Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline

Alderighi, Marco; Nicolini, Marcella; Piga, Claudio A.

doi:10.1162/rest_a_00451

Cited by 68 publications

(36 citation statements)

References 23 publications

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“…Recent applied research (Abrate et al, 2012;Bayoumi et al, 2013) stresses how booking time should be considered a crucial variable when it comes to implement dynamic pricing. There is a well-documented strand of research on the role of booking time in the airline industry (Piga et al, 2015;Bilotkach et al, 2010).…”

Section: Conceptual Frameworkmentioning

confidence: 99%

Strategic and tactical price decisions in hotel revenue management

Abrate

Viglia²

2016

Tourism Management

163

161

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Dynamic pricing techniques allow using a number of variables in a tactical way compared to standard catalogue prices. This study merges in a conceptual model the relevance of the tactical and the strategic dimension of these variables, classified according to their tangible, reputational or contextual nature.To empirically validate the hypotheses, a database of 21.596 price observations was retrieved from booking.com. The study presents a hedonic price function, using the Shapley-Owen decomposition of the Rsquared to elicit the importance of each group of factors. Further, a hierarchical cluster analysis measures the presence of heterogeneity across operators.The results show that online reputation is gaining importance over the traditional star rating. Despite the tangible variables remain of paramount importance, the findings suggest the relevant role of contextual variables in short-run price variations. The players operating in the tourism and hospitality industries should integrate these findings when designing pricing strategies.

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Section: Conceptual Frameworkmentioning

confidence: 99%

Strategic and tactical price decisions in hotel revenue management

Abrate

Viglia²

2016

Tourism Management

163

161

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“…Revenue management and yield management have long been an interest in the airline industry (Belobaba, 1987;Chiang et al, 2007) and have been investigated widely by practitioners and academics (Alderighi et al, 2015;Smith et al, 1992;Terciyanlı and Av ar, 2019). A main implication drawn from theoretical models (Tse and Poon, 2017;Wang and Fung, 2014) and empirical research is that overbooking can effectively minimise the loss of revenue due to passenger no-shows and late cancellations (Camilleri, 2018;Shlifer and Vardi, 1975).…”

Section: Introductionmentioning

confidence: 99%

Examining customer perception and behaviour through social media research – An empirical study of the United Airlines overbooking crisis

Tse

Wang

et al. 2019

Transportation Research Part E: Logistics and Transportation Re

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Airlines have been adopting yield management to optimise the perishable seat control problem and overbooking is a commoon strategy. This study outlines the connections between yield management, crises, and crisis communication. Using big data captured on a social media platform, this study aims to combine traditional yield management with emerging social big data analytics. As part of this, we use the twitter data on the 2017 United Airline (UA) to analyse the overbooking crisis. Our findings shed light on the importance of a more effective orchestration of yield management to avoid the escalation of crises during crisis communication phases. Highlights • UA had two image repair phases over the 24-hour apology tour. • The UA's insincere rhetorical apologies, and 'mortification' shown by their defensive posture was a main contributor to their crisis management failure. • Information on social media is propagated and spread rapidly and globally, which introduces new stakeholders into the conversation. • New stakeholders are difficult to define and target, thus making it hard to alter their perceptions and repair image. Keywords: Social media big data, Customer behaviour, Image repair, Crisis communication Twitter mining 'CEO' 'MUNOZ' 'EMAIL' 'DISRUPTIVE' 'BELLIGERENT' '@united CEO OSCAR MUNOZ issued a LETTER defending his EMPLOYEES, saying the passenger was being ???DISRUPTIVE and BELLIGERENT. Seriously?' '@Mikel_Jollett @united CEO MUNOZ CALLS him "DISRUPTIVE AND BELLIGERENT" in EMAIL TO EMPLOYEES #LIAR RESIGN NOW! #united3411 #wtf #cnn' 'MUNOZ is a moron United CEO DEFENDS ACTIONS of STAFF in VIRAL video, as lawmakers CALL for investigation' 3 Disappointed Messages 'NEWUNITEDAIR-LINESMOTTOS' 'PAYING' 'CUSTOMER' '#NEWUNITEDAIRLINESMOTTOS FLY United-Now with a free, priority DRAG off SERVICE randomly available to all PAYING PASSENGERS' 'Non-PAYING #United Airlines employees more important than PAYING CUSTOMERS. FLY with #United and get ASSAULTED. The not so 'FRIENDLY' 'SKIES' FRIENDLY SKIES.' 'FLY the FRIENDLY SKIES...on Some Other AIRLINE. #NEWUNITEDAIRLINESMOTTOS' 4 Blame 'HOPE' 'SUE' 'FXXK' 'SXXT' 'FXXKING' 'HXXL' 'I'm absolutely disgusted, @united! I HOPE that POOR man will SUE the HXXL out of the COMPANY. #unitedAIRLINES #disgusting' '@united HOPE you get the SXXT sued out of your COMPANY, FXXKING disrespectful degenerates. FXXK you and your employees #neverflyunited' 'I HOPE HE SUES THE HXXL OUT OF THIS FXXK AXS AIRLINE' 5 Company Lost 'STOCK' 'MARKET' 'LOST' 'MILLION' 'United Airlines LOST some $250 MILLION in STOCK MARKET value TODAY by #CNN via @c0NVEY' 'UnitedAirlines has LOST about a BILLION DOLLARS in MARKET value this MORNING' 6 Joke 'JIMMY' 'KIMMEL' 'COMMERCIAL' 'Unbelievable. "Reaccommodate?" WATCH: JIMMY KIMMEL created a brutally honest COMMERCIAL for United Airline' 'I had to share this. Too funny last night! United Airlines COMMERCIAL

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“…In the economic literature on civil aviation, flights are commonly thought of as imperfect substitutes (Alderighi et al, 2015;Basso, 2008;Borenstein & Netz, 1999;Lijesen & Behrens, 2017). Characteristics that affect the level of substitution include the (perceived) quality of the airline, booking restrictions, routing of the flight and time of departure.…”

Section: Introductionmentioning

confidence: 99%

Pricing of imperfect substitutes: The next flight is not the same flight

Bogaard

Lijesen

2019

Research in Transportation Economics

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We investigate how airfares respond to changes in the fare of adjacent flights. Using a fixed effects regression on fares from Amsterdam to Geneva, we find flights that only differ in departure times to be weak substitutes. Fareto-fare elasticities for imperfect substitute flights of different airlines are even smaller, implying weak competition between airlines on this specific route. If our findings hold for other routes as well, this will have implications for the analysis of price dispersion in civil aviation. It would imply that demand shocks for individual flights have small effects on prices of other flights. Demand volatility would then be likely to affect price dispersion on a route level and should be considered when analyzing price dispersion.

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Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline

Cited by 68 publications

References 23 publications

Strategic and tactical price decisions in hotel revenue management

Strategic and tactical price decisions in hotel revenue management

Examining customer perception and behaviour through social media research – An empirical study of the United Airlines overbooking crisis

Pricing of imperfect substitutes: The next flight is not the same flight

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