions on
Air Carrier
Schedule

Aircraft
 Aircraft is the most valuable resource for the air carrier
 Aircraft utilization can be maximize by maximizing the

number of its daily departures
 This is done by minimizing the ground time that an aircraft

spends on the ground
Aircraft
 Any disruption, delay or cancellation in the aircraft

schedule will certainly have a downline impact on other
flights
 SEE EXAMPLE
Crew
 Three different problems could happen to the crew
schedule of the schedule if one or more flights is disrupted:
 Misconnect problem: this is when a crew member arrives late
and is unable to fly the next flight in the same duty period on
time
 Rest problem: this is when a crew member has a rest period

(layover) that is less than the minimum required rest period
Crew
 Three different problems could happen to the crew
schedule of the schedule of one or more flights is
disrupted:
 Duty problem: this is when a duty period limit is exceeded
due to a delay of one or more of the flights of this duty period
Slack Time
 What is slack time of a Resource?
 It’s the difference between the departure time of the
outbound and the ready time of the resources
 What do resources do at this time?

 Passenger deplaning
 Unloading cargo and luggage
 Cleaning the aircraft
 Refueling
 Loading cargo and luggage for next flight
 Boarding passengers
 At this time crew members walk from the gate of the
inbound flight to the gate of the outbound flight
Slack Time
 What is slack time of a Flight?
 It’s the maximum amount of time the flight can be delayed
without affecting any of its downline flights
 Mathematically, its calculated as the least amount of slack
time of all the outbound resources the flight
Network Connectivity
 The schedules of the different aircraft and crew members
are put together to form the total schedule of the air
carrier
 The schedules of the different resources are very

interdependent and connected
Network Connectivity
 There is extensive connectivity among the flights’
operating resources and it is very important to consider
the downline impact when evaluating a change in flight
schedule
 These decisions are related to modifying flights schedule

(delay, cancellation and diversion) and workloads of
affected resources (aircraft, airport facilities, operating
crews and supporting staff) as well as reaccommodating
any stranded passengers
References
 Abdelghany, A. and K. (2009). Modeling Applications in the
Airline Industry. Burlington, VT: Ashgate Publishing
Company. ISBN: 978-0-7546-7874-8, or ISBN: 978-0-7546-
9725-1
Chapter 20: Airline Schedule
Recovery
Schedule Recovery under Irregular Operations
The main objective of the air carrier schedule recovery

during irregular operations conditions is to find an efficient
cost-effective plan to alleviate the impact of these
irregularities on the schedule
Five main conditions should be satisfied in

any recovery plan:
1. The plan should comply with any GDP
issued at any airport or any air-space flow
program issued to meter traffic in the
space affected by adverse weather
conditions
 Five main conditions should be satisfied in any

recovery plan:
2. This plan should also conform to regulations
required for the aircraft service and maintenance
activities
3. The air carrier should meet the terms that regulate

the work rules of crew and other workers
Five main conditions should be satisfied in

any recovery plan:
4. This plan should minimize the deviation from
the planned schedule by minimizing the
flight delays and cancellations
5. The plan should consider re-

accommodation of stranded passengers,
crew and aircraft
When the air carrier schedule is subjected to

any source of disruption due to GDP, or any
other reason and based on the size of
disruption (the number of affected flights)
three main actions can be taken by the air
carrier to recover the schedule
Schedule Recovery
under Irregular
Operations
 Resource Recovery
The main
sources of the
aircraft include
aircraft and
crew (pilot and
flight
attendants)
Aircraft Recovery
Aircraft swapping
Aircraft size should be the same or close to it
Because it takes an aircraft out of its planned route, another
maintenance activity should be created when is due to
maintenance
A completely new schedule should be created for each aircraft
It is preferable that the aircraft returns to its original schedule if
another swapping opportunity if found
Aircraft Recovery
Aircraft swapping
If no swapping opportunity is available between aircraft, the
only other option is to delay the down line flight to wait for it
inbound delayed aircraft
The delay can be incorporated with swapping to minimize the
total delay of the outbound flights
 Crew Recovery
Schedule
Recovery  Stanby:
 Air carriers typically position a predefined
under number of crew with different qualifications at
the major stations to operate as standby crew
Irregular  These crew members are scheduled to stay at

the airport for a few hours (usually four hours)
Operations  In case there is system disruption, these crew
members may be asked to operate any of the
disrupted flights
Schedule Recovery under Irregular
Operations
 CREW RECOVERY
 In case no flying assignment is given to them, these crew members return

home by the end of their four- hour duty period
Reserve Crew:
 Reserve crew is similar to standby crew except that they are not positioned
at the airport
 They stay at home and during a predefined period of time, they can receive
phone calls for a flying assignment
Operations
Reserve Crew:
 The call should be at least four to five hours in advance of the given
assignment, during which the crew member can get ready for the flight and
arrange transportation to the aircraft
Crew Swapping:
 Crew swapping is similar to aircraft swapping
 The swapped crew member should have the same
 qualifications
Operations
Crew Swapping:
 Crew swapping is similar to aircraft swapping
 The swapped crew member should have the same qualifications
 For pilots, the swapped pilots should be qualified to fly the same fleet and have
the same position (captain or first officer)
 For flight attendants, the swapped flight attendants should be qualified to serve
on the same fleet or aircraft type (wide body or narrow body)
Operations
Crew Swapping:
 When a swap is considered, the assignment should not
 violate the regulations of the crew working hours
 When a crew member is taken out of their original trippair for swapping
purposes, the swapping program should consider creating a new trippair for
the crew member that ends at their domicile station within a few hours from
the time of their original trippair
Crew Recovery
Stranded Crew:
Stranded crew member are the ones that have their
outbound flight canceled and are stranded at the airport
with no work assignment
These crew members can be used to fly other disrupted

flights at the airports
If no assignment is given to stranded crew, this crew is

flown to its domicile
Crew Recovery
Deadhead:
A crew member can be flown as a passenger to operate a
disrupted flight at a different station
A deadhead crew member can fly on a flight for the same

air carrier or a flight that belongs to another air carrier
Deadhead is also used to reposition stranded

Crew Recovery
Flight cancellation is usually an
unfavorable decision for
schedule recovery during
irregular operations conditions,
as it representsthe most costly
decision during the process
AWSC 4600 Aviation Management
United States Code of Federal Regulations (CFR)
14 CFR – Title 14 Aeronautics & Space
49 CFR – Title 49 Transportation
Every aviation manager should be familiar with key aviation topics. Please memorize the following
regulations. This will assist when trying to locate the information.
IMPORTANT REGULATIONS:
14 CFR Part 1 Definitions and Abbreviations
14 CFR Part 25 Certification of Aircraft (Transport Categories)
a. Performance Data b. Aircraft Limitations
14 CFR Part 61 Certification of Flight Crew Members, Flight Engineers, Ground Instructors
(FAR/AIM)
14 CFR Part 65 Certification of Airmen other than Flight Crewmember
14 CFR Part 71 Regulation of Airspace (FAR/AIM)
14 CFR Part 73 Regulation of Special Use Airspace (FAR/AIM)
14 CFR Part 91 General Operating Flight Rules (FAR/AIM)
14 CFR Part 107 Small Unmanned Aircraft Systems
14 CFR Part 110 General Requirements (more definitions)
14 CFR Part 117 Flight & Duty Limitations (Rest Requirements)
14 CFR Part 120 Drug & Alcohol Testing Programs
14 CFR Part 119 Certification of Air Carriers & Commercial Operators
14 CFR Part 121 Domestic, Flag Supplemental Operating Flight Rules
14 CFR Part 129 Foreign Air Carriers Operating Rules
14 CFR Part 139 Certification of Airports
49 CFR Part 172 Dangerous Goods
49 CFR Part 175 Hazmat
49 CFR NTSB 830 Notification & Reporting of Aircraft Accidents
49 CFR Part 1544 Security

11 12 13 14 15 16 17 18 19 20 y Regulaciones

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Chapter 11: Demand Forecasting

for Revenue Management

Prof. Caroline Ocasio

 The main goal of Revenue Management

 RM requires the existence of a rigorous

 Airline has a hub in DEN and ORD

In this case, the last seat on the flight

 Consider the flight f

 The different fare classes on each

 Consider an air carrier that operates

 Each itinerary has four different booking

 Time-Series Analysis Objectives:

 The impact of schedule change

 The expected seat revenue from each

 The expected revenue declines as the

 This is because the chances of filling

 The probability of filling the seat

 Abdelghany, A. and K. (2009). Modeling

• For any flight, there is a chance that an

• The reason for not showing up could be:

• The percentage of passengers that do not

• In practice, the no-show rate ranges from 4-

• The problem of the no-show rate is that the

• This action by the airline is known as

• Most airlines overbook their scheduled flights

• When an airline overestimates their no-show

• When an over sale occurs, passengers who are

• Overbooking allows the airline to generate

 Abdelghany, A. and K. (2009). Modeling Applications in the Airline

 Every flight serves both the local and connecting passenger

 The booking limits of the different itinerary-fare classes are

 Abdelghany, A. and K. (2009). Modeling Applications in the Airline

 Intermediaries are generally classified into:

 Wholesalers buy ticket in bulk from the different air

Can adopt retailers or sell directly to customer

Disadvantage: they give air carriers less control over their

Reduce the risk of air carriers having unsold seats on their

▫ The wholesalers intermediaries are more common

▫ Agents are more common in the air carrier

▫ They both communicate to customers via Internet,

• They extend the air carriers’ internal reservation

• After deregulation travel agents did not have an

• Global Distribution Systems (GDS) provided

• The GDS charged air carriers a pre-specified fee

• It is estimated that SABRE, GALILEO and

• More incentives are also provided to travel

• These Internet-based agencies use the GDS to

• The airline investors in Orbitz consisted of

• The Orbitz website was launched in 2001.

• Orbitz Worldwide was formed through the

Prof. Caroline Ocasio

 They also count for 2/3 of the air carrier industry’s

 Several initiatives are implemented by air carriers to attract

 Incentives are provided in the form of ticket discounts and

 The air carrier provides a fare discount to the employees of

 In return, the corporation has to guarantee that a portion of

 This type of agreement helps the corporation reduce their

 Contracts are initiated and renewed on a periodic basis

 Each contract is evaluated independently from other contract

 The air carrier and the corporation perform several rounds

 The air carrier seeks to minimize the amount of discount

 The corporation seeks to obtain the best discount deal before

1) The value of the ticket discounts to be offered to each